Property Management Kit For Dummies E-Book

Robert S. Griswold

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 776

Veröffentlichungsjahr: 2013

Beschreibung

Discover how to be a landlord with ease Thinking about becoming a landlord? Property Management Kit For Dummies gives you proven strategies for establishing and maintaining rental properties, whether a single family or multi-resident unit. You'll find out how to prepare and promote your properties, select tenants, handle repairs, avoid costly mistakes and legal missteps--and meet your long-term goals. Now you can find out if you really have what it takes to successfully manage a rental property, and you'll learn all about the various options for hiring someone else to manage your property for you. You'll find out the right way to prepare your properties for prospective tenants, set the rent and security deposit, clean up properties between tenants, and verify rental applications. In no time at all, you can become a top-notch property manager by working efficiently with employees and contractors to keep your properties safe and secure. * Manage your time and money wisely * Acquire a property and prepare it for tenants * Make your property stand out and attract tenants * Keep good tenants and get rid of bad ones * Collect and increase rent * Evaluate the different types of insurance and understand income and property taxes Complete with lists of ten reasons to become a rental property owner, ten ways to rent your vacancy, and the ten biggest mistakes a landlord can make, Property Management Kit For Dummies helps you achieve your dream of being a successful residential rental property owner. CD-ROM and other supplementary materials are not included as part of the e-book file, but are available for download after purchase.

Leseprobe

Property Management Kit For Dummies®, 3rd Edition

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Library of Congress Control Number: 2012956400

ISBN 978-1-118-44377-4 (pbk); ISBN 978-1-118-46108-2 (ebk); ISBN 978-1-118-46109-9 (ebk); ISBN 978-1-118-46110-5 (ebk)

Manufactured in the United States of America

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About the Author

Robert S. Griswold is the coauthor of Real Estate Investing For Dummies with Eric Tyson. He earned a bachelor’s degree and two master’s degrees in real estate and related fields from the University of Southern California’s Marshall School of Business. His professional real estate management and investing credentials include the CRE (Counselor of Real Estate), CPM (Certified Property Manager), ARM (Accredited Residential Manager), CCIM (Certified Commercial Investment Member), PCAM (Professional Community Association Manager), CCAM (Certified Community Association Manager), and GRI (Graduate, Realtor Institute).

Robert is a hands-on property manager with more than 35 years of practical experience, having managed more than 800 properties representing more than 50,000 rental units. He owns and runs Griswold Real Estate Management, Inc., a property management firm with offices in southern California and southern Nevada.

Since 1995, Robert has been the real estate expert for NBC San Diego, a network-owned and number one–rated station. Every Saturday, he provided impromptu answers to viewers’ real estate questions live on the air during NBC News This Weekend.

Once a week for nearly 15 years, Robert hosted a live, call-in, real estate news and information talk show called Real Estate Today! with Robert Griswold, heard throughout southern California on Clear Channel’s AM 600 KOGO radio station and around the world on the show’s website at www.retodayradio.com. He has twice been named the #1 Radio or Television Real Estate Journalist in the Country by the National Association of Real Estate Editors (NAREE) in its annual Journalism Awards Program. The first award was for Real Estate Today! with Robert Griswold, and the second was for his work for NBC News.

Robert is the lead columnist for the syndicated “Rental Roundtable” landlord-tenant Q & A column at www.rentalroundtable.com, which is also featured in the San Diego Union-Tribune and the San Francisco Chronicle. He also writes a nationally syndicated column, “Rental Forum,” at www.inman.com.

He’s a nationally recognized real estate litigation expert, having been retained on more than 1,750 real estate legal matters and serving more than 200 times as a court-appointed receiver, referee, or bankruptcy custodian.

Robert is a member of the national faculty of the Institute of Real Estate Management (IREM) and a National Apartment Association (NAA) and California Department of Real Estate Certified Instructor. He’s a licensed California and Nevada real estate broker, a Realtor, and an active member of the NAA, the California Apartment Association, and his local apartment association, the San Diego County Apartment Association. Since 2005 he has served as a planning commissioner for the City of San Diego.

In his spare time (?!), he enjoys travel (especially cruising!) and watching his children excel in all aspects of life, including academics (University of San Diego, University of California at Irvine, Point Loma Nazarene University, and Stanford) and sports, especially soccer. Robert wishes he had more opportunities but savors those precious times when he, his wife, Carol, and their four young adults (Sheri, Stephen, Kimberly, and Michael) can travel together, enjoy the holidays, or even have an old-fashioned family game night. Above all, he tries to retain his sense of humor and truly enjoy what he’s doing!

Dedication

I dedicate this book to my best friend and wife, Carol, with whom I celebrated 30 years of marriage in 2012. Carol played a key role in, and deserves much of the credit for, successfully raising our four children, but I also appreciate her 30+ years of love, friendship, support, patience, and persistence in attempting to bring the proper balance to my life, which starts with putting God first in everything I do. Of course, life’s always exciting and has real meaning thanks to my four great children, who have become incredible young adults — Sheri, Stephen, Kimberly, and Michael. I also want to express my appreciation to my mom, Carol, for her unconditional love and infinite encouragement. I’m also grateful to my father, Westcott Griswold (who passed away just after I finished writing the second edition of this book), for the positive role model he was in his work ethic and love for his family and friends. We all miss him. Most of all, I want to praise and thank God for the wonderful gifts and incredible opportunities He has given me.

Author’s Acknowledgments

This book was made possible through the efforts of some very fine people at John Wiley & Sons, Inc. Mark Butler initially believed in my concept for the first edition of Property Management For Dummies. Lindsay Lefevere was very supportive of my efforts to include a CD-ROM with forms for the second edition and has continued to strive for excellence in this third edition.

My project editor, Jennifer Tebbe, really understood the rental housing industry after serving as the copy editor for the second edition. She was helpful and supportive throughout, and this new edition is the most comprehensive book in the field and a fantastic resource for rental owners and property managers. My thanks also go to copy editor Todd Lothery for a masterful job. I’d also like to thank technical editor Kathleen Harmon, who helped make sure that the information was accurate and that my advice hit the mark.

My interest in real estate can be traced back to my father and mentor, attorney Westcott Griswold, who advised me to excel in real estate, not law; and my friend and first real estate professor at USC, Dr. Rocky Tarantello. Thank you!

I was blessed to formally begin my real estate management career working with two of the most savvy, knowledgeable, and ethical men in real estate — thank you, Rod Stone and George Fermanian, for starting me on the right track. In my property management days, I met many fine people, and two of the best are my friends, property manager Wade Walker and attorney Steve Kellman. I also want to thank attorney Kathy Belville-Ilaqua for her review and sage advice on fair housing materials covered in the new edition.

I’ll always be thankful to Carl Larsen, homes editor of the San Diego Union-Tribune, who started me in my writing career when he gave me a shot with the first “Rental Roundtable” column while his lovely wife, Sharon Larsen, assisted in creating my original book proposal.

Finally, I’d like to thank all my NBC news viewers, “Rental Roundtable” and “Rental Forum” readers, and radio listeners who’ve educated me with their interesting and thought-provoking questions on literally every aspect of real estate management.

Publisher's Acknowledgments

We’re proud of this book; please send us your comments at http://dummies.custhelp.com. For other comments, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax [phone].

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Vertical Websites

Project Editor: Jennifer Tebbe

(Previous Edition: Chad Sievers)

Executive Editor: Lindsay Sandman Lefevere

Copy Editor: Todd Lothery

(Previous Edition: Jennifer Tebbe)

Assistant Editor: David Lutton

Editorial Program Coordinator: Joe Niesen

Technical Editor: Kathleen Harmon

Vertical Websites: Josh Frank,Laura Moss-Hollister

Editorial Manager: Christine Meloy Beck

Editorial Assistants: Rachelle S. Amick, Alexa Koschier

Cover Photo: © Marcus Lindström/iStockphoto.com, © rysick/iStockphoto.com, © Maciej Maksymowicz/iStockphoto.com, © Alexander Mirokhin/iStockphoto.com

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Publishing and Editorial for Consumer Dummies

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Composition Services

Debbie Stailey, Director of Composition Services

Property Management Kit For Dummies,® 3rd Edition with CD

Visit www.dummies.com/cheatsheet/propertymanagementkit to view this book's cheat sheet.

Table of Contents

Introduction

About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organized

Part I: So You Want to Be a Landlord?

Part II: Renting Your Property

Part III: The Brass Tacks of Managing Rentals

Part IV: Techniques and Tools for Managing the Property

Part V: Money, Money, Money!

Part VI: The Part of Tens

Icons Used in This Book

Where to Go from Here

Part I: So You Want to Be a Landlord?

Chapter 1: Property Management 101

Understanding What Property Management Really Is

Considering the benefits

Confronting the icky parts

Examining the Types of Real Estate Available

Renting Your Property

Preparing the property

Knowing how much to charge

Capturing prospects’ interest

Turning interest into property visits

Picking your tenants and signing the deal

Getting Your Hands Dirty: Managing the Property

Moving tenants in and out

Collecting rent

Keeping the good tenants

Dealing with troublesome tenants

Maintaining the property

Protecting your investment

Chapter 2: Do You Have What It Takes to Manage Your Own Rental Property?

Understanding That Managing Rental Property Is a People Business

Identifying the Types of Real Estate Owners

The inadvertent rental property owner

The long-term investment rental property owner

Recognizing the Advantages of Owning Rental Property

Eyeing the Unique Characteristics of a Good Manager

Realizing that good management makes a difference

Separating your personal style from sound management

Managing your time

Delegating management activities

Knowing that your style is unique

Being Honest with Yourself about Your Skills and Experience

Chapter 3: Managing Your Property Yourself or Hiring a Pro

Managing Your Rental Yourself

The advantages

The drawbacks

The distance factor

Exploring Professional Management

Eyeing the pros and cons of using a pro

Understanding what a good property manager does

Telling the good from the bad

Compensating your property manager

Making sense of management agreements

Being aware of the tax consequences

Chapter 4: Taking Over the Property

Knowing What to Get Upfront

A list of personal property included in the sale

A copy of all tenant files

A seller-verified rent roll and list of all tenant security deposits

A copy of all required governmental licenses and permits

A copy of all the latest utility bills

A copy of every service agreement or contract

A copy of the seller’s current insurance policy

Working with the Current Tenants during the Transition

Meeting with the tenants in person

Inspecting the rental unit

Using a new lease or rental agreement

Evaluating the current rent

Part II: Renting Your Property

Chapter 5: Getting Your Rental Property Ready for Prospective Tenants

Viewing Your Rental Property from a Prospective Tenant’s Shoes

Paying attention to the exterior and common areas

Making sure the interior is up to snuff

Preparing Your Rental Unit the Right Way

General cleaning

Maintenance

Painting

Final cleaning

Carpet or floor covering cleaning

Using Outside Contractors

Chapter 6: The Big Three of Property Management: Rent, Security Deposits, and Rental Contracts

Setting the Rent

Examining the return on your investment

Conducting a market analysis of rents in your area

Coming Up with a Fair Security Deposit

Figuring what you can legally charge

Keeping security deposits separate from your other funds

Avoiding nonrefundable deposits

Paying interest on security deposits

Increasing (or decreasing) deposits

Choosing the Type of Rental Contract You Want

Contemplating a lease

Eyeing a periodic rental agreement

Getting your contract in writing

Chapter 7: FOR RENT: Generating Interest in Your Rental

Developing a Marketing Plan

Determining your target market

Thinking about what your renters stand to gain from your property

Understanding the Importance of Good Advertising

Eyeing the different approaches

Knowing which approach gives you the most bang for your buck

Getting your property to rent itself

Being Aware of Fair Housing Laws

Analyzing Your Advertising Options

Talking the talk: Word-of-mouth referrals

Showcasing your site: Property signs

Broadening your horizons: The Internet

Reading all about it: Newspapers

Papering the neighborhood: Fliers

Focusing on rental publications

Creating chat: Community bulletin boards

Going where the jobs are: Local employers

Meandering through other tactics to try

Chapter 8: Handling Prospects When They Come A’Calling

Understanding Why First Impressions Are Important

Valuing Phone Conversations above All Other Communication Methods

Preparing for Rental Inquiry Phone Calls

Having the basic tools ready

Answering the phone

Providing and obtaining the basic info

Selling the prospect on your property

Prequalifying the prospect over the phone

Handling phone objections

Converting phone calls to rental showings

Planning Ahead for Open Houses and Walk-Throughs

Holding an open house

Scheduling individual appointments

Providing directions to the property

Chapter 9: Strutting Your Stuff: Making Your Property Stick Out

Showing Your Rental Unit

Showing a vacant rental

Showing an occupied rental

Taking the First Steps to Get the Renter Interested

Prequalifying your prospect during the rental showing

Resolving your prospect’s objections

Convincing your prospect

Inviting your prospect to sign on

Having your prospect complete a rental application

Holding your prospect’s deposit

Developing priority waiting lists

Handling Mandatory Disclosures and Environmental Issues

Lead-based paint

Asbestos

Radon

Sexual offenders

Chapter 10: Eenie, Meenie, Miney, Mo: Selecting Your Tenants

Understanding the Importance of Screening

Establishing Tenant Selection Criteria

Why having criteria is important

How to create your criteria

Verifying Rental Applications

Confirming identity

Going over occupancy guidelines

Investigating rental history

Validating income sources

Reviewing credit history

Checking criminal history

Talking with all personal references

Dealing with guarantors

Making your final decision

Notifying the Applicant of Your Decision

Avoiding Housing Discrimination Complaints

The ins and outs of fair housing

Steering and chilling

Children

Reasonable accommodations

Reasonable modifications

Companion or service animals

Americans with Disabilities Act

Sexual harassment

Part III: The Brass Tacks of Managing Rentals

Chapter 11: Moving In the Tenants

Establishing the Move-In Date

Meeting with a Tenant Prior to Move-In

Covering the rules with your new tenant

Reviewing and signing documents

Collecting the money from your tenant

Inspecting the property with your tenant

Giving your tenant an informational letter

Distributing the keys to your tenant

Setting Up the Tenant File

Preparing a Welcome Package for Your New Tenant

Chapter 12: Collecting and Increasing Rent

Creating a Written Rent Collection Policy

When rent is due

Where rent is paid

How rent is paid

Dealing with Rent Collection Problems

Collecting late rent

Charging late fees

Handling returned rent payments

Dealing with partial rent payments

Serving legal notices

Raising the Rent without Sending Your Tenants Running

Figuring out how to raise the rent

Keeping your tenants (relatively) happy

Chapter 13: Keeping the Good Tenants (And Your Sanity)

Knowing What Tenants Want

Timely and effective communication

Quick responses to maintenance requests

Consistent respect for their privacy

Equal enforcement of house rules

Fair rental rates and increases

Recognizing the Ins and Outs of Renewing Leases

Reducing your turnover

Offering incentives for tenants to stay

Following up with tenants after move-out

Chapter 14: Dealing with Problem Tenants

Recognizing and Responding to Common Tenant Problems

Late or nonpayment of rent

Additional occupants

Inappropriate noise level

Unsupervised children

Exploring Alternatives to Eviction

Negotiating a voluntary move-out

Using mediation or arbitration services

Taking your tenant to court

Giving ’Em the Boot: Evicting a Tenant

Serving legal notices

Filing a formal eviction action

Following the do’s and don’ts of the eviction process

Collecting judgments

Handling Unusual Tenant Situations

Bankruptcies

Illegal holdovers

Broken rental contracts

Assignments or subleases

Departing roommates

Domestic problems

Tenant deaths

Chapter 15: Moving Out the Tenants

Requiring Written Notice of Your Tenants’ Move-Out Plans

Providing Your Tenant with a Move-Out Information Letter

Walking Through the Unit at Move-Out

Getting the 411 on the walk-through

Paying the security deposit — or not

Defining ordinary wear and tear

Using a Security Deposit Itemization Form

Deducting from the security deposit

Dealing with Special Situations

Forking out the dough: When damage and unpaid rent exceed the security deposit

Having your facts straight: When disputes arise about the security deposit

Reclaiming what’s yours: When the rental is abandoned

Part IV: Techniques and Tools for Managing the Property

Chapter 16: Working with Employees and Contractors

Surveying the Ins and Outs of Bringing Employees Onboard

Establishing job duties, work schedule, and compensation

Screening employees

Knowing your responsibilities

Working with your manager

Staying on the alert for danger signs

Firing an employee

Building Your Contractor and Vendor Dream Team

Recognizing what to look for

Avoiding common pitfalls

Chapter 17: Maintaining the Property

Recognizing the Importance of a Maintenance Plan

Being Prepared for Maintenance Issues

Emergency maintenance

Preventive maintenance

Corrective maintenance

Custodial maintenance

Cosmetic maintenance

Handling Rental Property Maintenance

Responding to tenant maintenance requests

Keeping tenants from doing repairs

Purchasing parts and supplies

Chapter 18: Keeping Safety and Security in Mind

Tackling Crime in and around Your Rental Property

Turning to crime prevention programs

Paying attention to tenant questions and complaints about safety-related issues

Responding to crimes when they occur

Taking Necessary Security Precautions

Keys and access-control systems

Lighting

Security firms

Prioritizing Tenant Safety

With tempered glass

With safe cords (or no cords) for window coverings

With anti-tip brackets for free-standing ranges

With appropriate enclosures and signage for swimming pools, spas, and hot tubs

Addressing Environmental Issues

Fire safety

Carbon monoxide

Electromagnetic fields

Mother Nature’s wrath

Mold

Bedbugs

Part V: Money, Money, Money!

Chapter 19: Two Necessities of Property Management: Insurance and Taxes

Cover Me, I’m Going in: Making Sure You Have the Insurance You Need

Telling the difference among the types of insurance coverage you can get

Determining the right deductible

Letting your tenants know about renter’s insurance

Handling potential claims

The Tax Man Cometh: Knowing Which Taxes You’re Responsible for Paying

Making sense of income taxes

Grasping (and appealing) property taxes

Chapter 20: Financial Management and Record-Keeping

Organizing Your Files

Maintaining Property Records

Taking Care of Business: Accounting

Creating a budget and managing your cash flow

Using computers for financial management

Chapter 21: Finding New Ways to Increase Your Cash Flow

Considering Non-Rent Revenue

Earning some cash with the wash: Laundry machines

Stowing some dough: Storage

Selling your space: Parking

Converting the World Wide Web to cash: Internet access

Cashing in on the ol’ dining room set: Furnished rentals

Putting Lease Options to Work for You

Taking Advantage of Government Programs

The scoop on rental subsidy programs

The lowdown on the Housing Choice Voucher program (also known as Section 8)

The 411 on rehabilitation loans

Working in Niche Markets

Taking another look at your pet policy

Renting to students

Catering to senior citizens

Designating your rental units smoke-free

Part VI: The Part of Tens

Chapter 22: Ten Reasons to Become a Rental Property Owner

You Can Diversify Your Investments

You Don’t Need Much Money to Start

It Can Be a Second Income

You Gain Tax Advantages

Real Estate Holds Its Value

You Get Leverage

It Beats Inflation

You Can Shelter Your Income

You Get a Positive Cash Flow

It Can Help You Retire

Chapter 23: Ten Ways to Rent Your Vacancy

Maintain Curb Appeal

Keep the Unit in Rent-Ready Condition

Establish a Competitive Rent

Offer Prospects a Rate Guarantee

Provide Wireless Internet Access

Offer Referral Fees

Accept Pets

Offer Move-In Gifts or Upgrades

Contact Corporate Relocation Services

Accept HUD’s Housing Choice Vouchers

Appendix: About the CD

Forms

Legal information

Bonus Part of Tens chapter

Educational opportunities and professional designations

Resources

Cheat Sheet

Download CD/DVD Content

Introduction

Welcome to Property Management Kit For Dummies, 3rd Edition. You can discover many of life’s lessons by doing some on-the-job trial and error. But that doesn’t apply to property management — the mistakes are too costly, and the legal ramifications too severe. This book gives you proven strategies to make rental property ownership and management both profitable and pleasant.

About This Book

Many landlord-tenant relationships are strained, but they don’t have to be. A rental property owner who knows how to properly manage his property and responds promptly to the legitimate concerns of his tenants will be rewarded with good people who stick around. The key is properly maintaining your property and constantly investing in upgrades and improvements. By doing this, you can be successful in meeting your long-term financial goals and realize that being a landlord is an excellent primary or secondary source of income.

This book is based on hands-on experience and lessons from my own real-life examples. Unlike many landlords and property managers, I believe that your tenants are your customers, not your enemies, and as such, you should treat them with respect. You may find investing in rental real estate to be a key piece of your overall investment strategy, but not everyone is cut out to be a property manager. I want to make sure you understand not only the basics of the rental housing business but also some of the tricks that can make you glad you’re a real estate investor.

Although this book is overflowing with useful advice and information, it’s presented in a light, easy-to-access format. It explains how to wear many hats in the property management business: advertiser/promoter (in seeking tenants), host (in showing the property), handyman (in keeping up with and arranging for repairs), bookkeeper (in maintaining records), and even counselor (in dealing with tenants and their problems). Just as important, this book helps you maintain your sense of humor — and your sanity — as you deal with these challenges and more.

I wrote this book in essentially chronological order — from your first entry into the world of rental property ownership and the corresponding steps to prepare and promote your property to showing your rental and selecting the right tenants. As a result, reading the book cover to cover makes sense, but feel free to read the sections that are most relevant to you at any given time. Skip around and read about those areas that are giving you problems, and I’m confident that you’ll find some new solutions to try.

To make your life easier, I’ve included many of the forms you need to be successful in managing your rental — whether you’re just starting out with a single-family rental home or condo, you have a handful of rental units, or you possess a whole portfolio of rental properties. If you’re reading this book in print, these forms are available on the accompanying CD; if you’re reading a digital version of this book, simply click the link in the table of contents to access the forms. Either way, feel free to print them out, have your local legal counsel review them, and start putting them to use.

Conventions Used in This Book

The Institute of Real Estate Management (IREM) and the National Apartment Association (NAA) are invaluable resources for rental property managers and owners. Because I mention them often, I refer to them by their acronyms.

I also employ the following conventions to help you navigate the text:

Italics highlight new, somewhat technical terms and emphasize words when I’m making a point.

Boldface indicates key words in bulleted lists and the action steps in numbered lists.

Monofont highlights websites and e-mail addresses.

What You’re Not to Read

Managing rental property takes time, so you may want to read just the essential information to help you find success. In that case, feel free to skip the following:

Sidebars: These gray-shaded boxes are full of fun bits or humorous stories that are quite interesting (if I do say so myself), but they’re not essential for you to understand the topic at hand.

Text with True Story icons: These passages contain some of my real-life experiences to help keep you from making my mistakes.

Foolish Assumptions

When writing this book, I assumed that you’re likely reading this book because you’re one of the following:

An unintentional property owner — someone who, through a series of circumstances, suddenly and unexpectedly came upon an opportunity to own property. Perhaps you inherited a house from a relative and, not wanting it to sit idle, you decided to rent it out. Or maybe you transferred to a job in another city and because you’ve been unable to sell your home, you’ve been forced to rent the property to help cover the mortgage and operating expenses. Many property owners find themselves in the rental housing business almost by accident, so if you count yourself in this group, you’re not alone.

One of those people who has made a conscious decision to become a rental property owner. Perhaps, like many rental owners with a plan, you needed to buy a new, larger home and decided to keep your existing home as a rental property. Or maybe while you were looking to own your own place, you found a great duplex and decided to live in one unit and rent out the other. In a world where people seem to have more and more demands on their time, many aspects of rental property ownership are very appealing, like the capacity to supplement a retirement plan with additional income or the proven opportunity to build wealth. The key to achieving this success is finding a way to make money while still retaining control over your life.

Someone who already works in the rental housing industry. Maybe you’re just starting out or maybe you’ve been in the field for some time. Either way, you want to find out more about your chosen profession. Good for you. The rental housing industry has so much variety that you’ll always be discovering new things and appreciating that every day is a new challenge. Yes, there is some repetition (you must collect the rent every month), but unlike many jobs, no two days ever seem to be the same. That’s what attracts so many professionals to the field of property management (and keeps them there).

As an owner, real estate offers one of the best opportunities to develop a steady stream of residual income that you earn whether you’re sleeping, participating in your favorite leisure activity, enjoying your retirement, or relaxing on vacation. Whatever the circumstances, the bottom line is the same: You hope to generate sufficient income from the property to cover the debt service, pay for all operating expenses, and possibly provide some cash flow, along with tax benefits, appreciation, and equity buildup. The key to your success is knowing how to manage people and time. And this book has plenty to offer you on that front.

How This Book Is Organized

I’ve divided this book into six parts. The chapters within each part cover specific topic areas in more detail, so you can easily and quickly skim a topic of interest or troubleshoot the source of your latest headache! Each part addresses a major area of rental housing management. Following is a brief summary of what I cover.

Part I: So You Want to Be a Landlord?

Managing rental property isn’t everyone’s cup of tea. The chapters in this part assist you in evaluating your skills and personality to see whether you have what it takes to manage rental units — or whether you should call in the property management cavalry. If a management company is the answer to your prayers, I show you how to select one, what to expect, and how much it’ll cost. Finally, when the day of your escrow closing arrives and the ink is dry, flip here to find out what your immediate priorities are as you take over your new rental property.

Part II: Renting Your Property

The most important aspect of rental housing is keeping the unit occupied with paying tenants who don’t destroy it or terrorize the neighbors. In this part, you figure out how to prepare the property for rent, set the rents and security deposits, develop a comprehensive (yet cost-effective) marketing and advertising campaign, and show your rental unit to prospective tenants. Because all tenants look great on paper, I also fill you in on some tricks and techniques for establishing good tenant selection criteria.

Part III: The Brass Tacks of Managing Rentals

This part takes you from moving in your new tenants to moving them out — and everything in between. You get some strategies for collecting and increasing rent, retaining tenants, and dealing with those few tenants who give you a headache whenever your paths cross. Minimizing vacancies and retaining tenants is the key to success as a rental owner. But when your tenants complain incessantly, decide to repaint in nontraditional colors, or stop paying the rent, the real challenge of managing rental housing begins. In this part, you discover techniques for dealing with these issues and more.

Part IV: Techniques and Tools for Managing the Property

Assembling the right team of professionals — from employees to contractors — is one of the main ways to find success as a landlord. Another way involves maintenance, which can be one of the largest controllable expenses most rental owners face. In this part, I also shed light on how to meet the minimum standards required for your property to be habitable and the pros and cons of different alternatives for handling maintenance.

Last but most certainly not least, because landlords and property managers are sued more than any other business entity, you definitely want to review the issues of crime, fire protection, environmental hazards, and the safety and security of your rentals — and I help you do that here, too.

Part V: Money, Money, Money!

Having the proper insurance for your properties and property management activities can be a complex topic, so in this part, I guide you through the ins and outs of insurance. Taxes are another inevitability of life in the rental property business, so here’s where you find basic info on property taxes, the way rental property income is taxed, and some of the tax advantages of owning rental property. With all that money going out for insurance and taxes, you also want to know just how much cash flow your rental empire is generating, so I provide you with some basics on rental accounting and record-keeping.

Every seasoned rental owner should look for additional sources of income beyond rent, including the opportunities of lease options, which I cover in this part. The effect of government-subsidized housing programs continues to play an important role in many communities, so here you find info on the advantages and disadvantages of working with public rental assistance programs. Niche rental markets — like those catering to students and pet owners — are also worthy of your consideration, and I let you know how you can use them to your advantage.

Part VI: The Part of Tens

Here, in a concise and lively set of condensed chapters, are the tips to make the difference between success and foreclosure. In this part, I address the benefits of owning rental properties and provide tips to rent your vacancy today. I also suggest you check out the CD for a bonus Part of Tens chapter on ten common management mistakes and how to avoid them.

Property management and rental housing laws are dynamic, with something new arising every day. So because I’m just that nice of a guy, I also offer an appendix to help you navigate them. Count on the invaluable resources in this appendix to keep you current and improve your management skills.

Icons Used in This Book

Scattered throughout the book are icons to guide you along your way and highlight some of the suggestions, solutions, and cautions of property management.

This icon points your page-turnin’ fingers to files or forms you can use in your day-to-day property management.

Remember these important points of information, and you’ll have great success as a rental property owner.

Keep your sights on the bull’s-eye for important advice and critical insight into the best practices in property management.

Focus on this icon for real-life anecdotes from my many years of experience and mistakes. When you’ve managed more than 50,000 rental units in 30 years, you see some interesting situations. Now, I share them with you.

This icon highlights the land mines that both novice and experienced rental property owners need to avoid.

Where to Go from Here

Like any great resource book, you must read it! This bookis designed for experienced or seasoned landlords, as well as rookies who still think all tenants are nice and prompt with rent payments and should be invited over for Thanksgiving supper.

Whether you’re contemplating rental real estate, looking to fine-tune your proven landlord secrets, or facing total financial ruin at the hands of the Tenant from Hell, this bookoffers chapter after chapter of solid rental property management advice, especially for the small rental property owner. It explains how to attract qualified prospects; select and screen tenants; maintain the rental rate; handle security deposits, rental contracts, broken water pipes, late rents, tenants who overstay (and don’t pay), and more. Find the topic you want to know more about and start reading right there. Remember: Everything is manageable and workable — if you know what you’re doing!

Property Management Kit For Dummies, 3rd Edition,helps you protect your investment and maintain your sense of humor, as well as your sanity, as you deal with one of the most unpredictable professions in life — property management. Consider this book your Property Management Bible, written just for you.

Part I

So You Want to Be a Landlord?

In this part . . .

Managing rental property isn’t for the faint of heart, but it can be very rewarding for the right person. The chapters in this part guide you through the process of figuring out whether you have what it takes to manage rental property or whether you’re better off leaving it to a pro — someone you hire to do the dirty work for you. I also fill you in on what you need to know if you’re taking over ownership of a rental property, including how to deal with the current tenants and inform them of your policies and procedures. This is the part for you if you’re just starting to think about purchasing a rental property but aren’t quite sure what that entails.

Chapter 1

Property Management 101

In This Chapter

Looking at the pros and cons of property management

Exploring the different types of real estate

Surveying the steps involved in renting your property

Walking through the day-to-day details of property management

The key to long-term success and wealth-building through real estate ownership lies in the foundation you acquire as a hands-on property manager. For instance, some people start out managing rental properties owned by someone else and gain a great deal of experience that they can use for their portfolio.

There are many positive reasons for becoming a rental property owner or manager, and just as many ways of doing so. Perhaps you’ve saved up the down payment to purchase your first small rental unit and hope to see your investment grow over the years as a nice retirement nest egg or a supplement to your current income. Maybe you want to invest in a medium-sized apartment building and build some equity as well as rental income to supplement or replace your current income. Perhaps you’ve inherited Aunt Gertrude’s run-down cottage and need to find a good tenant who’ll care for it and pay the rent on time. Maybe you’ve recently closed on your new primary residence, only to find that selling your existing home isn’t as easy as the real estate agent promised. Or perhaps you’ve had to move across the country to find a suitable job but want to return to your home in the future.

Whether you plan to become a full- or part-time property manager, you need to know what you’re doing — legally and financially.This chapter serves as a jumping-off point into the rental property world. Here you can find useful info, tips, and checklists suitable for novice or seasoned rental property managers. So get ready for some practical advice from the tenant trenches to help you handle situations when they arise!

Understanding What Property Management Really Is

Property managers provide consumers with a product known as shelter. In other words, as a property manager, you supply tenants with a place to live in exchange for the payment of rent. Although property management doesn’t seem that complex, you can avoid the many mistakes unprepared property managers make by knowing what you’re getting into.

The following sections give you a quick overview of the pros and cons of property management. Chapter 2 provides more in-depth analysis of these advantages and disadvantages to help you determine whether renting your property is the right choice for you.

Considering the benefits

Property management can be a rewarding and fun venture. I can’t imagine my life without some aspect of property management in it (why else would I have written this book, right?). Following are some of the reasons why I get such a kick out of this business:

Experience with real estate investment: As you manage rental property, you have the opportunity to observe and begin to understand investing cycles, which is an essential skill for becoming a successful real estate investor. Of course, some real estate investors succeed without ever being hands-on property managers because they hire others to handle the task for them. However, I believe rental property owners should gain that real estate investment expertise by actively working as property managers for several years, either for themselves or others.

Interaction with different people: If you’re a people person, you’ll find that property management is a great opportunity to meet all types of people. Not everyone you encounter is someone you want to make your close friend, but you’ll certainly have the chance to work with a smorgasbord of personalities.

Skill development: Property management requires diverse skills because you must handle so many different tasks (such as marketing, advertising, leasing, screening, and maintenance). But it also allows you to grow those skills beyond the basics through patience and passion. For example, you may begin by advertising your rental unit in a basic way and move to analyzing an entire ad campaign. Pay attention to how unrelated products are presented for sale and apply those concepts to rental housing. Most of the best marketing ideas are already out there, and you just need to adapt them to your rental property.

Variety: Personally, I enjoy the variety of tasks and challenges found in property management. Sure, some aspects of it are repetitious. Rent is due every month, and all properties require ongoing care and maintenance. But for the most part, every day in property management is something new.

Confronting the icky parts

You can’t expect all aspects of property management to be fun. Just like your primary job, some days run smoothly, and others are filled with problems. Here are a few of the bad aspects of the property manager gig:

Difficult tenants: Despite the great people you meet, property management has its fill of difficult and challenging personalities, including people who’re downright mean and unpleasant. You have to be prepared for adversarial and confrontational relationships with others. Collecting the rent from a delinquent tenant, listening to questionable excuses, or demanding a contractor come back and do the job properly requires patience, persistence, and a fair but firm approach.

Long hours: Because you’re dealing with housing, you don’t know when you’re going to be needed. It may be 3 p.m. or 3 a.m. Like me, you can expect to be constantly on call — even when you’re on vacation, at the movies, or in the middle of a family holiday dinner — to deal with issues that only the rental owner or property manager can handle. Fortunately, you can minimize these inconveniences by planning carefully and hiring competent and reliable employees and vendors who can prevent many unexpected emergencies through good management and maintenance. However, owning and managing rental property remains a 24/7, year-round commitment.

Need for emergency capital: One of my favorite sayings and goals in life is “No surprises,” but owning rental properties can lead to situations in which unanticipated expenses arise at any time. Tenants suddenly stop paying rent at the same time the roof leaks and the water heater goes out in the middle of the night! Having a nice nest egg, a rainy-day fund, or at least a decent unsecured credit line at reasonable rates can be very helpful, as most rental property owners experience a squeeze on their cash flow at times.

Potential liability: After more than 30 years in property management, my opinion is that most tenants are good people just looking for a decent, quiet place to call home. But some “professional tenants” look for any mistakes you make or even set traps for you to fall into that can lead to claims for free rent or even litigation. You need to stay on top of all the legal requirements for landlords in your area and make sure you always comply with all laws and disclosures. If you’re not willing or able to keep up with ever-changing legal requirements and health and safety issues, or if you’re sloppy with your record-keeping, you may learn some expensive lessons!

Renters drive rental property management

The Census Bureau reports that more than one-third of the U.S. population, or 94 million people, are renters occupying nearly 39 million rental units, including more than 13 million single-family home rental properties. The number of renters has increased in the last few years with the economic challenges in most areas of the country. Also, the limited availability of credit has made it more difficult to become a homeowner, and the overall percentage of homeownership has fallen from a high of 69 percent in 2006 down to 65 percent in late 2012.

Individual property owners dominate the rental housing industry. According to the National Multi Housing Council, individuals own nearly 85 percent of the small rental properties with 2 to 4 units and nearly 60 percent of the residential income properties with 5 to 49 units. In comparison, one of the most popular ways for individuals to invest in real estate is through real estate investment trusts (REITs), which have exploded in the market with the acquisition of billions of dollars of high-profile rental real estate assets. Yet, in spite of the significant publicity they’ve received in the real estate media, REITs actually own less than 10 percent of all residential rental housing units in the United States.

The good news is that these negatives can be found in many other careers or professions that don’t offer the benefits and satisfaction you can get from property management. So in my opinion, the pros outweigh the cons.

Examining the Types of Real Estate Available

Before you run out and purchase a rental property, you need to have a good idea of the different types you can own. Most real estate investors specialize in properties with specific uses. Investment properties fall into classifications such as residential, commercial, industrial, and retail.

For the purpose of this book, I focus only on residential real estate because the majority of rental real estate is housing, and the basic concepts are easy to understand and master. (After you master the basic concepts of residential real estate, you may want to consider other types of property management.) The best practices I present throughout this book are applicable for these types of residential rental properties:

Single-family houses and condominiums or townhomes: Most real estate investors start with a rental home, condo, or townhome because these properties are generally the easiest ones to gain experience on. They may be located in a common interest development (CID) or community association where all the common areas are the association’s responsibility.

Duplexes, triplexes, and four-plexes or subdivided houses: This category includes properties with two to four units. Often these properties are the first choice for real estate investors who plan to live in one of the units or want to take the next step up from investing in a single-family rental home or condo. These properties qualify for favorable financing terms, so they’re perfect for the new investor or an investor buying in higher-priced urban markets.

Medium-sized multi-family apartment buildings: These buildings usually have between 5 and 30 units and are best run with on-site management and regularly scheduled maintenance and contractor visits.

Large, multi-family apartment buildings: These properties are larger buildings that can have 30 or more rental units in a single location, with an on-site manager or maintenance staff. Owning one of these properties is the goal for many real estate investors who look forward to being able to hire a professional property manager and just check their bank account for their regular cash distributions. (I reveal what to look for in a good professional property manager in Chapter 3.)

No matter what type of residential real estate you’re involved with, you need to understand the basics of property management. You must market or staff a property differently depending on its size and location, but many of the fundamentals are the same, regardless.

Over the course of your tenure as a property manager, you’ll probably manage several different types of properties. That’s just one of the challenging yet fulfilling aspects of the job. For example, you may start out managing single-family rental homes or condos and then see your investments or career progress to larger rental properties. Sometimes people in the rental housing business start out as on-site employees for large rental properties, learn the ropes, and later apply that knowledge to become the Donald Trump of rental houses in their area.

Owning and managing all types of rental property can be lucrative, and I suggest you jump in where you have your first opportunity, because no rules mandate your starting position.

Factors that influence real estate as an investment

Almost everyone has heard the adage that the top three keys to success in real estate are location, location, location. This adage is more than just a cliché. Unlike a stock investment, you can’t easily liquidate real estate and reinvest in another opportunity in a different geographic area. Real estate success is closely correlated to a property’s location.

Real estate is also a very cyclical business that’s subject to the Economics 101 concepts of supply and demand. During economic business expansions, the demand for real estate is strong, enabling owners to raise rents. With the higher rents, real estate developers can build new properties, which causes the supply of real estate to catch up with the demand and forces rent increases to slow or disappear. When the business economy begins to slow, the demand declines, and once again you have an abundance of rental real estate. This cycle typically repeats every seven to ten years but can go longer.

One of the best reasons for investing in residential real estate (versus commercial or retail properties) is that it tends to be the most stable sector of the real estate market, a fact that was proven again in the economic downturn that began in the mid-2000s. Virtually all types of real estate income properties saw significant decreases in value during that downturn, but residential real estate fared better than any other category and rebounded first when the market began to improve.

Thanks to very generous tax laws, for many years (prior to the major income tax law changes in 1986) real estate investors really didn’t have to worry about the cash flow generated from their properties. An owner’s ability to generate tax losses that could be offset against earned income, plus other creative tax strategies, outweighed the common-sense goal of generating more income than expense. Positive cash flow was just an added benefit.

The bottom line: After you purchase your property, you can’t effectively control or change its location. Nor can you really influence the overall business economy or real estate cycles.

Seem perplexing? Many so-called “investing gurus” try to sell you their DVDs, but if you’re looking for honest advice on the proper way to find, evaluate, and invest in residential real estate, I suggest you read Real Estate Investing For Dummies, 2nd Edition (Wiley),which I coauthored with Eric Tyson.

Renting Your Property

One of the first and most important lessons I learned when I started in property management more than 30 years ago is that vacant real estate isn’t a very good investment. You need to fill those vacancies and keep them filled with tenants who pay on time. Just try looking in the mirror and telling yourself that all the rent came in last month. I bet you can’t do it without smiling!

Of course, renting your property and retaining your tenants doesn’t just magically happen; it requires a plan and a lot of work. But you want to work smart and not just hard. In the following sections, I cover some of the best practices for preparing your rental units, setting your rents, attracting qualified prospects, and closing the sale.

Chapter 4 expands on where it all begins: the acquisition of the rental property. Part II then helps you position your new rental property within the rental market and discover how to find good tenants.

Preparing the property

Before you can rent your property, you have to make sure it’s ready for a tenant to move in. However, you can’t simply put a For Rent sign up and expect to rent to the first caller. You need to spend some time properly preparing the property. And by “some time,” I mean a lot.

Relax! Tear up that application to those cable shows that completely renovate your fixer-upper for free, because you can prepare your property yourself. Just remember to focus on the inside as well as the outside. Chapter 5 shows you the best way to determine what to upgrade and renovate to meet the needs of your target market of prospective renters. I also explain how to ensure that your property’s curb appeal, or its exterior appearance, makes your potential new tenants want to see the inside of it and not keep driving by to the next property on their list.

During this stage, you really get to test your decorating skills on a budget because you don’t want to over-improve the property. But if you’re too tight and try to get by with anything less than your best effort, be ready for the majority of those individuals showing interest in your rental unit to be the least-qualified prospective tenants. The moral of the story? Don’t be cheap, but do be practical!

To get the great tenants, you need to guarantee your rental property compares favorably to other properties in your area and makes that important positive first impression. This impression starts on the exterior, with a neat and well-maintained appearance, and continues with a clean and inviting interior, with the features and amenities expected by prospective tenants in your area.

Properly preparing the unit also often requires the use of outside vendors or contractors. What you don’t contract out — tasks such as basic cleaning, maintenance, and painting — you need to do yourself. You also need to know how to perform a careful inspection to make sure the unit is ready to show. I give you details about how to accomplish all these tasks in Chapter 5.

Knowing how much to charge

Understanding what you can charge your tenants is far from arbitrary. Setting the rent in particular can be tricky — especially if you’ve just spent hours investing your time and sweat into renovating and scouring your rental unit to make it sparkle.

In such cases, you may overestimate the market value of your unit because you have so much personally invested. But your prospects aren’t likely to be impressed that you laid the tile. Instead, they’ll quickly point out that the carpet color doesn’t match their furniture, but if you lower the rent $300 per month, they’ll consider taking the unit off your hands, almost as if they’re doing you a favor. You may be able to structure some mutually beneficial rental concessions, but don’t be a pushover.

Many rental property owners are simply too nice. Maybe you’re someone who has trouble bargaining and holding out for the top fair-value dollar, kind of like my mother-in-law, a sweet but overly generous woman — especially when it came to yard sales. My wife and I are glad no one ever offered Rita 50 cents for our car!

In addition to setting the rent, you need to make the following decisions before a tenant moves in:

The amount of the security deposit: Setting security deposits is a function of not only market conditions but also limitations on the amount you can charge and whether that amount’s fully refundable. These restrictions are set by your state laws. Determining whether you want to pay your tenants interest on the deposits you hold is also subject to law, but certain advantages can warrant doing so even where not required (especially for long-term tenants).

The best way to decide on all the details of the security deposit is to conduct market surveys to see what others are doing. If everyone else has security deposits set at approximately half of a month’s rent, requiring your new tenants to come up with a security deposit of two full months’ rent upon move-in is difficult.

The type of rental contract: Another important decision that has lasting consequences is deciding whether a lease or month-to-month rental agreement is best for your property. Such conclusions are often reached after conducting a market survey and understanding the pros and cons of each type of contract.

Check out Chapter 6 for more info on determining how much to charge, setting deposits, and figuring out what type of rental contract to use.

Capturing prospects’ interest

A successful property manager needs to understand the role of marketing in creating demand and meeting the needs of local renters. Fortunately, your marketing and advertising possibilities have increased dramatically with the advent of the Internet and social media. You (or perhaps your teenage children) can develop a fantastic website with digital photos and floor plans. Just make sure you follow all the fair housing laws as you work to generate rental traffic.

In Chapter 7, I review the various electronic and nonelectronic options available for promoting your rental property and attracting prospective tenants.

Turning interest into property visits

The ways to attract potential tenants are endless, but the fundamentals of getting them to visit your property are centered around your ability to answer their questions on the phone. You need to understand how to qualify your prospects both for what you want in a stable, long-term resident and what they need to call your rental property their home for years.

Converting your e-mails or phone calls to actual property visits is the next essential step to creating maximum interest in your rental unit. Chapter 8 explains how to get prospective tenants to view your property.

The way in which you show your property to prospects is important. Avoid walking from room to room, stating the obvious. Instead, point out certain benefits of your unit’s unique or special features. Just don’t oversell the product and talk fast, like a late-night cable infomercial. Ultimately, the best technique for showing your property is letting the property itself make the right impression, as I explain in Chapter 9.

The best result you can expect to achieve at the property-viewing stage is convincing the prospect to complete your rental application and put down a holding deposit. What the prospect can expect from you at this time is the receipt of any mandatory disclosures.

Picking your tenants and signing the deal

Property management isn’t exactly like an online dating game, but you do want to gather information (while following all fair housing laws to the letter) and select a tenant who meets or exceeds your minimum written rental qualification standards. Tenant selection is probably the one single step in the rental process that can make or break you as a property manager, and I devote a lot of detail to this important topic in Chapter 10.

With tenant selection, what seems to be a fairly straightforward process can actually be tricky because of the various limitations on the questions you can ask and the information you can request from interested applicants. Follow the same procedure for everyone to comply with fair housing laws, and determine how you’re going to verify each prospect’s rental application. Be sure to select tenants based on objective criteria and then properly communicate your decision to both approved tenants and unsuccessful applicants.

Getting Your Hands Dirty: Managing the Property

You never hear from your tenants, yet the check seems to come in the mail each month. Managing your rental unit seems easy — just like you pushed a button! But after a year of progressively busting out with pride at your exceptional property management skills, you decide to drive by the property . . . only to find that your retirement plans and financial nest egg are candidates for a remake of Animal House!

In the next sections, I present the practical, in-the-trenches part of property management that can help you get familiar with every day-to-day eventuality related to the operational side of property management and the life cycle of a tenancy.

Moving tenants in and out

Coordinating the move-in of a new tenant is one of your most pleasant tasks because this time is your best opportunity to ensure your tenant starts out on the right foot by explaining your rental rules and guidelines. Chapter 11 helps ensure your move-in process runs smoothly.