When I moved from Massachusetts to Texas, I learned real fast how to automate my investment business.
I was always too involved with the business and didn’t want to pay other people to do things that I could do easily. The problem became that I was spending far too much time doing mundane tasks instead of being focused on earning more money.
I was the classic person who always worked “in” my business but never worked “on” my business.
Once I began to automate my investing business, my growth exploded. In one year, I doubled my portfolio from the previous 5 years combined.
Sure, part of this is due to the fact that it takes some time to get established.
But a large part of that is because I spent more time focused on growing and less time on mundane tasks like maintenance and paperwork.
- How to Completely Automate Your Real Estate Investing Business
- 1. Manage your investments without hiring a property manager
- 2. Automate Rent Collection For Free
- 3. Manage contractors without ever seeing them
- 4. Bookkeeping
- 5. Budgeting
- 6. Eliminate Paperwork
- 7. Sign Agreements Anywhere
- 8. Automated Mailings
- 9. Website lead generation
- 10. Automated Advertising
- 11. Automated social media
- 12. Automate email
- 13. Automate Buyer/Seller Screening
- 14. Customer Relationship Management
- 15. Crowd-source your calendar
- 16. Simplify your comparative market analysis
- 17. Automate Offer Making
- 18. If this then that (IFTTT)
- The 5 Key Rental Property Systems
- To Delegate or Abdicate – That is the Question
- System #1 – Leasing
- System #2 – Collections
- System #3 – Bookkeeping & Administration
- System #4 – Maintenance
- System #5 – Turnover
- What do you use?
How to Completely Automate Your Real Estate Investing Business
I break my business down into 3 distinct areas, but I’m in no way saying this is how your business needs to look.
- Operations – Management, maintenance, focused on what you currently own
- Admin – Income, expenses, accounting to help you make decisions
- Acquisition – Lead generation, analysis, purchasing future deals
I look at operations as the management of your current projects/portfolio. It’s an absolute necessity but it requires the most time and isn’t directly a revenue generating activity. I think this is the most cost effective category to automate first.
Most investors are pretty good at finding and maintaining their inventory but are really bad with the accounting and admin. Unfortunately, this is the stuff that will come back to haunt you.
Acquisitions are the most important part of your business. It’s also the only part of the business that generates more revenue for you. I would automate this last.
5-Step Investing System
We have spent years developing this process that has literally generated millions of dollars in value and a stable yearly revenue for investors.
1. Manage your investments without hiring a property manager
Probably the most time-consuming part of being a real estate investor is actually managing the property. I’m not talking about cutting grass and shoveling snow (you should have outsourced that a long time ago).
I’m talking about dealing with tenant complaints, listing vacancies, scheduling showings, taking applications, scheduling/doing inspections, scheduling maintenance….ugh
This is also the first thing you need to automate.
I was a hands-on landlord for a long time. I would go to my apartments, fix things, talk to tenants, collect rent…you name it, I did it.
I was growing slowly but surely. I was happy with my progress, but it is frustrating when you spend most of your time dealing with your current buildings instead of finding new deals.
Then I decided to move to Texas.
Suddenly we had to hire people to do everything I was doing before.
…And my business exploded! I doubled my inventory in just over a year.
If you don’t automate the management of your business, you’ll never grow. You’ll spend all your time fixing problems and dealing with tenants instead of finding more deals.
How to Automate Property Management Cheaply
The first thing that comes to mind is to hire a property manager. Of course, this is an option, albeit an expensive option. If you only have one or two properties in an area that’s far away from you, this may be your only choice.
The way I look at it – the management fee usually covers phone calls and a spreadsheet once in a while. Listing vacancies, maintenance, improvements, and anything else are all subcontracted and charged to you (with a management fee on top).
I wasn’t interested in paying 10%+ of my rent just to have someone else take the calls, so I follow a hybrid approach.
Hybrid Approach to Property Management
I chose to use Buildium for my property management software. It is by far the most comprehensive property management software that you can buy and it’s options are amazing.
Plus I can manage up to 50 units and still pay just over $100/month. It costs more or less depending on how many units you have.
$100 might seem like a lot, but it’s actually pretty cheap considering a property manager would charge me $3,000/month just to take phone calls.
Buildium also helps me coordinate directly with my handyman or other service people. I can have someone do inspections and send them via pdf, and tenants put maintenance requests through it as well (with pictures).
Tenants have an online portal where they can submit maintenance requests and also pay the rent.
This makes rent collection far easier. Instead of chasing down rent, you just have to let them pay online. You only have to knock on their door if they don’t pay.
Buildium can also keep track of your expenses, income, and produce the necessary reports.
Granted, not everyone will be able to get all their accounting needs met with Buildium, but I bet 80% of normal investors will be satisfied with it.
2. Automate Rent Collection For Free
I found this little gem recently. Over at Properlyrent.com, there are some cool free features for both landlords and tenants.
The feature I like most is that tenants can pay the landlord via automatic ACH monthly through Dwolla. It doesn’t cost the landlord or the tenant anything at all.
The tenant also has control over applications and credit/background reports. Many states don’t allow landlords to directly collect fees for applications, and there are laws about the security of personal information such as the tenant’s SSN.
With properly, tenants actually pay for the report themselves and then share the reports with the landlord after all the private information has been stripped out. The tenants also get access to it for 30 days, which means they don’t have to pay multiple application fees if they apply for multiple apartments.
When I started automating my real estate investing business a couple years ago, I really wish Properly existed. They are new to the scene and just started 2015. They have some new tools coming online soon, so make sure you check back from time-to-time.
3. Manage contractors without ever seeing them
You can’t have a completely automated real estate investing business until you’ve somehow managed to deal with contractors remotely.
SmartSheet is an amazing product that is recommended by both Microsoft and Google.
It integrates with Salesforce, Dropbox, DocuSign, Microsoft, Google, Evernote…and the list goes on.
You can get multiple people on your team working with it, track progress, and automate processes, and provide roll ups for reporting.
Every sheet is customization. You can add discussions and files and attach it to rows to keep things flowing and looking clean.
Plus, this sweet product only costs $10/month for basic users.
It was really easy to automate bookkeeping. I made a stack of receipts, left them on my wife’s desk, and they mysteriously disappeared that night. The greatest part – A profit/loss statement randomly appeared on my desk the following day.
I’m still not sure how it works, but I clearly have a magic desk ( ;-)Hi honey ).
All jokes aside, this was actually the hardest thing for us to automate. If your books are too complicated for Buildium, you will need to do two things.
Step 1: We started to automate this last year, we started by scanning all receipts and documents into PDFs then saving them on our Microsoft OneDrive. It’s like Google Drive or Dropbox, but it comes with our office 365 subscription and also has 1 Terabyte of storage. Yes, that’s 1024 Gigabytes.
Once we did that, we were on the fast track toward automation. Now any contractor can simply snap a pic of a receipt and email it to us, and we’ll just slide it over to the appropriate folder in the OneDrive. This saves us hours and hours worth of filing and managing paperwork.
Step 2: Outsource your bookkeeping.
You can hire a local bookkeeper that can spend a few hours or a day each week to do all your bookkeeping.
I was also able to find a great online bookkeeper called Bench.co. There are a lot of sites out there, but these guys really have an end to end product that can fit most businesses.
Once your records are all digital, you can really go either direction and be fine.
Are you still budgeting on paper…or perhaps excel?
Take a step up for $5/month and check out You Need a Budget. It is budgeting software geared toward the smaller end, so I would not recommend this for a person with complicated budgeting needs.
It will work if you are trying to track expenses for yourself and your first project.
I jump straight to advanced because….there simply isn’t anything in between.
Once you graduate from basic budgeting, you need to get QuickBooks or QuickBooks Online. There is simply no way around it (unless you get on with Buildium and hire a Virtual Bookkeeper). For the rest of us, we need QuickBooks.
I’ve been using Quickbooks for about 3 years now, and my taxes, accounting, and budgeting are far easier and way more advanced than it’s ever been before.
If you use QuickBooks Online, you can have access to an app that allows you to snap a pic of your receipts and save them automatically, rather than scanning and saving to your OneDrive.
Though this isn’t a full “automation,” we are saving many hours every week.
6. Eliminate Paperwork
To be completely automated, you need to eliminate paper. After moving to Texas, I turned my entire business digital; I don’t maintain any paper documents anymore except a few super important documents.
There are a lot of cloud based options now, but I use Microsoft OneDrive which comes bundled with my Microsoft Office 360 subscription.
Sure, some of you are worried about storing everything on the cloud (me too), but I think this is the future.
Basically, I get the latest version of Microsoft Office on all my devices (awesome) and it comes with 1 Terabyte of online storage for free. I then add OneDrive as another folder on my computer and just drop all my files into it.
It syncs up with my computer in an interesting way and when accessing the OneDrive folder, it’s literally exactly like accessing a normal folder. It’s even available offline!
Then you install the OneDrive app on your phone and all your files sync across all of your devices. I can access any document, at any time, from anywhere.
7. Sign Agreements Anywhere
If you receive a document that you need to sign, how do you get it signed and sent back?
Right now you open the file and print it, sign it, scan it, then email it back.
What do you do if you want to go on vacation? How to you remotely handle your real estate investing business? Do you own a portable printer and use an app on your phone to scan? I’m sure that’s convenient.
If you’ve ever negotiated a real estate deal, you know that you’ll send the same document around 4 or 5 times until it’s pretty much illegible.
Then you get that one agent or seller/buyer who just doesn’t understand technology, and every time they scan it in crooked or with black lines.
It’s just a disaster.
That’s why I got a Microsoft Surface Pro.
This is literally a 3-in-1 computer which let me throw away my laptop, desktop, and 2 tablets. Well, I actually gave one of the tablets to my daughter.
Anyhow, it can dock and extend the screen to your two monitors at your desk, or go mobile with the detachable keyboard. It also works as an amazing tablet.
But the really cool feature is how you can integrate the pen directly into any Office 360 program.
Sign any document, anywhere.
I can write a letter to a tenant and sign it in Microsoft Word.
I can sign pdf offers or a Purchase and Sale agreement, then email it back without ever printing it.
It’s just amazing. It has freed me from my office and now I can take my business anywhere in the world, simply because I own this cool little device.
8. Automated Mailings
If your business generates leads through mailings, yellow letters, postcards, or other mail, then you need to check out yellowletters.com.
You can simply upload your documents, your mailing list, and select what product you want, and they do the rest.
Oh, and if you use the Promo Code “EricBowlin” you can get 10% off your order.
It’s pretty cool because you can choose colored envelopes, simulated hand written yellow letters, post cards, flyers, anything you want.
If you don’t have a mailing list, you can buy one from them too.
It’s the ultimate way to automate your mailings.
9. Website lead generation
When people have a problem, the first thing they do is hit the web and search it. So, if you want them to find you, you need to be on the web.
Sure, it’s cheap to start a website, but is anybody actually going to find it?
Trust me when I say this, a website requires a long-term commitment to researching keywords, promoting your site, creating quality content, and maybe you can get to the top of the search results.
But probably not.
Unless you are spending all your free time doing research about your site, you probably won’t learn all the intricacies required to get to the top page.
OnCarrot will set up your lead generation site based on the type of business you are running. You can choose from pre-made optimized articles, then schedule them to be published.
Once you select the content you want, simply edit the content to change the location and adjust the information to meet your goals.
Personally, I would edit the colors, images, and at least 50% of the content so when someone searches online and finds you and another competitor using onCarrot, yours will not look the same as theirs. Also, Google doesn’t like content that is duplicate.
If you already have a website up and running, then just grab their quick SEO Bible to help you work on some content and articles to help you drive traffic.
If you are too focused on making deals happen to study and become an SEO expert, then outsource it to a company like onCarrot.
10. Automated Advertising
The cool thing about doing research for an article like this – I get to find and try out some cool new things!
I discovered a “robo-advertising” agency named Needls that helps you create and target your ads. It’s hard to explain, especially for an advertising neophyte like me, so just watch this video.
I’ve played around with Facebook ads and it really is hard to produce quality ads that convert. Needls is supposed to help with this.
It’s also pretty cool that they scan and target individual people based on their activities. If someone is talking about not being able to sell their house and you are a house wholesaler, your ad should start targeting their feed.
But, it does start at $100/month. This is far less than an ad agency, but you need to make sure you have a dedicated marketing budget before you can justify this expense.
11. Automated social media
I don’t have all day to spend posting and tweeting every couple hours.
I definitely don’t have any way to engage with readers from overseas, since I’m asleep when they are awake.
So I decided to automate it.
If you use Twitter, Facebook, Instagram, Google+, or others to engage with your buyers, sellers, or other clients, you need to get on board with Hootsuite.
Honestly, I don’t know how they make money because I do everything for free. I schedule out an entire week worth of tweets and posts, then forget about it until the following week.
All I have to do is interact with people when they comment or share…which I like doing anyhow.
12. Automate email
As your marketing systems with Yellowcards.com and onCarrot.com gets started it will take time to generate a continuous flow of leads.
At first, you can probably handle the flow.
As your marketing matures and begins to really churn out leads, you’ll need to automate your email follow up.
Step 1: write down the system you are using to screen and nurture these leads. Step 2: to automate it with MailChimp.
They offer a free entry-level plan that never expires. It’s not a 30 day trial or anything like that.
Once you get over a certain number of monthly subscribers, then you need to upgrade to a paid plan.
You can set up drip feeds and other automations to keep your list warm or further refine your potential clients.
13. Automate Buyer/Seller Screening
First, you need to have a screening process that will help you take the information down and qualify leads.
Then, go hire a Virtual Assistant. There are a ton of websites, but I have used Upwork.com many times to get odd-jobs done dirt cheap.
I wish I had some cool software, app, or service to show to you, but this step is really quite simple.
With Upwork, you can definitely hire someone and pay them per screened lead or per phone call. Just start with the screening card I provide, then add to it to make it fit your niche and needs.
14. Customer Relationship Management
Now that you have someone else generating all your leads, taking your phone calls, answering your emails, and screening deals, you need to manage the relationships so no one slips through the cracks.
If your fairly large or sophisticated, you can use the leading CRM tool out there, Infusionsoft. If the $200/month starting price tag is too much for you to stomach, you can also try out Insightly.
Insightly is also a ffeature-richCRM tool starting at $0/month, but you’ll probably end up on the $15/month plan pretty quickly.
I don’t deal with enough people to need a CRM tool, so I won’t go into crazy details on it. But I have needed to use CRM software in the past when I was doing business that involved a lot of leads and clients.
15. Crowd-source your calendar
Client: “Let’s set up a meeting or phone call, when are you available?”
You: “I have Tuesday afternoon and Thursday morning free.”
Client: “I can do Tuesday at 2, or Thursday afternoon”
You: “I’m already booked at 2 on Tuesday, can you do 3?”
Client: “No I have an appointment at 3, how about Friday instead?”
I know you’ve done it. You spend so long scheduling the meeting, you could have just had a meeting instead.
Or, you can crowd-source your schedule. With Calendly you can send your schedule to your client and just have them block off the time that works for them.
You can embed it into your website, integrate it with Gmail, Mailchimp, or others, and it’s free (or $8/month for all the features).
16. Simplify your comparative market analysis
I’m personally not at this level yet. I don’t spend a ton of time writing offers, plus I spent time as a real estate agent, so I can easily do my own CMA pretty quickly.
If you need a quick refresher on how to do a CMA, check out my article on doing comparative marking analysis.
If you’re a high volume real estate investor, you definitely need to automate this, or at least speed it up. So, if you’re spending a ton of time on CMAs, or just need some help, here are a few options.
Use a Real Estate Agent
If you are generating a lot of sales, you may be able to get an agent to do your CMAs for you. The easiest way to automate anything is to simply hire someone to do it.
There are a lot of agents that are very good at doing the numbers, but don’t have a strong referral base. They may be looking to do some side-work to make ends meet.
You could easily find one and offer to pay a fixed fee per CMA. You’d get reliable results even if it is the most expensive option.
Use Software to Help
Software can help speed up the process for you, even if it doesn’t completely automate it. I have found a couple full featured subscription based sites that can help.
These products are generally used for presentations, so you will be paying to make it pretty, but it does provide the framework for you to make quick and easy CMAs.
Plus, they have free trials.
17. Automate Offer Making
I don’t think I would personally automate this part of my investing business… but I know people who have. Then again, I’m a buy and hold real estate investor. I buy less often and want every deal to be great.
For those of you who are wholesalers or high volume flippers, you may want to automate making offers.
You could hire someone to do it based off a spreadsheet you made. Problem is, you’ll be giving out all your numbers and secrets to anybody with the spreadsheet.
Your secret sauce will be safe while you can hand it out to a select few individuals with a company tablet or phone.
They can take the data off the calculator and pop it into offers before sending them out.
18. If this then that (IFTTT)
Logically, automating offer making should come last, but I decided to close out with IFTTT. The reason is because you can automate just about anything that you do on your computer.
Just think about your tasks in a logical fashion and build the task.
- If I post to Facebook, then tweet the first 140 characters of the post.
- If I post something to WordPress, then post the image to Instagram.
- If I send an email with Mailchimp, then tweet the links
The only limitation is that you need to do something with a supported application (there are almost 400 of them).
It includes the basics like email, Twitter, and Facebook, but it even includes integration with appliances, your car, or air purifier.
The 5 Key Rental Property Systems
Systems permit ordinary people to achieve extraordinary results predictably … Systems run the business and people run the systems.” – Michael Gerber, The Emyth Revisited
Here’s paradigm #1 as the CEO of your real estate investment business. You need systems.
And every part of your real estate business can be systematized. When documented physically or online, these systems become what’s called an operating manual for your business. Originally I had mine in a 3-ring binder, but today I keep it online in a set of shared folders on Google Drive.
A business system is just a documented process of doing something. For example, the monthly processes of keeping good accounting books is a system. It often looks like a checklist or a set of instructions. The system both tells you the expected result and the current best practice to get that result.
Systems can get very detailed. My personal real estate investing operations manual contains checklists, forms, contracts, software, and more. You can find a lot of your local documents and best practices networking with other investors.
Here are the 5 rental property systems that I’ll cover:
I’ll explain each one of these systems in detail. But first, I want to begin with an important distinction: delegation vs abdication.
To Delegate or Abdicate – That is the Question
If manage your properties and do everything yourself,you will follow these processes yourself. You are both the creator and the person running the system. But if you outsource some of your systems to someone else, like a property manager or a bookkeeper, you have chosen to delegate.
While this sounds good, many real estate investors and business owners think they delegate but instead, they abdicate their responsibilities. I know, because I’ve been there! I’ve asked contractors to fix things without correctly delegating, and the results were the opposite of what I wanted.
Delegation means you, as the business CEO, hold a person accountable for expected results. Abdication, on the other hand, is sticking your head in the sand and hoping the other person gets done what you need. With abdication, you’ve given away your responsibility as the CEO to ensure the systems work.
Delegating does not mean you need to micromanage. Depending upon the size of the system you’re delegating, you may just have one upfront conversation to clarify expectations. But for bigger projects, like outsourcing your entire property management operation or hiring a bookkeeper, plan to have more in-depth training and discussions to ensure the person understands and can execute the business systems as you want it.
That is why the content of this article is important whether you will do everything yourself or delegate 99%. If you want to enjoy peace of mind as an owner of a rental portfolio, you need to have clear communication with the people on your team entrusted to do things for you. The systems that follow will be the framework to help you do that.
System #1 – Leasing
Leasing is the system that quickly fills your rental properties with qualified tenants that take care of your property and stay for a long time (at least that’s my goal!). As you may have experienced, not all tenants fit that qualification. And as I’ve experienced, it sometimes takes longer than I like to fill the property.
But a system will ensure you apply the best techniques to accomplish your leasing goals. And as you learn new techniques (like from all of the RealEstateInvesting.org articles!), you can improve and replace your existing systems.
I actually have 5 sub-systems within the leasing system. Each has its own checklists and instructions. I’ll summarize each of these sub-systems here.
Lead Generation For Tenants
This is the process of telling the world about your rental property so that prospective tenants contact you and want to apply. In some cases for your most popular properties, you won’t even need to promote it. Your existing tenants will just their friends and they will call YOU to be first in line when the existing tenant leaves. This is a BIG reason to buy in-demand properties, by the way.
But for normal rentals, you need a process of advertising online, taking good photographs, describing the property well, printing flyers, putting up signs, and then managing all of these promotion channels.
In terms of advertising online, most of my own prospective tenants come from free websites like zillow.com, trulia.com, craigslist.com, and other local websites. You can do a google search for your area to find the websites most tenants use.
Once a tenant shows interest in a property, they’ll usually want to view the property before applying to rent it. You want a system at this stage so that you can track how many people are viewing the property and so that you can manage your time.
This system begins with great photos and videos of the unit. You’ll be surprised that some tenants will rent a property without visiting in person if you provide a great online tour. This is especially true if the tenant is moving from out of town.
But when people do want to view the unit, you have a few choices for showings:
- Drive across town on-demand to show the unit (not recommended)
- Schedule open houses 1-2 times per week
- Put a lockbox on the property and give pre-qualified prospects the code to let themselves in (my favorite)
I prefer #2 and #3. If the house is occupied, someone will likely need to meet the tenant to let them in. In this case it’s best to schedule 1-2 open houses per week. Don’t be afraid to keep these windows of time relatively short, like 30 minutes or an hour. If prospects see other prospects viewing the unit, that will only incentivize them to move fast!
For 12+ years we have used lockboxes to show our vacant rental units. After a phone call to prescreen them a little bit we give them the lockbox code. On the initial phone call we ask general questions like why they’re moving, when they want to move-in, whether they have pets, where they work, etc. Then we write down what time they are going, and we ask them to lock the door behind them and text or call us when they’re done. We used to leave flyers and applications on the kitchen counter, but today all of our applications are done on our website.
This is one of the most critical systems of the entire rental business. Don’t short-cut it! And trust me, when you have a vacant unit hemorrhaging cash flow you will REALLY want to short cut it. In the long run, however, you’ll lose more money than you gain by lowering your tenant standards.
The goal of this system is to objectively screen tenants to ensure they qualify. I hope you know by now, but you can not discriminate based upon qualities like race, religion, national origin, sex, age, disability, or familial status. But you can and should screen tenants for other criteria that demonstrate their ability to pay and to be a responsible steward of your property.
I recently had a guest post from a national expert on tenant screening. She wrote a fantastic step-by-step guide to screen for the best tenants, including a helpful infographic you can print as a reference. But in summary here, you can screen for things like:
- Employment status
- Debt to income ratio
- Prior landlord references
Be sure to document your tenant screening criteria in writing and communicate them with your property manager, if applicable. And once you have these in writing, stick to them. You will get yourself in trouble with the law and with your own cash flow by deviating from your stated criteria.
I once read a great property management book called Landlording on Autopilot by Mike Butler. His own systems included something called a “Rent Talk.” This was a one-hour meeting with the tenant to review the lease, receive their upfront money, discuss the landlord rules and expectations, and listen to any questions or concerns of the tenant. I think it’s a great idea.
At the meeting, the core document is your lease (aka rental agreement). If you have your real estate license, you can probably get a reasonable lease from your local Realtor board. You can also get leases from property management seminars and courses, from your local attorney, or from online document resources like at BiggerPockets.
The important point of this system is to communicate clearly your expectations and the consequences (aka late fees and an eviction) if the rules are not followed.
Once you’re tenant signs the lease and pays their deposit and first month’s rent, it’s time for them to move in. I have a checklist to remind us of the taks involved at this stage. It includes things like:
- Ensure we have current video/photos of unit’s condition prior to move-in
- Give and receive tenant walk-through inspection checklist (or meet in person)
- Transfer utilities out of our name before move-in day
- Remove staging materials and lockbox from unit
- Leave tenant welcome package & house-warming gift (we plan to start this one soon)
- Add tenant lease information and documents to accounting/property management systems
As we forget different tasks and it costs us money, we end up adding to the checklist to make it longer!
System #2 – Collections
The collections system occurs once your tenant has moved in. This system is the lifeblood of your business, because it ensures you receive the cash flow that pays for your expenses and hopefully eventually pays for your financial freedom!
Collections fall into two categories:
- Regular collections
- Delinquent collections
For regular collections, our system goal is to make it easy for our tenant to pay us and easy for us to process it. We give them a few options:
- Online payment directly to your account
- Physically deposit with a teller at our bank
- Mail to our PO Box
Well over half of our tenants pay online, and the number is increasing. And we try to discourage mailing payments because of the delay and potential for getting lost (which leads to a late fee for the tenant). You’ll notice none of these require us physically being there to collect money. We don’t have an office, and we prefer to automate or outsource this as much as possible.
For delinquent collections, the key is to be fair, fast, and firm. Tell your tenants during your initial leasing appointment when the rent is due. Also tell them when late fees begin and when you’ll be filing an eviction if no payment plan has been agreed to. Then stick to your system.
Here is a summary of our delinquent collection process:
- Rent due on the first.
- After 5 p.m. on the 5th of the month, a late fee is incurred.
- A call, text, and/or email will be made on the 6th to inquire about unpaid rent.
- If we receive no response or do not notice proactive effort from the tenant, we file an eviction immediately. In South Carolina, we do not have to mail notice if the proper wording is in our lease. If that’s not the case with your state, you’ll have an additional step to give official, written notice to the tenant of their delinquency.
- We prefer to work with the tenant to stay. So, if they can demonstrate means to pay us back in a reasonable period of time, we will work with them and cancel the eviction.
- If the tenant ignores us or cannot catch up, we proceed with the eviction until the tenant moves (typical) or until the Sheriff comes with us to set them out (rare).
Being fair is both good business and the right thing to do. If the tenant has the ability to pay even though it’s late, it usually makes sense to work with them. But many amateur landlords go too far the other way and are not fast or firm.
Letting a tenant live for free is not fair to you, to your financial partners, to your lenders, or to anyone else you have the obligation to pay if your tenant does not pay you. That’s why this system is important. It helps you to be objective, because this can be a very emotional part of the landording business.
For another perspective on what to do with a delinquent tenant, read Eric’s What to Do When a Tenant Is Not Paying Rent.
System #3 – Bookkeeping & Administration
Bookkeeping and administration is the system that keeps your business finances and your paperwork organized. This system is very important for your tax purposes and for the efficient management of your business affairs.
Like everything else, you should make checklists for your own personal systems. But here are some of the important tasks we have on our bookkeeping and administration checklists:
- Reconcile bank and credit card accounts by the 5th of the month
- Label and correctly enter all transactions into accounting system (we love Avail.co for property management and Quickbooks for our rental accounting).
- All paperwork, receipts, & records scanned, uploaded, and organized (we’ve gone paperless using Evernote.com)
Quarterly and Yearly:
- File federal and state payroll reports and make withholding payments
- File annual 1099, 1098, W2, and FUTA/SUTA forms
- Prepare books for tax return filing
- Annual corporate meetings and file minutes
Then there are tasks that I (the CEO/owner) still handle and plan to handle indefinitely in the future.
- Sign all checks or send online payments (never give this up!)
- Enter HUD-1 statements into Quickbooks after a purchase or a sale
- Final audit of books for tax return filing with CPA
- Handle miscellaneous problems, anomalies and rabbit holes (and bookkeeping holes can be dark, deep, and unpleasant!)
- Oversee bookkeeper and administrator’s tasks
When you have well a well-run bookkeeping and administrative system, you can spend your mental energy on other important tasks like making money!
System #4 – Maintenance
I think the number one complaint I get about directly owning rental properties is the potential for maintenance calls. But if these people only learned how to build a system around this aspect of the business, the challenge would become a non-factor.
The maintenance systems in our business can be divided into Urgent and Preventative.
You can avoid maintenance crisis by building a good team of subcontractors. Here is a list of some of the important subcontractors you’ll probably need:
- Plumbers (multiple)
- HVAC techs (multiple)
- Electrician (multiple)
- Appliance repair
- Lawn service
- Pest control/moisture control
- Gutter and vinyl siding contractor
It may take some time up front, but as you build relationships with trustworthy contractors, you can learn to depend upon them to handle issues even without your presence.
For example, I specifically remember calling my plumber about a hot water heater leak while I was traveling. My wife and I were about to visit a penguin colony on the southern tip of Chile in South America! The call took 2 minutes, and he handled the rest while I visited some penguins.
You can prevent many maintenance issues from becoming urgent by performing regular, preventative maintenance. Here are some of the items we have done regularly:
- Check roof for nail pops, lose shingles and other potential water entry points
- Clean debris off roof and gutters
- Change HVAC filters
- Clean and inspect HVAC system, mechanical parts, and duct work
- Check electrical breaker box and service lines for problems
- Check all sinks and tubs for leaks
- Caulk and reseal areas exposed to water (bathrooms, kitchens, exteriors)
- Spray for bugs (especially down South)
- Enter the inside of units to check for other misc problems
My business partner and I also like to at least annually (often more) ride around to each property and make a list of any issues or upgrades we’d like to make. We then hire a contractor during a slow time of this schedule to make some of these repairs.
System #5 – Turnover
The final rental property system has to do with the turnover time between tenants. This could be as short as a couple of days (my favorite) or a month or two (not good). Here are the goals we have for our turnover system:
- FAST turn-around time. Every day of vacancy costs money.
- A high standard of property condition and cleanliness that you can hold your tenant to.
- Fixing problems and perform preventative maintenance as needed.
There are a couple of sub-processes within the turnover system.
Tenant Walk-Through Inspection & Return Security Deposit
This is an important and often contentious part of the landlord-tenant relationship. You need to walk through the property after a tenant moves out in order to determine if they have caused damage or failed to clean the property. If so, you will need to deduct money from their security deposit.
Some landlords are completely unfair and keep too much of the tenant’s security deposit. But some tenants treat the property poorly and cost the landlord a lot of money.
The key to this system actually begins with the lease signing and tenant move-in process in system #1. If you clearly explain your expectations and document the initial property condition, you can avoid a lot of problems later on. We also like to take a video before a tenant moves in so that we could show them evidence of before and after.
I used to spend a lot of time walking through properties and making punch lists for our contractors to fix before the next tenant moved in. Then it dawned on me that I was doing extra work!
We decided to make standard punchlists for the following categories that always come up during turnover:
Spend a lot of time on the front end creating detailed expectations for your contractors (instructions are helpful too). They can then print off this checklist and use it as a guide. Sometimes there are repairs needed that aren’t on the checklist, and either the contractor or the property manager will catch these while the other work is being done.
One important part of this system is your choice of paint (yes paint!). I recommend using a standard paint color and brand for all of your units. We actually found that the less expensive, Sherwin-Williams contractor paint touched up the best. Because we use one paint color for walls and another for trim, we can buy in bulk and use up every drop of a can. We can also touch-up or just paint one wall instead of painting an entire room.
This is a big savings!
What do you use?
I covered a lot here, but I can’t cover it all.
I’d love to know what you are using to automate your business! Add your comments below.