If you missed our post on our diversified real estate holdings (sounds so grown up to call them that, huh?), here’s a quick catch up on our little rental duplex.
We bought our duplex in 2010 for $50K and immediately put about $8K and 6 months of weekend sweat equity into it to bring it up to rentable standards. (We’re not trying to be slumlords, here.) The duplex has two units, each of which are ~900 sqft 2 bed/2 bath units with full kitchens and laundry facilities. It’s located about 15 minutes from the local university, and about 25 minutes from our house, sitting in a nice-ish rental heavy area of town.
We don’t have a property manager for our rental units. We do most of the repairs and maintenance and property management on our property ourselves, and occasionally find ourselves helping out with the property management on the duplex that Mr. PoP’s parents also own in the same neighborhood. So, since we’re “active” investors in this “passive income stream” – what do we actually do?
How we make good money by being good landlords: (click to tweet)
1. Get Good Renters. Easier said than done. Our ideal renters are quiet-ish college students who have mommy and daddy still willing to cosign since their credit history is short. So how do we find them?
- Craigslist is practically useless around here, no offense to those that use Craigslist to search for places (we’ve both done that before buying our house). Overwhelmingly Craigslist-ers are trying to move in without paying a security deposit, or stand us up for appointments to check it out. But we still post on their to make sure we’re getting good (free) advertising coverage; it just takes a bit more work to find the diamonds in the rough of Craigslist callers.
- Advertising with flyers on the college campus actually works – we paper all the departments and dorms with bright orange flyers, making sure we get places like the honors college and laundry facilities. There’s nothing that makes a student want to move off campus more than the ability for them to do their laundry in their home and not drag it to a laundromat.
- Referrals are amazing. Whenever we have a unit available, we offer between 1/3 and 1/2 of a month’s rent to all of our current renters as a referral bonus when a 1-year lease is signed. Our most recent referral offer was for $250, and that’s good money to the college kids around here, so you can bet they told all their friends they knew a place was available.
2. Hold Their Hands A Little When They Move In. Because of how we like our renters (young with mommy or daddy to back them) sometimes it’s the first time any of them have to do things like set up utilities, start paying bills, and write checks.
- Almost half of our renters make mistakes when filling out some of their first checks. They write the amount on the wrong line, leave our names off the check, forget to sign it. You name it, we’ve seen it by now. But, we show them the error, and get another check from them. We don’t charge them a fee the frst time; they’re still learning this stuff.
- Have a good relationship with your renters. Mr. Pop does the handy-man work, the lawn work, and is always available on moving-day. For college kids, signing a lease can be a big deal, and a little scary, so we’ve found its a good idea to have a strong relationship with our tenants, and make sure they know we appreciate them keeping our rental units clean and un-damaged. Its easier to pay late rent to a faceless corporation than it is to stiff your friend who happens to also be your landlord.
3. Be On Site And Available.
- Mr PoP is generally at the property about once a week, taking care of the lawn, so the renters know he is always available if something goes wrong. We’d much rather hear about a leaking faucet when it starts than find lots of water damage when they move out.
- When we’re out of town, we give the renters phone numbers of other people to call if they can’t reach us and something needs to be addressed immediately.
4. Have A Sizeable Cash Cushion
- You don’t have the option to postpone repairs. With renters, you have a contractual obligation to provide upkeep on the unit so that it remains in the condition they rented it in. If the washing machine or the AC dies, as we had both happen in a single month this year, you absolutely have a contractual obligation to get them working again ASAP. And doing so means having enough money on hand that you don’t have to mess around and can just get the job done.
So yeah, being a landlord the way we do it isn’t a walk in the park. We could hire a property manager, but for starters, they would take a cut off the top, and we’re willing to work a bit for the money. (We think of this as our “side hustle” of sorts. More importantly, though, a property manager has very little skin in the game. They’re not going to go the extra mile to make sure you have renters who will treat the place with care and always pay on time. They’re also not inclined to get you the best prices if they ever need to outsource repairs on your behalf. If something breaks, they’re more likely to hire their buddy who gives them a referral fee than they are a highly respected and recommended contractor. Why pay extra for that kind of service?
Have you ever been a landlord? What’s your experience been like? If you were a renter, what were some of the things you did or didn’t like about your landlord or apartment upkeep?