I will say this time and again, renting homes is not rocket science. It is a disciplined approach to systems, the law, and your communication with the tenants. I have already wrote about some of the common mistakes DIY landlords make, so after reading this, check that out too.
Before I start, however, I want to make sure you’re jumping into self-managing under the right pretenses. Being a landlord is not for everyone. Alternatively, some folks are fine on their own.
But first…
Some Reasons Why You Should Not Self-Manage
1) Litigation.
Washington State has some of the most tenant-friendly laws in the nation. This will only get worse as the years go by. Professional property management companies understand these laws front and back. This includes Fair Housing laws, required timelines on notifications and addendums, eviction procedures, and plenty others. We are not lawyers, but we know enough to keep ourselves and our owners out of trouble. The vast majority of our DIY landlord owners come to us because they don’t want to deal with this headache, and rightfully so.
2) Remotely Managing.
Having someone on the ground to look at your property is crucial. If you think your trusted handyman or broker is going to drive by your home every time you need, you’re wrong. That relationship will only last as long as you pay them. And in that case, you might as well pay a full-time professional to look after your home.
3) Contractor Relations.
Many property management companies have strong relationships with vendors that will get them discounted volume-based prices. They may even have them in-house too. In addition to this, they know who the good vendors are. You won’t have to do any vetting process on your own dime.
4) Advertising.
Vacancies crush cash-flow. Professional property management companies have powerful software that syndicates your listing to as many potential applicants as possible. Additionally, they have a large network of tenants internal to their network, making it quicker to source qualified tenants to your home.
Alright, those are our top four. Are you staying local to your rental? Open to staying abreast of federal, state and local laws? Comfortable with maintenance and advertising? Then maybe being a landlord is for you.
Let’s get into it.
How to Self-Manage Your Property:
1) Understand Federal, State, and Local Laws:
Understanding federal Fair Housing Laws and other state and local statutes is imperative if you intend to rent your home yourself. If you live in Washington State, we have some of the strictest tenant-friendly laws in the nation.
Federally, the best resource is with Housing and Urban Development (HUD). We recommend going to their website and educating yourself as much as possible. At the state and local level, you need to be smart too.
For those of you who live in Washington, the Revised Code of Washington (RCW) spells out pretty much everything you need to comply with. This includes notices and other processes you must abide by. It’s a big list, but you need to be educated and know how to handle each situation you may find yourself in. Other states will likely have this same resource. It’s a Google search away.
2) Screen Your Tenants
If you read nothing further: stay firm on your criteria. Do not deviate.
A one month vacancy is better than an eviction process. It only takes one time to learn that lesson the hard way. As always, ensure your screening criteria stays within all legal requirements.
We recommend:
Credit Score of 650 or above
Monthly income is 3x the monthly rent (Example: if rent is $2,000/mo, they make $6,000/mo)
Proof of income and financial responsibility
No previous evictions, notices to comply, or money owed to landlords in the past 12 months
No smoking
First, Last, and Security Deposit due at signing
We will give you discretion on pets. Just know that approximately 50% of households in America have pets now, and that number is only growing. If you accept pets, always have a pet deposit or a monthly fee that will cover the required cleaning and repairs when the tenant departs.
3) Advertise Your Property
The best free resources to advertise your property are:
At the time of writing this, Zillow is king. Over 90% of traffic will come from Zillow. Trust us, you do not need the premium version.
The above three websites will syndicate your property, for free, to over 20+ other platforms. That's about all you need. You will have to use three different logins to communicate with potential tenants, but it’s still pretty easy. They even do credit and background checks too. In fact, in the early days of Up First Management before we had slick software, this is how we did it!
4) Sign Your Lease and Required Addendums
If you are managing your property on your own, you need to take it seriously. Therefore, I highly recommend investing some of your money in a Bigger Pockets membership and using their leases. They update them frequently, are reviewed by lawyers, and have most/all required forms for every state.
In addition to that, you need to check your state and local requirements for addendums. These can include a lead addendum, crime-free addendum, or even city-prepared documents that explicitly tell the tenant their rights (like in Tacoma and Seattle).
This doesn’t have to happen in-person either. Docusign is an online tool for signing contracts and will be more than adequate for you as a DIY landlord.
5) Collect Deposits and Rent
Thousands of resources exist to send or collect money. You can use paper checks in the mail, monthly direct deposits, Venmo, Zelle, or any number of software that exist. The most important thing you can do, however, is maintain a property accounting of funds. You should audit yourself quarterly to make sure you have all your funds straight. Because of this, we recommend having a separate bank account for your rental income.
As a DIY landlord with maybe 1-3 properties, Microsoft Excel can get the job done. Once you upgrade beyond 10 properties, we recommend Quickbooks or, even better, a full on professional property management software.
6) Have A Strong Contractor Network
Having to sort contractors out on your own is difficult, especially when it’s your money on the line.
First, when working with a new contractor, let them know you have a rental property (or several) and you intend to find a trustworthy person for the profession they’re in. That way, they may be open to a volume-based discount (if you have several homes), or they will be more inclined to be meticulous on your job, in the hope of return business.
Second, search some key words on Facebook for local real estate investing networks. Try, “real estate investors [your town/state]” and see what comes up. Once you’re a member, shoot a line out there asking for the specific trade you have. DIY real estate investors have been found to be helpful in vetting these folks. Wise people learn from the mistakes of others!
Third, ask a local real estate agent or property manager for their preferred vendor list. Seriously! These exist and more often than not they’ll be willing to help you get the right person, especially if you can refer their name for them.
7) Stay Disciplined!
We highly recommend using the Bigger Pockets Forums to ask your questions. You can also look at all previous questions asked there and get educated. The community on Bigger Pockets is outstanding. We also recommend reaching out to your local real estate investing groups on Facebook to stay in touch with ongoing legal changes that will directly effect your market.
Lastly, stay on top of things and stay motivated! People say real estate is “passive income” but if you’re self-managing you will find that it is definitely not. Hah!
If all else fails, shoot us a line and we can answer a quick question for you. Or, if all of this sounds like too daunting, give us a shout and we would be happy to discuss being your property manager.
Best of luck!
