Today, property investment has become one of the fastest-growing investment strategies for young entrepreneurs. Although real estate investment is one of the most successful methods of generating passive income and offers investors great tax advantages and stable cash flow, it is not without its challenges. Jason Cohen, a Pittsburgh real estate investor with more than ten years of experience in real estate development and management, can attest to this. Although Jason Cohen of Pittsburgh has had a highly successful real estate investment career and helped to renovate and manage properties in some of the most desirable neighborhoods in Texas, Pennsylvania, and the Midwest, he stresses to young entrepreneurs that the learning curve for property management can be steep.
After renovating and renting out a property, many amateur real estate investors choose to manage their property to save money and generate a higher return on their investment. However, many investors are unaware of the true scale of a property manager’s responsibilities.
A landlord’s or property manager’s list of management responsibilities can be broken down into three unique sections:
- Managing tenants
- Managing the property
- Managing finances
While it will likely take a great many hours of research for new real estate investors to fully understand each of these sections’ responsibilities, Jason Cohen of Pittsburgh hopes the following article will provide amateur property managers with management tips that will help during the transition.
Within the past ten years, more and more tenants have become interested in paying their rent online. While this may seem like a small benefit for renters, 60% of millennial renters say electronic rent payments are a significant draw for them. As millennials currently make up the largest contingent of renters, and by 2025 are expected to make up 20 million new households, it is more and more important for property managers to offer electronic options for the “digital generation.” In addition to paying rent, rental portals allow tenants to file paperwork online, making documentation recovery all the easier for landlords and property managers.
Electronic rent collection and paperwork filing can be completed with the help of property management software. Property management software can help landlords stay organized by tracking maintenance requests, offering tenant screening services, and can even help market vacant properties in some cases.
Hire An Accountant or Use Property Management Software
When entrepreneurs purchase their first real estate property, it is quite common that they will also act as the property’s accountant. While there is nothing inherently wrong with this approach, experienced real estate investors do not recommend it. There are many financial aspects of property management that can become quite complex, and the more properties one invests in, the more complicated the finances can become. Real estate investment on a large scale should be thought of as a business – and any successful business is a highly organized one. For this reason, many real estate investors hire an accountant in order to track recipes, create accurate earning reports, and keep property finances separate. Or, real estate investors can choose to purchase property management software to keep records of property accounting. While property management software requires a fair deal of work from real estate investors, they are an excellent affordable option for tracking property finances. Whether you decide to hire an accountant or utilize property management software, all investors should be at least be aware of:
- How much rent is collected each month
- Total mortgage payment for each property
- How much insurance is paid each month
- What each property’s yearly property tax amounts to
- How much each tenant pays in utilities and how much the gas, water, and electric bills are each month for all properties
- What fees they must pay for annual property inspections, court costs, or maintenance issues
Know What Repairs You’re Responsible for Fixing
If you have chosen to manage your property personally, you will be responsible for completing landlord tasks – including house maintenance. One of the most time-consuming aspects of being a landlord is fixing repairs within the home; however, while these tasks may be a pain, landlords are required by law to keep their property in a habitable condition regardless of rental or lease agreement. This means that as a landlord, you must ensure that the property or unit is structurally safe, that residents have access to both hot and cold water, that the plumbing is operational, that the roof is free of any leaks that could cause water damage, and that the electrical and heating systems operate and are in a safe condition. Landlords are also responsible for any infestation of pests unless the tenant’s poor cleanliness caused the infestation.
However, there are minor property issues landlords are not required by law to fix, including replacing a light bulb, small holes in the carpet, replacing an air filter, paint touch ups, and dirty grout. Although a tenant may feel these minor problems deserve their landlord’s attention, the landlord is under no obligation to repair any of these minor issues. There are specific circumstances where the landlord may be required to make minor repairs within the property which include:
- The landlord has given the tenant either a verbal or written promise to fix the repair. In this instance, the tenant may be able to legally hold the landlord to their promise to fix the repair.
- If, within the lease, the landlord has stated that they will fix a specific problem
- Finally, if the state, local building codes, or landlord-tenant laws require the landlord to make repairs, that would typically be at the landlord’s discretion.