Real estate has been and continues to be seen as a way to grow wealth. Likely, you have clients interested in owning their own homes, buying fix and flip properties and investing in properties that have the potential to generate rental income. (If you don’t, get busy.)
Concentrating on rental properties for this piece, investors need to view rental properties and the management of rental properties as a business. Neither is a hobby. Rental property investors, be they individuals, married or unmarried couples, corporate entities, need to be in agreement that this business of property rental can work on all levels…financially, logistically and emotionally.
Josh Hetherington, a therapist with the Chicago Center for Relationship Counseling’s North-side location, specializes in working with married and unmarried couples and partnership groups around issues of rental property management. Here are some property management issues Hetherington has seen come up again and again.
- Clearly define roles. There needs to be a clear understanding about division of labor. Key areas of responsibility can include
Hiring, supervising, terminating subcontractors
Compliance with licensing regulations
- Be realistic about finances. Finances are about more than mortgage payments, property taxes, repair costs, etc. They are also about downtime expenses when rental units are vacant and/or needing overall maintenance. There are also potential line items such as
- Natural disasters
- Replacing flooring, carpeting, appliances
- Landfill costs
- Legal fees
- Marketing costs
- Insurance costs
- Open eyes and ears to all details. Let’s say the property manager rents a unit to a single man. He brings in his girlfriend to the unit. He leaves in the middle of the night and is nowhere to be found. The girlfriend stays on as a nonpaying squatter. Now what? Make sure there is a detailed lease that clarifies and protects all parties.
- Make sure that all parties are all in to this investment or be all out. Let’s say that the partnership in this investment is consists of a couple. One member of the couple is all in; one member of the couple is ambivalent. Each member of the couple needs to clearly understand they are making shared choices about their shared resources, time, their shared money. Both members of the couple need to pitch in to pay the bills, do background checks, find people to fix/replace things in the unit, etc. If those shared choices are not clearly understood by both members of the couple, according to Hetherington, “there will almost always be ongoing conflicts.”
As every business requires time, money and hard work to succeed, so does the business of rental income property. The specifics of this business may include scenarios like tenants who think that light bulbs are included in the rent or pets that “make mistakes” on carpets and hardwood floors or a boyfriend who doesn’t leave when the leaser does. Nothing’s perfect.