Rental Property Management Minneapolis MN

If you’re reading this chapter, you’re probably considering purchasing rental property or already own rental property that you want to rent — for any number of reasons. This chapter helps you make the decision to purchase property or help you cope with the decision that has been made for you (if, for example, you inherited property or are renting a house you’re having trouble selling). One thing is for sure — this is not an easy process. You need to treat owning rental property like purchasing a brand-new business that you know nothing about. When you own rental property, there are numerous things you must learn or you will end up in trouble. One idea is to look for a reputable property manager in your area and make an appointment to discuss managing property. As a property manager for others, I often get calls saying, “I don’t know anything about renting property, but I’m moving out of the area and don’t want to sell.” This is one of my favorite calls. You will likely find that property managers are willing to take the time to discuss the pros and cons with you for the specific type of property and your situation. You need to be willing to take the time to learn the basics at the beginning and be willing to continue to learn. Know in advance that you’ll make your share of mistakes. When you do, get up, dust yourself off, learn from the mistakes, and then swear you will never let those situations happen to you again. This is where joining a group of other property owners or investors — for advice and for moral support — can really pay off. I have been managing my properties and managing for others 23 years, and I still make mistakes. So I am still learning by reading periodicals, taking courses, and networking.

Understanding the pros and cons
Here’s a look at the positives and the negatives of purchasing and managing rental property. If, after perusing these two lists, you decide that property management is not for you, professionals can manage your property for you — see Chapter 17.

Pros of managing rental property
The positive aspects of renting property are as follows; a lot of these apply whether you hire a property management company or not:

You own your own business.

You’ll never be bored.

You save the fees charged by a property management professional.

Bright Idea
I recommend calling a local property management company and offering to pay a consultation fee. Make a list of questions in advance and spend some time talking about your rental property. By taking the time to get the basics from a professional, you may avoid several mistakes that you would otherwise make.

Technology has made self-managing your properties easier than in the past.

It’s a people business.

It can be fun and challenging.

You may enjoy it enough to make it your career and even manage property owned by others.

After everything is set up properly, it’s not a lot of work.

You have a choice: You can be completely or minimally involved.

You can see and touch your investment.

The business provides continual income rather than the one-time income from a sale.

With creativity, you can purchase with little cash.

You can keep a home you may want to move back to later (for example, if you’re transferred from an area you love).

Renting properties is usually profitable.

Renting property provides current or future lodging for your children.

Buying your first property starts you on your way to purchasing more.

Property values usually appreciate.

You diversify your investments.

There are great tax advantages.

You can defer capital gains with a 1031 exchange (see Chapter 15).

It can be a second income.

It can be a part of your retirement.

You can use your 401k or other retirement plan to buy the investment property.

It can be a long-term business.

Cons of managing rental property
You may have days when you question why you purchased rental property and became a landlord. But then, when you arrange an appraisal and find that your property value has gone up, you’re probably pleased with the gain in value. The time, money, and effort suddenly are all worthwhile, and you realize that hard work really does pay off. Keep in mind, however, that managing rental also has a few downsides:

It takes a lot of time in the beginning to set things up.

There are many details you need to learn and understand.

The initial outlay may be greater than with other investments.

Your property may have a negative cash flow, especially at first.

Technology is hard to keep up with and takes time.

Reporting income and expenses on your tax return requires additional time and knowledge.

There are many local, state, and federal laws.

You will need to purchase more insurance.

Like anything, there is always a risk involved.

You can be sued.

There are ways you can be taken advantage of.

The hours are not 9 to 5.

It is like having a second job, often without vacations.

Dropping everything to respond to an emergency isn’t fun.

Finding and dealing with contractors can be tricky.

It is a people business, which means you have to enjoy talking to people.

You listen to many complaints.

The market can and does change constantly.

Things do go wrong with rental property.

You can always hire a professional to rent and/or manage your property. This way you don’t have to deal with the emergency call in the middle of the night or all the problems that arise from dealing with different types of people. You let them take on the timeconsuming tasks while you receive the income.

Overcoming the negatives
To overcome the negative aspects of managing rental property, consider these tips:

You already know by this point that it takes a lot of time to get started. Just know that and set aside the time. Knowing the time commitment in advance and taking things one step at a time helps you in the long run.

Minimize or eliminate the risks by investing in setting up your business and tending to the details in the beginning. Also line up and meet with the professionals you will work with (see the “Hiring real estate professionals” section for details).

Keep your files concise and be sure to keep all paper receipts in your property file (see Chapter 11).

In addition, many software programs can assist you with your recordkeeping. If you choose to set up your new business on a computer, you may save a great deal of time and effort when filing your tax returns. Invest in a scanner so that all your documents can be accessed online. Get a digital camera so that pictures of the property can be downloaded to your computer and uploaded to your Web site. “Purchasing rental properties allowed me to retire a lot earlier than I expected. Over time, I have made enough money to hire a professional management company, so now I can leave town anytime I want without the worries. ”—Chuck P., investor

You’re on call 24/7 and there are no vacations when you self-manage your properties. However, perhaps you can occasionally trade with friends who own property by taking turns covering for one another while taking vacations. In some states, you cannot pay your friends for their time unless they have a real estate or property management license, but you still have options. I even know people who travel in a motor home all year, managing their rental properties via e-mail and cellphone, and accessing all records and monies online.

Ask around and do your homework before you hire contractors. Most states require a license to do a trade. If so, check government Web sites to find consumer brochures. You’ll probably find some hints and tips on what to ask before you choose the right one for you. If you have friends who own property, ask them whether they will share some of the names of their contractors. And don’t be afraid to ask friends or other contacts how they’re handling their rental properties. Be prepared to hear their war stories, though — listen and learn from them, don’t let them scare you.

Carry plenty of insurance and be prepared to be sued. Make sure you review your insurance annually with your agent. Always look at your property from a safety and liability angle.

Take workshops on how to deal with and listen to all types of personalities. Know that managing rental property is and always will be a people business.

Keep up with property-management laws by joining a local income property owner’s association in your area. Use the Internet by searching on “landlord association” and the name of your area. Continue to read books and take classes.

Expect things to go wrong and learn how to be proactive and creative in handling them.

Keep up with technology.

Turn negatives into positives and be ready for the next challenge.

Click Here to Purchase this Book