It's a typical story …
The investor is aware of all the ways in which real estate can be a good investment. Now that he has the real estate insect and is looking for financial freedom, he puts aside a little bit of money. He's ready when his first "big deal" arrives. Since he is starting on a limited budget, he decides to do everything himself. What at first glance seems to be a good experience gaining an understanding of all sides of the business quickly turns into a time-consuming portfolio of 10 self-managed rental homes. He's knocking on doors picking up rents, mowing lawns, repairing toilets, painting walls. He is a handyman. Before he knows it, he is going through a white day in his work on the W-2, and nights and weekends work alongside him, hoping that one day he will succeed in achieving financial freedom but forgetting to enjoy the road there.
Sounds familiar? If you too are bogged down in the minutia of rented properties, perhaps there are some ways to make your life easier and more enjoyable. Here are some ideas to add a little more freedom and health to your investment game.
If you often find yourself doing monthly activities like renting, paying mortgages, renewing insurance premiums, etc., then you're lucky. These are the easiest things to automate for free. Set them up to automatically deposit or draft directly to and from your company account the first time. You will not have to touch them anymore. View your bank statements for accounting purposes and for any errors that may appear.
Use free web-based sources to help you with automatic and free rental payments via ACH, such as cozy.co. They provide other free services, such as online applications and background checks / evictions / credit that can be sent by SMS or e-mail to the applicant through a link. These require that they pay the site directly for those checks, taking that step away from the landlord's shoulders. You do not like cozy.co? Continue to search. Of course, there are other sources out there, both free and paid, that could make your life a lot easier as a landowner.
2. Create systems
There are tasks that landlords do regularly with predictable steps and processes. Activities such as listing openings, framing tenants, showing properties, signing locations and even problem solving calls with tenants (such as plumbing problems) can be managed much more efficiently and with less stress when creating a system for each situation. You can also use free tools like Trello and Google Voice to make it more automated and easier for others in the process of communicating with each other.
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For example, "landlord A" has a clear system for controlling tenants. Create a free business phone number using Google Voice, saving your cell only for personal calls and emergencies. All his lists and calls / commercial texts go directly to this business number. When an applicant calls the number, he hears an outgoing voice message with information about his available properties and causes them to leave (or send messages) their: 1) name, 2) phone number, 3) email address. These messages are forwarded directly to his personal cell and Google transcribes them all in text format. So use a block of time each day to go through these calls and texts.
Send each email the same email with detailed information about the property, its application requirements and the process. He created an application workflow board through Trello, where he can keep information about each candidate and where he is. Quickly adds cards to new stakeholders on the first step on this forum. The first response email eliminates many candidates who do not meet its requirements. He has no more news from them and moves on to the next step in his application funnel. Applicants who claim to meet their minimum requirements receive a link to the free online application through cozy.co; sent a walk-through video via e-mail; and are required to provide him with verification of the revenue and previous references of the owners. This eliminates more candidates. It moves further through its funnel, entering the final stages for those who are truly interested in the property and seem to actually meet all the requirements. If this is the case, you can take the time to meet them at the property for a walk-through and send them a virtual link for credit checks, background and evictions.
This is a system that is clearly reproducible and can be created for any predictable and recurring activity that an owner has. By writing it, practicing it and perfecting it, it is rents that invest as a business, thus allowing investors to make better business decisions to increase and increase their income more quickly. Smart, right? It also allows processes and systems to be communicated to someone else when it is time to hire help.
3. Virtual assistant
Now that you've created the systems for your predictable activities that occur regularly as an owner, you can hire a virtual assistant to do it for you. Virtual assistants are freelancers who work with their computer and receive a specific and agreed salary for their work. They often work in other countries where the salary is lower than in the United States, making them more accessible to an owner who is growing his business.
Do you really hate screening tenants in the early stages of the application process? Is it taking time and / or scares you to acquire new properties? Take a virtual assistant and eliminate this task. You will be able to grow your business faster because you will have more time to do the things that only you can do (the most precious activities) and you will not see the time to get new properties.
4. Separate utilities
If you manage your properties, take the time to look for those with as many separate utilities as possible. This can be easier in single-family homes, of course, but it's just as important when buying a multi-family property. This means that the tenant can put utilities in their name. Then they will spend their time paying them every month, saving the landlord not only money, but precious time.
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If a property has a shared utility, it is almost always possible to automate those payments every month. This avoids spending precious time paying bills. However, it may be worth paying for having separate meters installed in advance when possible, creating more cash flows and time for deeper activities in the long run.
5. Maintenance of the yard
This may seem obvious, but I continue to be surprised by the number of landowners who think they are the only person able to maintain a pristine yard on their rental properties. Remember, it's your investment, not your home, (from this blog post). Forget it. You should not do it. Especially if you are reading an article on how to make your passport more passive. Tenants who rent single-family homes should be required to maintain their own backyard. In multi-family cases, this expense must be considered before the purchase of the property.
6. Property management
Any advice on landlording automation and more passive investment would be incomplete without having to hire a property manager. A good property manager is worth their weight in gold. When they do a good job, their 10 percent share (or whatever they charge) is well deserved. Anyone who has managed different properties understands it well. The time and energy that a good property manager returns to the investors they manage are easily compensated by allowing them time to do the deeper work to find other ways to make their money work for them through further investment.
If your real estate investments are in an area where property management is an option and you are not enjoying the landlord's game or you are finding little time, hire a property manager. Keep looking until you find an exceptional one. So use all the free time to climb.
What are your best practices for making rental investments more passive?
Share them with us below. We'd like to know what's working for you!