Seeking Advice for First Rental Property Venture

[Candi Kham]

I wanted to reach out and share some exciting news—I've just finalized the purchase of my first rental property, and the closing is scheduled for next week.

As I embark on this journey, I'm eager to kickstart the process with some guidance from seasoned investors like yourselves. My plan is to self-manage the property and rent it out by the room, and I believe your expertise could provide invaluable insights to help me navigate this venture successfully.

Specifically, I'm seeking advice on the following areas:

1. Property Management Software: I'd appreciate recommendations for property management software that would streamline my operations and help me stay organized.
2. Bookkeeping: Could you provide guidance on best practices for bookkeeping in rental property management? Any tips or resources would be greatly appreciated.
3. Tax Professionals: I'm in search of a strategic tax professional who specializes in real estate investments. Any recommendations or insights on how to find the right fit would be incredibly helpful.
4. Tenant Screening: Lastly, I'm curious about effective strategies for finding high-quality tenants, especially when renting out rooms individually. Any advice on this front would be invaluable.
5. I truly value the insights and expertise shared within the BiggerPockets community, and I'm grateful for any guidance or recommendations you can offer as I embark on this new venture.
6. Thank you in advance for your time and support. I look forward to hearing from you soon. 

[Nathan Gesner]

Quote from @Candi Kham:

SOFTWARE

Good software will handle management, accounting, and application screening.

Software is a common question on BiggerPockets. Here are some things to consider:

1. Most investors don't need software until they have 5-10 rentals. All you need is a single place to track tenant information, payment history, maintenance, and other things. You can easily do this on a spreadsheet and it will take less time to track than find and learn a new software. If the software is not simplifying your life or making you more accurate, you shouldn't use it.
2. Software does have extremely helpful features like online payments, marketing syndication (click a button, and your property is advertised on multiple sites), electronic document review/signing, maintenance tracking, and owner reports. But do you need that for your one rental?
3. There's no perfect software out there. Every system you try will have flaws or you'll salivate over a feature that shows up in other software.

Some familiar names you'll see thrown around a lot: Stessa, Apartments.com, RentRedi, TenantCloud, Innago, RentManager, Avail, Rentec Direct, Doorloop, etc.

I recommend you search for each app online and see what they offer, how much they charge, etc. Make a simple spreadsheet or written list with the features of each and see which ones appeal to you most. Try to narrow it down to your top 3-4. Once you have a short list, get an account with each one and run them through the wringer to see how they function. Do one task at a time in each app to compare apples to apples.

• Load a property with pictures and details.
• Market that property.
• See what your marketing looks like from the public's perspective.
• Submit a fake application to see how easy the process is.
• Run a credit/screening report on yourself.
• Enter a maintenance request, assign a vendor, and attach a fake invoice.
• Enter charges to the tenant's ledger.
• Enter recurring charges and automatic late fees.
• Sign documents electronically.
• Run owner reports.

After testing a few apps, one should stand out for you. Choose that one and use it. No system is perfect, so don't waste time chasing after the next shiny object. You should only have to change when your current software has a flaw or lacking feature causing you to spend too much work on a work-around. Then you can consider researching and finding something that meets your needs better.

APPLICATION SCREENING

I recommend you include some of your key qualification criteria in the advertisement. For example, I mention that every adult must pay a $30 application fee, pass my credit/criminal background, make a combined income of 3x the rent, and whether or not the property accepts pets. Use the top three or four discriminators so applicants can screen themselves.

Then you need to have clear screening criteria yourself. What's the lowest credit score you will allow? Do you check Landlord references? Do you verify their income? Do you know how to read the credit/criminal background? What if they have collections or judgments?

Here's a detailed guide on how to screen applicants: https://www.biggerpockets.com/...

TAXES

You are in a market saturated with investors and investor groups. Meet up with other investors and get recommendations for a CPA. Go to BUILD YOUR TEAM at the top of your screen and you can search for other MEMBERS or LOCAL MEETUPS. You can also check meetup.com or search facebook for real estate investment groups, clubs, or meetings in your area. 

[Drew Sygit]

Your profile is blank and you don't mention a location on this post, so difficult to refer you to anyone.

[Jake Baker]

@Candi Kham

At the bare minimum, you should do the following to make your bookkeeping easier:

1. Dedicate one checking account and credit card exclusively to real estate. Keep personal and business finances separate. This alone will create less headache.

2. File all receipts in a dedicated Google Drive folder. Digitize physical receipts for easy storage. Use a consistent naming convention - ex. 2024.03.25 Home Depot

3. Maintain proper records - Contracts, Settlement Statements, Agreements, Promissory Notes etc.

Additionally, you can track income and expenses consistently, using software or spreadsheets.

As you scale, if bookkeeping isn't fun for you, consider hiring a bookkeeper for a couple hundred bucks per month.

[Max Emory]

@Candi Kham, agree with what @Jake Baker said. In addition to keeping your personal and business finances completely separate, consider having a checking account for each property if your portfolio size allows for that. This will make your life easier and any financial professionals who work with you in the future as well.

I'll speak a little to bookkeeping software. Once you have more than a few properties, you'll want to consider this. We use QuickBooks Online exclusively for all of our agent/REI Clients. We've found it has superior reporting features, integration features, and is overall more efficient to work within than other REI-specific software.

The downside is QBO is not set up for REI so you'll need to do that or work with an expert to ensure it is set up for your business appropriately.

Something else to keep in mind is your entity structure and how your entities file tax returns. As a general rule, each entity that files a separate tax return (partnership, s-corp, c-corp, etc) will need its own QBO subscription. If entities are disregarded/passthrough, you can keep up with more than 1 in a single QBO account using the location/business feature to keep track of them separately.

If you want to discuss any of this further, I'm happy to answer questions and help walk you through it.

Best of luck!