How to be a landlord

Question

What does it takes to be a landlord? I want to own a duplex to begin with but I heard you have to hire landlord management? I'm not sure what that is. What do I have to go through to rent out the other half to someone?

Stewart Guthrie · Answer

Hello Duke,I am a property manager in the Sacramento region, and the advice you've received up to now has been terrific, (@Steve Vaughan nailed our business environment). Since you're hanging out on Bigger Pockets, my guess is that you see RE investment as a big part of your future, so you should probably purchase the Nolo CA book anyway, (whether you choose to engage property management or not), it will make you a better, more informed investor/landlord. Now, on to your question.You can engage property management in a couple of ways: You can pay for "Lease-Up" service where the PM does the showings, tenant screening and and signs the lease as your agent, (usually a generic CAR or RHA lease), and then hands the deposit and lease over to you to manage moving forward. The PM is out of the picture until you need them to re-lease the property; you collect the rent and handle any tenant or maintenance issues. For lease-up service in the Sacramento market, PM's usually charge, (around), the equivalent of one month's rent when the lease is signed. They will generally document the condition of the property with an intake inspection/photos/video and do the move-in walk through with the tenant. When the property is rented, they collect the deposit and one month's rent, they keep the rent and turn the security deposit over to you, (PLEASE don't spend it, put it in an separate account so it is safe and readily available, treat your rental business like a business). From there on, the tenant hands his or her rent directly to you.Full Service Management is where all the tenant interaction is supposed to go through the property manager and your tenant doesn't know who you are or that you exist. In our market, the lease-up fee would be discounted, (about 50% of the first month's rent), and you would pay between 8 and 10% of collected rent, (per month), for rent collection, accounting, maintenance dispatch, contract enforcement, move-in and move-out inspections and move-out reconciliation, (basic management services, in other words). Much of the benefit of paying for full management is the professional separation that comes with having an agent between you and the tenant. That is not likely to happen with your situation, and it is likely that you will be subject to all sorts of casual requests for service or leniency based on your personal relationship. Obviously, you would have these requests if you manage your own property too, but at least you wouldn't be paying management fees for the privilege.This isn't to say that having full service management is impossible in your proposed scenario; I have seen your exact situation work well well in a number of cases, but it takes a ton of self-discipline to look your neighbor in the eye and tell them to call the property manager for all their questions, concerns and requests and, (in my experience), usually there was some other circumstance as well: Owner or tenant traveled a lot, owner or tenant are naturally very private and sought no relationship with their neighbor, the property was configured in such a way that the owner and tenant rarely saw each other, etc.So, like almost everything in life, a decision like this is going to take some self evaluation. Are you emotionally equipped to have an adversarial, (in the legal sense), relationship with your next door neighbor? What is your tolerance for risk, (learning about/implementing fair housing laws in your rental etc)? Are you comfortable with the likelihood of interruptions in your personal space and time for business issues? You CAN overcome your discomfort, (if any), with all of these issues, but is it worth it for you to do so? Would you time be better spent at your profession or in finding your next RE deal?I hope this helps, good luck.

Stewart Guthrie · Answer

@Ellie Hanson, Regarding not letting the tenant know that you're the owner. We had the same idea and tried it every time we had a similar situation for a couple years, (it doesn't happen that often). Our experience is that the tenants always find out, which certainly isn't a legal problem, but the feedback we received from tenants and owners after the fact is that it made the relationship a little weird once the cat was out of the bag, ("Why did they lie?"), and most agreed that it would have been better to establish firm ground rules up front, developed a little thicker skin, (which is good for everyone), and be firm that any questions or concerns need to be directed to the property management company, (if Duke decides to engage a management company for ongoing service, which is by no means a slam dunk in his case).

Al Williamson · Answer

@duke vang welcome to the Sacramento scene. You've received some excellent advice already. Be sure to know that we locals are hear to help you as well.

Vinh Le · Answer

@Duke Vang, I completely agree with @Stewart Guthrie about carefully considering your time spent on the property. Since it is only a duplex, the number of tenants is minimal and considering if the location is convenient for you to drive back and forth to handle any concerns that might occur, I would recommend to handle the management on your own. The "Lease-Up" is a great option to utilize to get your units occupied initially and reading the books mentioned above will give you a great start and confidence in the business. I also recommend the book, "Buy it, rent it, Profit: Make Money as a Landlord in any real estate market" by Bryan M. Chavis. Hope this helps!Best of luck!

David S. · Answer

Pick up the following book: "Every Landlord's Legal Guide" by NOLO if you are not renting in CA. You may also want to look at all of the NOLO books at the following website:NOLO Landlord LinkHere is the link to the CA Landlord book by NOLO:California Landlord Law BookThe 1st link also has a lot of freebee info as well.You need to learn your state and local laws concerning landlords. The NOLO books have leases and forms that are very good and included in the books above. You may need the CA specific materials if you rent there. Since I am not in CA, I did not read the CA book but it appears to be the equivalent of "Every Landlord's Legal Guide."Next, learn the ins and outs of being a Landlord. You can go to your local library and borrow all the books on the subject. I have read so many and can't remember all of them but I can remember "Landlording" from Leigh Robinson was good.

Jassem A. · Answer

If you don't hire a property manager then you will want a solid lease agreement and knowledge of how to screen applicants and evict tenants

Duke Vang · Answer

Thanks. I will take a look at the book. Looks like there will be lots of reading coming lol

Duke Vang · Answer

Thank you. I appreciate it. I will notify you if I need anymore help. I'm just trying to get my full time job so I can start on the investment.

Duke Vang · Answer

Vincent Crane · Answer

You need lease agreements, rules, and systems. Spend some time reading the articles on this site about landlording, there's plenty of them.