Operating Your Rental Property
Property management encompasses everything required to maintain the property, keep it occupied, and collect rent. Investors choose between handling these tasks themselves or hiring professional management. The right approach depends on the investor’s time, proximity to the property, number of units, and willingness to handle landlord responsibilities directly.Self-Management vs. Professional Management
Self-management
Self-management
Handling all landlord duties directly without a property manager.Responsibilities include:
- Marketing vacancies and showing units
- Screening and selecting tenants
- Executing leases and collecting deposits
- Collecting rent and enforcing payment
- Responding to maintenance requests
- Coordinating repairs with vendors
- Conducting inspections
- Handling tenant communications and complaints
- Managing lease renewals and turnover
- Legal compliance and record keeping
- Investors who live near the property
- Those with time and interest in hands-on involvement
- Smaller portfolios (1-4 units)
- Investors who want to maximize cash flow
- Those learning the business before scaling
Professional property management
Professional property management
Hiring a company or individual to handle day-to-day operations.Services typically include:
- Tenant placement (marketing, showing, screening, leasing)
- Rent collection and accounting
- Maintenance coordination
- Regular property inspections
- Tenant communication
- Lease enforcement
- Eviction processing
- Financial reporting
- Out-of-area investors
- Those with limited time
- Larger portfolios
- Investors who prefer passive involvement
- Properties requiring frequent attention
Cost of Property Management
Professional management fees reduce cash flow but provide time savings and expertise.| Fee Type | Typical Range | Notes |
|---|---|---|
| Monthly management | 8-12% of collected rent | Core ongoing fee |
| Leasing fee | 50-100% of first month’s rent | Charged when placing new tenant |
| Lease renewal fee | $100-300 or percentage | Some managers charge, others include |
| Maintenance markup | 10-20% | Added to vendor invoices |
| Eviction coordination | $200-500+ | Plus legal costs |
| Vacancy fee | Varies | Some charge reduced fee during vacancy |
Fee structures vary significantly. Compare total costs across managers, not just the headline management percentage.
Evaluating Property Managers
Not all property managers deliver the same service quality. Evaluate carefully before hiring. Questions to ask:- How many units do you manage?
- What is your vacancy rate across your portfolio?
- How do you handle maintenance requests?
- What is your tenant screening process?
- How do you handle evictions?
- What reports will I receive and how often?
- What is your fee structure including all fees?
- Can I speak with current clients as references?
- What is your communication style and response time?
Tenant Screening
Selecting reliable tenants is the most important factor in successful property management. Consistent, thorough screening reduces late payments, evictions, and property damage.Screening Criteria
Establish written criteria applied consistently to all applicants to ensure fair housing compliance.| Criterion | Common Standard | Purpose |
|---|---|---|
| Income | 2.5-3x monthly rent | Ability to pay |
| Credit score | 620-680 minimum | Payment history indicator |
| Rental history | 2+ years positive history | Past landlord behavior |
| Background check | No recent evictions | Risk indicator |
| Employment | Verified current employment | Income stability |
Screening Process
1
Pre-screening
Before showing the property, verify basic qualifications: income range, move-in timeline, reason for moving, pets, number of occupants. This saves time showing to unqualified applicants.
2
Application
Collect a written application with authorization to verify information and run credit and background checks. Charge an application fee to cover costs (where permitted by law).
3
Credit check
Review credit report for payment history, outstanding collections, and overall score. Look for patterns rather than isolated issues.
4
Background check
Check for eviction history and criminal background. Follow fair housing guidelines regarding how criminal history is considered.
5
Income verification
Verify income through pay stubs, tax returns, or employer contact. Self-employed applicants may require additional documentation.
6
Rental history verification
Contact previous landlords to verify payment history, lease compliance, and whether they would rent to the applicant again.
7
Decision
Approve, deny, or approve with conditions (such as additional deposit where permitted). Provide adverse action notice if denying based on credit report.
Screening Services
Several services provide tenant screening for landlords:- TransUnion SmartMove
- RentPrep
- Experian Connect
- MyRental
- Avail (for smaller landlords)
Rent Collection
Consistent rent collection maintains cash flow and establishes expectations.Payment methods
Payment methods
Offer convenient payment options:
- Online payment portals (most efficient)
- ACH bank transfers
- Check or money order
- Payment apps (Venmo, Zelle)
Due dates and grace periods
Due dates and grace periods
Most leases specify rent due on the 1st with a grace period (often 3-5 days) before late fees apply. Be consistent in applying the lease terms.
Late fees
Late fees
Charge late fees as specified in the lease. State laws may limit late fee amounts. Consistent enforcement encourages on-time payment.
Non-payment response
Non-payment response
When rent is not paid:
- Contact tenant to understand situation
- Serve pay or quit notice per state law
- Offer payment plan if appropriate
- Begin eviction process if not resolved
Maintenance Management
Responsive maintenance protects property value and tenant satisfaction.Establishing vendor relationships
Establishing vendor relationships
Build a network of reliable contractors before emergencies:
- General handyman for small repairs
- Plumber for water issues
- Electrician for electrical problems
- HVAC technician for heating and cooling
- Appliance repair technician
Response time expectations
Response time expectations
Set clear expectations for response times:
- Emergencies (flooding, no heat, gas leak): Same day
- Urgent (broken appliance, plumbing issue): 24-48 hours
- Routine (cosmetic issues, minor repairs): Within one week
Maintenance reserves
Maintenance reserves
Set aside funds for ongoing repairs and major replacements. Common rules of thumb:
- 5-10% of rent for routine maintenance
- Additional reserves for capital expenditures (roof, HVAC)
- Older properties need higher reserves
Preventive maintenance
Preventive maintenance
Scheduled maintenance reduces emergency repairs:
- HVAC filter changes (quarterly)
- Gutter cleaning (seasonally)
- Smoke/CO detector testing (annually)
- Water heater flushing (annually)
- Exterior inspection (annually)
Property Inspections
Regular inspections catch problems early and verify lease compliance.Move-in inspection
Move-in inspection
Document property condition thoroughly before tenant occupies. Take photos or video of every room, noting existing damage or wear. Both parties should sign the inspection report.
Periodic inspections
Periodic inspections
Conduct interior inspections quarterly to annually. Check for lease violations, maintenance needs, and unreported issues. Provide proper notice per state law.
Move-out inspection
Move-out inspection
Document condition at move-out, comparing to move-in inspection. Identify damage beyond normal wear and tear for security deposit deductions.
Drive-by inspections
Drive-by inspections
Periodically observe exterior condition without entering. Check for lease violations, unauthorized occupants, or property care issues.
Record Keeping
Maintain organized records for tax purposes, legal protection, and business analysis. Records to keep:- Leases and all addendums
- Tenant applications and screening reports
- Move-in and move-out inspection reports
- Rent payment records
- Security deposit documentation
- Maintenance requests and work orders
- Vendor invoices and payments
- Correspondence with tenants
- Notices served
- Insurance policies
- Property tax statements
Keep records for at least 7 years for tax purposes. Some records (like lead paint disclosures) should be kept for 3 years after tenancy ends.
Technology Tools
Software and apps streamline property management tasks. Property management software:- Buildium
- AppFolio
- Rentec Direct
- TenantCloud
- Avail (for smaller landlords)
- Stessa (focused on finances)
- Online rent collection
- Maintenance request tracking
- Tenant communication
- Lease management
- Accounting and reporting
- Document storage
Learn More
Property Management Overview
Understanding professional management services
Types of Services
Full-service, tenant placement, and specialty management
Comparing Property Managers
How to evaluate and select managers
Costs and Fees
Understanding management fee structures
Evaluating Performance
Measuring manager effectiveness
Owner Responsibilities
What owners still handle with a property manager
Landlord Rights
Legal rights of property owners
Tenant Rights
Understanding tenant protections
Lease Agreements
Creating effective rental contracts
Security Deposits
Legal requirements for deposits
Eviction Process
Legal procedures when needed
Fair Housing
Anti-discrimination requirements
Next: Tax Strategies
Deductions, depreciation, and 1031 exchanges for investors