Brenton Hayden is the founder and chairman of the board of Renters Warehouse. A Harvard Business School and MIT Sloan School of Business graduate, Brenton leads a team of over 140 employees and franchises in 21 states with a portfolio of managed properties valued at just under $1 billion.
Demystifying Long-Distance Landlording
When you’re a ten-minute drive from your rental, it’s no trouble to stop in to fix a leaky faucet. But what happens when your property’s out of town — or even out of state?
September 8, 2015
Long-distance landlording seems easy enough — in theory. The tenants mail you checks every month, and you can stop in and check on the property when you’re in the area.
But the reality, of course, is far less rosy. Things go wrong. Tenants left unattended and unaccountable may be more likely to push the boundaries, paying rent late or causing damage to the unit. And when renters move out, you’ll be stuck with the process of advertising the property and trying to find another tenant from afar.
Of course, this isn’t to say that long-distance landlording can’t be done — it most certainly can. You shouldn’t let these difficulties stop you from owning investment property in another area. But it’s important to take the right steps and set up your properties to run profitably without your physical presence.
Whether you’re already an out-of-town landlord or you’re considering purchasing a rental in another town, here’s what you can do to make sure your investment is set to run efficiently and profitably in your absence.
Find Local Assistance
One of the best options for the long-distance landlord is to find a capable and responsible property manager — they will be your eyes and ears. A good property manager will be able to help with tenant sourcing and screening and should be able to vet prospective tenants more thoroughly than you could online or over the phone. Once a tenant has been found, the property manager will essentially serve as the go-between for tenant and landlord, act in the landlord’s place to collect rent, and perform inspections and maintenance. They will also be able to handle problems that arise, such as emergency repairs, lockouts, or issues concerning the lease. In short, they can save the landlord a tremendous amount of time and hassle.
If you’re unsure about hiring a property manager and thinking about managing your properties yourself, it’s important to note that location and proximity to the rental are important. The closer you are to the property, the easier it is to stop in for inspections and minor repairs. Much of how you decide to operate depends on whether you wish to have a hands-on or hands-off approach to being a landlord and how much trust you wish to place in those who act on your behalf.
Get a Schedule for Your Rental Property
As a long-distance landlord, you’ll want to set up a schedule to keep everyone on the same page. Make sure you’ve planned out trips to the rental at least twice per year. It’s easy to lose track of time between visits, and penciling in dates can help you to plan and budget for travel expenses.
On a monthly basis, make sure you’re on top of rent payments. Don’t fall into the trap of letting rent slide. It’s easy for a tenant, especially a long-distance one, to take advantage of your generosity and assume that because you let them pay late once, they can pay late again.
This varies from building to building, of course, but some common monthly maintenance duties include replacing air conditioning filters and lawn maintenance and landscaping tasks.
Make a note in your calendar to touch base with the tenant occasionally, every month or two, and be sure to schedule regular calls or e-mails just to see how things are going with the rental. Tenants are often reluctant to call the landlord out of the blue to notify them of small issues, so checking in is a good way to prevent minor problems from becoming worse.
Keep a running list of maintenance duties. Some long-distance landlords allow the tenants to perform basic maintenance such as mowing the lawn, and in return will deduct an agreed-upon amount from the tenant’s rent. However, other landlords find that having contractors come in for routine maintenance is the best option and keeps tenants from being tempted to find more work that “needs” to be done in order to obtain a credit on the rent. Regardless of whom you choose to perform maintenance, it’s important to have a schedule that will keep everyone accountable and ensure that nothing falls behind.
A typical seasonal maintenance schedule will look something like this:
- perform walk-around inspection
- inspect and service air-conditioning units
- clear all gutters and drains
- remove insulation from external pipes
- touch up paint
- inspect and repair the roof
- assess tree growth and prune as needed
- drain external pipes and wrap with heat tape
- turn off water supply to outside spigots
- clear all gutters and drains
- store all outdoor equipment for the winter
- service the heating system
- inspect the electrical system
- remove snow and de-ice as needed
Annually, or at the end of the rental period, be sure to review the terms and conditions of your leases and make sure there’s nothing that should be amended or added. Also, review the rent. Many landlords find that raising the rent even 1 to 3 percent each year helps to keep up with inflation and rising expenses such as taxes, insurance, repairs, and upgrades. Just make sure the increase and your method of notification are in compliance with the state laws where the property is located.
What About When Things Go Wrong?
Unfortunately, with rental properties, it’s not a matter of if things go wrong; it’s a matter of when! Have contingency plans for common scenarios such as boilers quitting in the middle of winter and tenants locking themselves out of the unit. This can save you a tremendous amount of time and trouble.
Having a property manager will be invaluable during a crisis, as they will be onsite to deal with contractors and tenants, find the best person for the job, and make sure the work is completed to your standards.
If you don’t have a property manager, you’ll want to know whom to call if there’s an emergency. If you’re a considerable distance from the property, it’s extremely helpful to have some contacts in the local area in case something goes wrong. If you don’t have friends and family nearby, take the time to connect with local real estate agents, inspectors, and contractors. In an emergency, you’ll want to have someone who can be at the rental within a relatively short time frame.
Finally, if you are managing your properties on your own from out of town, make sure you are absolutely certain of the character of your tenants. Don’t rent to anyone who seems less than trustworthy. The wrong tenant can fall behind on the rent or cause a tremendous amount of destruction to the property. In extreme cases, you may even have to deal with an eviction long-distance, which, depending on how cooperative the tenants are, may involve traveling back and forth for court hearings. In the end, it’s just not worth taking a gamble.
Managing property long-distance can be a challenge, but it’s definitely doable. The best approach is to analyze the way you prefer to operate and design your approach to long-distance property management to fit that model. For landlords who prefer to take a hands-on approach, this means making connections with local contractors and establishing maintenance and emergency plans. For others, finding a reputable property manager is the way to go. Just don’t let distance come between you and the perfect investment opportunity.