Time-Saving Financial Management Tips for Landlords

Being a landlord requires a significant amount of time and financial investment. One way to reduce the amount of time spent managing a rental property is to streamline how finances are handled. These financial tips can shave valuable hours from your weekly landlord duties.

 

Discuss Property Purchases with an Accountant

An accountant can offer useful financial suggestions regarding investment real estate purchases. While you may be an expert at management, your accountant is the expert at tax-friendly property financing, calculating property depreciation, the financial benefits and drawbacks of incorporating rental properties, and documentation for tax season. This expert advice can save you both time and money, and may prevent you from making costly mistakes. For example, people who are purchasing a sixth rental property may not be able to receive financing without incorporating their rental properties into a freestanding business. An accountant will be able to spot this problem and recommend an attorney to file any necessary paperwork.

 

Consider Accepting Online Rental Payments

Are you still accepting paper checks for rental payments? You aren’t alone. Paper checks are still a popular way of collecting rent, but this payment method is antiquated. Online rent payments are much quicker and can save a lot of time and potential hassle. With online payments, you can immediately see when a rent payment has been made, and you don’t have to worry if a check is lost in the mail. You can also send email reminders a few days before the rent is due.

Some landlords avoid online rental payments due to the cost of processing fees. While these fees are a reality, when you factor in the elimination of returned check fees and quicker payments, you may actually end up saving money by accepting online payments. In addition, offering online rental payments can be a selling point to young professionals who seldom write checks.

 

Try a Digital Financial Management System

By law, landlords must record their rental income, keep track of their rental expenditures, and produce documentation that supports their bookkeeping when requested. Each year, these record keeping requirements can yield hundreds of pages of documents that must be stored and examined during tax time. With a digital system, bank statements, rental payment records, and other documents can all be uploaded and stored within a single software program. Landlords can also scan paper receipts and store them digitally. Many programs automatically detect essential information from these financial records and use the data to create up-to-date spreadsheets. Digital records are also safer than paper records. For example, a fire can destroy paper records and computers, but digital files stored on the cloud (securely stored on the Internet) will remain safe.

 

Schedule Annual Property Inspections

Booking regular property inspections may seem like a waste of time, but they can uncover small problems that can quickly turn into expensive time-consuming projects. An annual roof inspection can detect a few missing shingles or a small leak before water damage and mold occur. Examining the bathroom can uncover deteriorating caulk, which can lead to expensive water damage. Recaulking a tub or patching a small leak may take a day to complete. Fixing water damage and mold from an overlooked problem could be an expensive two-week project.

To avoid wasting time while managing rental properties, it’s important that landlords establish a system that will help avoid unpleasant surprises and minimize bookkeeping. Learning new software or meeting with a property inspector will require a few extra hours of time, but these investments will easily yield dividends for years to come.

Landlord’s Guide to Rental Discrimination

Discrimination is a bad word in today’s society, but landlord’s need to discriminate as much as they legally can in order to get the best tenants possible into their property.

What a landlord can and cannot do is government by local landlord/tenant laws, so before starting any vetting process, make sure to check local statutes for specific ways you may need to be in compliance.

When Is Rental Discrimination Illegal?

In general, tenants are protected from certain types of discrimination wherever the rental home might be located.

The Federal Fair Housing Act and Fair Housing Amendments Act specifically prohibits a landlord from rejecting an application from a tenant for the following reasons.

  • Race or religion.
  • The ethnic background of the prospect or their national origin.
  • Gender.
  • The status of the family, including children.
  • Physical or mental disabilities.

Some laws also specifically prohibit discrimination due to sexual orientation, the age of the applicant, or the prospect’s marital status.

Even subtle differences in the application process, such as setting a higher income standard for certain households or setting different terms in a lease for different demographics could be considered illegal rental discrimination.

When Is Rental Discrimination Legal?

As a landlord, you need to be able to screen dangerous tenants away from your property as much as possible.

This means that the #1 method of legal discrimination that you can implement is a consistent policy of not accepting tenants that have committed certain crimes.

For homes that are near schools, this is especially critical to do because you could be held legally responsible for a tenant who reoffends.

If you’re concerned about how certain households may treat your property, then you may also wish to set a high income standard that applies to every applicant.

Requiring a minimum income is a valid business reason to reject a tenant because you have a certain level of profitability that is required.

Performing a credit check or implementing credit score minimums is another way to help prevent problem tenants from sneaking into your property on you.

If a tenant does not have a positive reference from a previous landlord, then this can also become the cause of a rejection.

Not having a positive reference from an employer, however, is not necessarily something that you can use to reject a tenant.

Not having a job or evidence that a rental lease can be met over a specific amount of time may be a valid reason to discriminate.

Having a poor reputation, but the ability to pay rent consistently, may not be a valid reason to discriminate.

As long as you have valid business reasons to reject a tenant that are not based in any way on the illegal rental discrimination areas that are in place, then you can do so.

This will allow you to be able to effectively screen out potentially problematic tenants so that you can have a long-term investment with your rental property.

Selling A Rental Property With Tenants

Selling a rental property with tenants may be very straightforward; having a tenant in place can make for an unpleasant selling experience. Most real estate professionals will recommend allowing a lease to expire before selling a home. That isn’t always a possibility, so it is important to make sure that local landlord-tenant laws, which vary by jurisdiction, are taken into consideration. Some tenants have the right of first refusal. Others have this right when an offer comes in. A smart tenant can hold up the sale of a rental property for at least 12 months. This has a negative impact on the sales price, so getting the tenants on board with the sale is incredibly important. You get the advantage of selling the property. Your tenants need some advantages too. Here are some ideas to help get them on board so they house stays clean.

1. Offer a Rental Discount

If you know that the property is going to be on the market for at least a month, then give them a break on their rent for that month. Most tenants will laugh at a 10% discount or less. Think bigger – like 50% – to make an impression on them. You might take a small loss that month, but maybe you’ll get a sale on the property that will make up the difference.

2. Tenants Don’t Always Need to Vacate a Home

If the house is going on the market, landlord-tenant laws are often very specific about the lease you have signed. Your tenants may not need to vacate the premises at all because they have a business contract to occupy the property. Having a tenant home during an open house is a bad idea, so try offering a free hotel room or other incentive that will make life easier for them.

3. The Lease May Not Expire Upon a Sale

Many jurisdictions have the new owner taking over the business contract for the property. This means that an eviction does not automatically take place upon the sale of a property. If there is 9 months left in the lease and the new owner wants to live in the house, then some tenants may stay the full amount of time. Offering to subsidize a new rental deposit, the cost of rent for a month or two, or a straight cash payment might change their mind.

4. It is the Tenant’s Home

Many landlords see a rental property as an investment or business commodity, but tenants see it as their home. Their belongings are there and they’ve build memories there. Offering them a gift certificate to go have a nice dinner somewhere isn’t going to alleviate any concerns they have for their family heirlooms. You’ll likely need to put something into writing that will give them a legal guarantee that you and your real estate professional will protect their things.

5. Give Notice in Writing

Most jurisdictions require at least 24 hours in a written notice for a showing or an open house. If you do not provide this notice, then a tenant may not be required to let you, the real estate agent, or anyone else into the home.