Seattle and Portland are expected to see rents appreciate by 7.2 percent and 6 percent, respectively, more than triple the national average of 1.7 percent over the next year. Bay area rents are also expected to stay up. South Carolina and Georgia saw 7.26 percent and 6.41 population increases over the past six years. And, investors interested in properties in the Midwest are wise to keep an eye on North Dakota, which experienced a whopping 12.69 percent increase during the same time period.
It can be tempting for landlords all over the country to want to cash in on the prosperity of these regions. However, being a long distance landlord poses a whole new set of challenges. What should you look out for? How can you protect—and manage—your property when you aren’t there?
Fortunately, the connected world we live in makes it easier than ever to cash in on the lucrative rental market beyond your own neighborhood. Here are some ways to keep an eye on your rentals from afar, courtesy of 5 Arch Funding’s CEO Shawn Miller.
Use Technology to Protect Your Property
“Today’s technology can give long-distance landlords greater peace of mind than ever before,” explains Miller. It’s easy to see why: Alarm systems can send you an email or a text in an emergency. Video doorbells allow you to use your mobile device to see who is at the door of a vacant property. Intelligent lighting and smart sprinkler systems can make it appear as though a property is occupied, with the latter solution also providing the added benefit of a lush, green lawn.
“These ‘smart’ gadgets provide added value for today’s tech-savvy renters,” says Miller.
Know the Local Laws
An experienced landlord in New York may not know his or her rights if a tenant in San Jose refuses to pay. That’s why it’s important to understand local building codes so you don’t find your property in violation or spend more than necessary for repairs and improvements to make a unit safe and habitable, according to Miller. “Some states have specific maximum deposit amounts or lease specifications, so reading up on local laws and regulations can save you time, money, and numerous headaches,” he says.
For instance, the city of Middletown, New York, recently passed a law requiring rental property owners to hire professional property managers or provide master keys to on-site tenants. Additionally, certain states have enacted laws that protect victims of domestic abuse, including a tenant’s early termination of lease, their right to change the locks, and a landlord’s limited rights to evict.
“Start your research online, but contact local real estate lawyers if you have any questions or need help drawing up a proper lease,” Miller says.
Hire a Good Property Manager
Any task becomes easier when you build a strong support team. For an absentee landlord, a good property manager should head that team.
For a single-family property, expect to spend about 10 percent of rent on a property manager. Your property manager will essentially do all of the things you would if you lived locally, including stay in touch with your tenants, perform or commission emergency repairs, and keep an eye on the property. Property managers for multiple-dwelling units (MDUs) typically collect between 4 and 7 percent of the gross monthly rent. Some property managers will do the additional legwork of listing the property and screening tenants for an additional fee.
“Read online reviews and ask local investors for referrals,” says Miller. “You need an individual or a firm you can trust.”
Miller also says that a property manager is vital for a distant landlord to be responsive to property needs and issue management. He advises landlords to hire a property manager with strong communication skills to ensure that there is alignment with how they want their properties and tenants managed.
“Build a partnership, not one-way ask street,” says Miller. “Your property manager should feel part of the business and that his or her success is tied to the property.”
Stay in Touch with Tenants
Don’t leave it all up to the property manager, though. Just like any other business owner, it’s important for real estate investors to get to know their customers. Take at least a few trips to the property each year, using the opportunity to look over your investment yourself and build a better relationship with your tenants.
Don’t think you can spare the time? How about coupling the trip with a business conference or taking the opportunity to scout for additional investments? From a cost-savings perspective, it might make sense to cluster your rental properties in one region. At the very least, you can write off the trip as a business expense on your taxes.
Miller suggests an annual or semi-annual questionnaire as another way to stay connected with tenants and their needs. Based on the data you retrieve, make the necessary changes or updates. “Be sure to contact your tenants via email or snail mail to let them know their input was valued and solutions were implemented,” he says.
Make Friends with the People in the Neighborhood
It pays to have more than a few eyes on your property. During your visits, get to know the neighbors. Even better? “Shop around for hot investment properties in areas where you already have friends,” Miller says. “They can drive by and make sure everything looks okay, or even help out in an emergency if the property manager is unavailable.”
Enjoy the Benefits of Being Away
Stretching beyond your own region does carry some risks as a landlord, but it can also bring incredible financial rewards. Best of all, being a long-distance landlord allows you to spend less time managing your current properties and more time investing in new opportunities.
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