1) Create systems & treat your real estate like a business:
Whether you have one building or 10 buildings, the power of systematizing your business is the forced competency it brings to you. To document your system, you must ask questions like:
As you ask these questions, you become aware of good habits and bad habits. Then you can change or improve what you’re doing.
As you perfect the system for yourself, you can also begin delegating and teaching your system to others. Because you have a logical process to follow, your team and you know what to expect. It makes accountability easier for you, and it makes implementation easier for whoever does it. Write down procedures for what you do & require of your tenants & create an operations file for your real estate business. You can use an online filing system like Dropbox for free to store your documents securely. See www.dropbox.com.
2) Regular Collections
This is the process of invoicing, receiving, depositing and tracking all the rent you are owed each month. You can systematize this step with spreadsheets and file folders, but a solid property management software can make the process much easier.
Some real estate clients use management software like Buildium, but many others use Quickbooks for invoicing and collections. A cloud based service like Buildium is ideal for systematizing a small rental business because it already has many of these systems built into its framework.
In addition to tracking who has paid and who hasn’t, offer easy and passive payment options for our tenants. This does NOT include going to pick it up in person. Payment options could include:
If you want to outsource this step without hiring a property manager, a great person to hire is a part-time bookkeeper. Bookkeepers are already used to tracking inflow and outflow of money, so this is a natural position for them.
3) Update & maintain your list of subcontractors to maintain your property:
This system starts with building a good team of subcontractors who are reliable, easy to communicate with and who are willing to visit properties on short notice. Price is certainly also a consideration, but beware of the cheapest handymen to fix all your problems. You’ll pay (as we learned) for that mistake sooner or later in the form of further problems.
List of subcontractors on should include:
The maintenance system itself should focus on the things you can control once you buy the property. It can be divided once again into several sub-categories:
4) Preventative Maintenance
If you want to prevent as many expensive, emergency problems as possible, periodic maintenance is a must. The best practice is to create a checklist and schedule the visits. Here are some regular maintenance items you might want to consider:
As you can tell, the goal is to spend a little bit of time on the major systems (roof, plumbing, HVAC, electrical, structural) to prevent larger problems later on.
These visits can be outsourced to competent sub-contractors using your checklist, and they can send videos or photos to you for your files.
5) Proper insurance…for your tenants.
Make sure your tenants carry underlying general liability insurance AND name YOU (Yes, you) as additional insured on their tenant’s policy. This is one of the biggest gaps I see day to day working with commercial real estate clients. They often don’t have a system in place for this or enforce it. You want to make sure that IF something happens & someone hurts themselves while at your tenant’s place of business that your tenant’s policy will not only step in to defend them, but also to defend your business. Also, depending on the terms of your lease you may require your tenants to have contents coverage, & business income. Know & understand what your lease requires & have your tenants send you a copy of THEIR insurance policy EVERY year. My landlord does this to me!
If you would like to review your current commercial insurance email me at firstname.lastname@example.org or call me at 727-385-5082.
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***Parts of this article excerpted from Biggerpockets.com****