Last year, more than three-quarters of independent landlords in the U.S. told us they worked a full- or part-time job in addition to their work as a property owner. So if you own an investment property, there’s a pretty good chance you’re also working a day job. And because of that, there’s also a good chance you’ve run into trouble trying to get everything done.
I’ve been there. I bought my first investment property while I was working in finance, and one of the things that struck me was how much time it took to manage the paperwork side of being a landlord.
In the years since, I’ve developed a three-part system that gets everything done without taking all my free time: organize, automate, outsource. (Full disclosure: I use Rentalutions, the company I founded, for the automation piece.)
Part 1: Organize
Legally, your rental activities classify you as a small business. A lot of landlords don’t think of themselves that way, but adopting the small-business mindset is a great way to increase the odds that everything gets done in an efficient and cost-effective way.
One helpful way to organize your landlord business is to identify the “departments” in it or the types of work that have to be done. For example:
• Property advertising.
• Tenant screening (credit checks, background checks, reference checks).
• Legal work (leases).
• Maintenance (processing requests, performing work).
• Finance (rent collection and processing, paying utilities, paying vendors or contractors).
• Accounting (taxes).
Once you have a list of all the types of work required to keep your business running, it’s much easier to make a plan for having them run efficiently.
Part 2: Automate
The most efficient way to get something done is to automate it — but, of course, not every task can be automated. Utility payments are usually a great candidate for automating (if you plan to keep utilities in your name). Performing maintenance, on the other hand, not so much.
Go through your list and determine which items can be fully or partially automated by online software, vendors you work with, etc. In this list, you can probably automate or partially automate:
• Advertising properties.
• Paying utilities.
• Processing maintenance requests.
The question, then, is whether it makes financial sense to automate. You can find the answer with a cost-benefit analysis. Specifically, ask these questions:
• How much does the automation cost? (Cost of tool or service).
• How much time does it save? ([How often you do the task] X [time per task]).
• How much is my time worth? ([Your yearly revenue] X [1.5 for benefits] / [hours you work per year] = hourly value of your time).
If the cost of the tool is less than the value of your time (I recommend working in monthly units, as many tools are billed monthly), go for it! If the cost of the tool is greater than the value of your time — or if you really enjoy that task — don’t automate.
Part 3: Outsource
Outsourcing is an incredibly powerful tool for busy landlords. For example, about 58% of independent landlords we surveyed outsourced their taxes by hiring an accountant. It’s one of the smartest things to outsource (unless you yourself are an accountant) because it requires deep expertise and can have a significant impact on your bottom line.
Another great thing to outsource is the legal side of your business, unless you’re a lawyer. That “outsourcing” may be as easy as using the state-specific lease and other document templates that are available online.
And if you’re not handy, outsourcing maintenance can make everyone’s life easier and ensure that your property stays in top shape for the long haul. Worth noting, we’ve found that most landlords consider maintenance the most time-consuming part of owning a property.
Most importantly, think critically about what tasks make sense to outsource. If a task is mission critical but not strategically important (e.g., the dryer needs to get fixed but it doesn’t matter how), it’s probably a good candidate for outsourcing.
Part 4: Have An Emergency Plan
Okay, I know I said it was a three-part system. But, as most landlords find out pretty fast, things occasionally go wrong. Maybe your tenant calls to report a burst pipe when you’re out of town or at a meeting you can’t get out of. Or you’re around to take the call but your go-to plumber is in the hospital watching his first kid being born.
Just as small-business owners have backup suppliers they can turn to, it’s a good idea to have a plan for what to do if something goes wrong. Scrambling to get things done in an emergency doesn’t just take a lot of time — it can be expensive, too. Taking time to plan ahead now can help ensure you’re able to juggle your landlord life and your day job for as long as you need to.