Rental Real Estate Series: Part 5 – Execution

You own rental real estate, let’s discuss how to execute.  You may be a passive investor or an active manager.  Either way you will need to be continually assessing performance.

Each month keep an eye on when rental payments are being made.  The income side of the equation is the most important for rental real estate.  This most influences your cash flow…because it is your cash to pay expenses.  If a tenant gets behind be sure to be in constant communication with them on what is going on exactly.  When can they pay? Where is the payment coming from?  These are important questions.  If you are owed payment and it is officially late be sure to talk with an attorney about your options for beginning the eviction process if the writing is on the wall in that regard.

Be sure to keep on top of maintenance issues as they come up as well, they may seem small and easy to pass up initially but they can easily add up to large expenses and multiple calls from tenants in the long run.  If there are tenant issues be sure that they are not issues arising from issues with the property itself that need addressed on a larger scale (e.g., bulbs keep burning out so it may be an electrical issue).

In the event you are employing a property manager, you should be consistently assessing their performance.  How timely are they sending you their reports and payments disbursing the net rent amounts?  If you have a mortgage, be aware and ensure they are paying the mortgage on time every time.  Be sure that your manager is doing what you pay them to do at the level you expect them to perform.

Annually, you can run the figures to make sure the pre-tax net income is in line with what you expect.   If it is not, be sure to address the issues at hand.  If the revenue is the issue, see if you can raise rents or find income in other ways (laundry, shifting utilities to the tenants responsibility, etc.).  If it is an expense issue, see what are the culprits and if they are recurring issues then see how to cut them down.  If the net income is the core issue, sell it!


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