A tool kit for new landlords
Many professions have their own special tools. Here's some for the well-equipped landlord.
NEW YORK (CNN/Money) - "You know you're a landlord," says Matt Martinez, a real estate investor from Boston, "when you get a new drain snake for your birthday."
Landlords face daunting problems, from tenants behaving badly to leaky pipes and clogged drains (that's where the snake comes in) to unexpected vacancies.
It takes more than plumbing tools to run a home-rental business. With all the complicated paperwork and governmental filings landlords are responsible for, they need a lot of do-it-yourself help to keep everything organized.
This subject is of more interest to more Americans every day. Some 15 million now own rental properties in the United States, according software maker Intuit, which makes property management software. About nine million of these investors are small property holders, owners of 10 units or less.
Some are accidental landlords -- they've inherited or otherwise taken possession of a property and decided to keep it and rent it out.
Many of these, and other new landlords as well, are less than fully prepared to run their business.
For them, there are a few items essential for making running their small business empire run smooth. Call it a tool kit for small landlords.
Since many real estate investors spend a lot of time in the field, either on site at their properties or looking at new buildings to buy, a laptop is one of the most useful of these tools. Making instant entries – the cost of a repair, a rent paid – as they occur can help landlords keep more accurate records.
Loaded into that laptop should be a robust software program. Many small landlords try to track their records by creating their own paperwork with worksheets, ledgers, and hand-written notes.
These "systems" are usually hard to keep up to date, error-prone, and often difficult to decipher – even for their author. It's better to get some information technology to help.
Martinez says first time owners can start out with a simple Excel spreadsheet, if they only have one or two tenants. Any more than that and it pays to invest in a more sophisticated package.
Jeff Zimmerman, product manager of Intuit, says property owners face three problems: keeping tax records, knowing whether properties are profitable, and keeping track of payments, leases, and expenses. Property management software helps landlords do all three.
Quicken's Rental Property Manager tracks expenses, organizes taxes, and performs housekeeping duties such as flagging problem tenants and keeping track of expiring leases.
At tax time it can automatically export that information to a Schedule E tax form that landlords must fill out, making the process of filing, normally a hellish one for even small operations, a little more agreeable.
The Quicken software can be used by landlords owning as many as 100 separate units. Other property management software, such as IDEAS Property Clerk or RentRight's Property Management Software, comes in several different flavors and price points, based mainly on the number of units under management.
Packages cost as little as about $99 for one designed to manage 10 units or less. The price of software for more robust operations can run into the thousands.
There are three other essential pieces of hardware for an active small landlord. Martinez always carries a digital camera on his prospecting forays for new properties. He'll snap several pictures of any potential buys to help document all the building's virtues and shortcomings.
Martinez also likes to carry a Blackberry-type device that enables him to e-mail and text message, send digital photos, access the Web, and organize his calendar.
Meanwhile, back at the office, he has a combination scanner, FAX, and copier. He can receive, send, and save all his bills, leases, contracts, bids, and other necessary paperwork.
Strength in numbers
Finally, although it doesn't qualify as either hardware or software, a support group is a great tool for many landlords new and old. Small landlords associations exist all over the country and can provide all sorts of useful information and resources for a fledgling property investor.
Martinez believes in these organizations so much that he started his own in Boston, the Landlord and Investor Group. His members talk over problems, trade information about properties, and offer advice to each other. They recommend contractors and share where the best buys are in building materials. More experienced members often act as mentors to newbies.
All that can make the difference between success and failure. Being a small landlord can be an extraordinarily complicated operation. Having the right tools can make a difficult job much more manageable.
One major real estate investor is choosing this time to exit the industry. For more, click here.