One of the most time consuming parts of property management is the coordination of rent collections and increases. What for many people is a nightmare can be made quick and easy by taking a very few simple steps. In order to simplify your property management for greater profitability, focus on the following three items first:
1. Have all rent due on the first day of the month. Some people collect rent based on when during the first month a resident or tenant moved into the space. This is a recipe for disaster. Experienced property managers will tell you to always pro-rate the first month’s rent and then collect all future rents on the first of the month. Imagine the headache of trying to coordinate rent collections, statements, and billings if each space required its own timing.
2. Increase rent on all (no exceptions) leases at renewal. When a lease is first signed, it should be understood that rents will go up at the end of the lease period, whether it is six months a year, or whatever term you use. The best way is to have the resident or tenant agree to the rent increase in their original lease. They are excited to get in and will typically think; “Fine, in a year from now you can raise the rent by $50 a month and if we like it here we’ll stay, otherwise we’ll move.”
3. Increase all month-to-month rents at the same time. If you use a firm lease period with the resident having an option of extending on a month to month basis, then schedule all increases at the same time. This way you can sent out a blanket letter to all residents that fit in the category. When a group receive the same letter they are less likely to feel that they have been singled out for the increase and that others are getting a better deal. In addition, it is easier to change your accounting/billing program one time per year for this purpose than multiple times. In addition, if you choose wisely what time of year to implement these increases you will have less people leave due to the additional rent because they will be too busy to look for another place, it will be too hot or too cold, or they will want to be stable through the holidays. The make-up of your residents will tell you what the best time of year will be. If you want more specific help with your exact area, MCM members can go online to our forums and ask for some input specific to your area from other readers and our home office staff. www.middleclassmillionaires.com.
If you evolve your business to take advantage of this type of management process in a systematic manner, you will find that property management is not as difficult or time consuming as you may have once thought. The Middle Class Millionaires course on property management can step you through the process of building an effective system to handle all of your property management operational challenges while accessing all of the income opportunities available. Property Management can be a wonderful and profitable part of the business. Good luck and let us know how we can help.