What You Need To Do After You Purchase An Investment Property.
You’ve bought or acquired a new rental property...congratulations! You’re in a great position to capitalize on the investment opportunities that real estate presents. But just because you’ve gotten through the tedious closing process doesn’t mean the work is done. If your goal is to maximize your returns, which it should be, follow these five steps that have been time tested by Nexus Property Management ™ over the last decade. As The Real Estate Investing Authority®, we want to provide you with a blueprint to ensure a seamless, smooth transition for yourself and your tenants.
STEP 1: NOTIFY TENANTS OF THE CHANGE OVER
The first thing you’ll want to do is notify the tenants that there is new ownership and/or new management, if you work with a property manager (Which Type of Property Manager Is Best For You?). Most importantly, you want to let the tenants know:
- How to pay the rent (Never Accept Cash Payments!)
- How to contact you (or property manager)
- How to submit maintenance service requests
- How to reach you in the event of an emergency
At Nexus, we provide a single page notice with all of that information clearly stated. It is essential that you successfully communicate for this step: post on the main entrance(s) to the property, mail it, email it...you want to be 100% sure your tenants know how to reach you. Remember, one of the main objectives is to provide a smooth transition for your tenants, which is essential to long-term tenancy and keeping that rent coming in without interruption.
STEP 2: GET KEYS IN ORDER
Keys are obviously important but they can be a nightmare. You want to make sure they’re all labelled, updated, and any excess is thrown out. Very often there are lots of extras that are unneeded, corroded, or outdated that just need to be removed. From time to time you might need to replace locks. Now is the time to do it.
Your goal is one nice set with all of the keys to the property on one key ring. Nexus uses a key engraver for efficiency and to avoid having to readdress this need down the road. Keep in mind, when we say “all of the keys”, we’re talking exterior doors, apartment doors, basement doors, garage doors, attic doors, utility rooms...they may all have a key and you need to have access to all parts of the property without any headaches or hunting when the need arises.
NEXUS’ KEY TIPS OF THE TRADE WITH TODD RICHARDSON: Cut your own to save time and money!
STEP 3: WAIT FOR MAINTENANCE REQUESTS
You’ve let tenants know you’re in charge and they know how to reach you...so inevitably you’re going to get hit with a bunch of maintenance requests right away. The all too common reality is that the previous owner knew for some time that they were going to sell so they very likely did not keep up with smaller maintenance requests. We see it all the time. Why spend money if I’m close to closing when the next owner can deal with it instead? This is simply the reality 9 times out of 10. So expect it and address it.
The first couple months are likely to be pretty expensive due to that deferred maintenance...but it will quiet down soon. Remember, your goal as a property owner is long-term tenancy, so this is a great opportunity to build trust and respect from your tenants.
STEP 4: RAISE THE RENT
Yes...you read that correctly. We just established that you want to build trust and respect and now we’re advising you to raise rent. Here’s the reality: with the market being what it is right now, most rents are already low. This is even more likely to be true when the previous owner knows he or she will be selling, so they were happy to keep lower rent to avoid the risk of vacancy prior to selling you the property. Very often we see inherited rents right around $750-$850 when it is almost impossible to find an apartment for less than $1000 these days (in Rhode Island and Massachusetts).
IMPORTANT: YOU CAN NOT DO STEP 4 BEFORE YOU TAKE CARE OF STEP 3!!!
The fact of the matter is you’re more than likely picking up a property with deferred maintenance and low rents. You need to address the two in that specific order: it’s not fair to raise rents before you’re provided the tenants with greater value. It’s not realistic and it’s going to ruin relationships before you even get to build them. No one wants to pay more, but it’s easier to accept AFTER your maintenance issues have been handled and you trust that the new owner will continue to ensure your comfort.
STEP 5: START LOOKING FOR ANOTHER PROPERTY
If you’re in the business of rental property then there’s no reason to stop at one or two properties. Real estate is such a great investment (when done correctly) because it is scalable. The longer you own property the more efficient your system will become. Take advantage of what you’ve learned and reapply it to additional assets.
Owning multiple properties allows you to create more equity. It allows you to lower your mortgage balance and to develop a network of real estate professionals (contractors, real estate agents, insurance agents, lawyers, etc.). You’ll have the skills, ability, and knowhow...so why stop at 1 or 2?
Maybe it’s not where your mind was when you began, but real estate investment can ultimately replace your 9 to 5 job. It can pay for college, fund your retirement, and finance a vacation home. All of these luxuries are a reality when you put your money and assets to work for you. At Nexus Property Management ™, this is the language we speak and the opportunities we have in mind for all of our clients throughout Southern New England.
As always, the name of the game is long term returns.
- STEP 1: Notify Tenants of Change Over
- STEP 2: Get Keys In Order
- STEP 3: Wait For Maintenance Requests
- STEP 4: Raise Rent
- STEP 5: Start Looking for Another Property
These five steps will ensure that you create a smooth transition for your tenants that shows them early and often that they are in good hands and that they’re getting great value for their monthly payments. The previous owner was looking to sell and you have the opportunity right out of the gate to show that you can and will do better. Develop an efficient system that begins with notification of changes, streamlined key organization, and timely responsiveness to inevitable maintenance requests. Now that you’ve proven yourself, increase rent, continue to provide quality service, and prepare to do it all again with additional properties.
Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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