December 2007
Community Paper


How (Not???) To Manage A Rental Property
by Mike Derenthal, Derenthal Realty Group and College Park resident

Landlording ain't rocket science. There seem to be some folks out there who want to make it more complicated than it needs to be. I can often talk to a disgruntled landlord and within 60 seconds sniff out what it was the landlord was doing that was leading to their management headaches. That's right, landlording headaches are most frequently caused by, of all things… the landlord!

I bought my first rental property about six years ago. That was back when you could purchase a home with 10% down, rent it out, and still put fifty bucks in your pocket at the end of the month. Back when your folks and friends thought you were odd for wanting to own rental homes, and back when $80,000 still bought you a decent, clean home in a nice neighborhood. Using my best Carroll O'Connor impersonation, "Tho-o-o-o-o-se were the days…"

Somewhere along the way, the market went berserk. Everyone and their brother became a real estate investor, and everyone was making money. If you got in with a "buy and hold" strategy, and decided you didn't like being a landlord, you could sell, and most likely you'd realize instant profit. There really was no negative side to owning rental homes, because they were so darn easy to unload - and at a profit to boot!

Now that things have slowed down however, there are a lot of folks who have found that being a landlord is more akin to having a nasty head cold that you can't shake. If you bought the property a few years ago, and didn't refinance all of your equity into a bunch of flat screens, then chances are you can still rent the place out at a rate that covers most of your monthly expenses.

If you bought more recently (or enjoy a lot of flat screens throughout your house), then you're probably renting it out and still having to feed it every month, and the management headaches seem to be adding insult to injury.

Unfortunately in this scenario, the need to feed that hungry mortgage machine every month often drives folks to make decisions that make the management aspect of owning the property even more onerous. Assuming you can live with the negative cash flow situation that you find yourself in, there are steps you can take to at least minimize some of the headaches.
In a nutshell, my rules of thumb for headache-free (or nearly so) property management bliss are as follows:
1. Know two things: your numbers and your competition.
2. Undercut your competition.
3. Rent only to outstanding tenants, but first you have to…
4. Find outstanding tenants (see # 2).
5. Expect your outstanding tenants to be "not-so-outstanding" sometime within the first few months.
6. Be prepared to help them quickly become the outstanding tenants that you always expected them to be.

I won't claim these ideas to be my own – most are borrowed. But this formula has worked for me quite well. When it has not worked it is because I have, quite frankly, quit following the rules.

We'll look at each of these in more detail over the next few weeks. Given the slow market, the number of reluctant landlords out there is growing almost daily. If this describes you, and the word "rental property" is synonymous with "migraine", then hopefully you'll find a gem of a suggestion or two over these next few articles to help simplify things a bit.

by: Mike Derenthal, Derenthal Realty, www.DerenthalRealty.com
1520 Edgewater Drive, Suite E, Orlando, FL 32804
407-965-1919

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