With the combination of rental income and the potential for property appreciation – being a landlord and owning a rental property can be a great way to grow your net worth long-term.
And, depending on how good you are (or become) at being a landlord – you might discover that owning rental property doesn’t take much work (relative to the income you’re receiving).
Now, with that said, being a landlord and owning rental property is still a lot of work; especially if you’re trying to learn everything yourself.
So, in this guide, I’m going to help direct you down the path of becoming a successful DIY landlord.
Table of Contents
My Experience As A DIY Landlord
At the time of writing this guide, I’ve been a landlord for over 3 and a half years so far. During this time:
- I’ve made a lot of mistakes
- made stupid decisions
- learned how to do a majority of home improvement projects (up to code)
- changed (aka optimized) my lease agreement every year as I learn from other’s mistakes
- purchased thousands of dollars worth of tools
- and still made money
Just like most people that will read this post, I was a beginner.
I didn’t get a great deal on the property I purchased (I house hacked a duplex). Nor did I have a mentor walking me through the process (that probably would have helped me not make so mistakes).
And, if I can make a ton of mistakes, not get a great deal, and figure most things out by myself – you can absolutely become a successful landlord.
Recommended Reading: What Is A Typical Day Like In The Life Of A Landlord?
What Does It Mean To Be A DIY Landlord?
Being a “DIY Landlord” basically means that you’re an independent landlord.
For some people that means the landlord doesn’t have a property management company managing the property. Instead, the landlord does all of that work themselves.
For other people, the landlord still self-manages the rental property but also does most of the work themselves.
So, to make sure both you and I are on the same page for the rest of this guide – DIY Landlord will simply mean someone who doesn’t have a property management company and is self-managing their rental properties
That’s it.
Pros Of Being A DIY Landlord
Being a DIY landlord comes with several benefits that you may not experience if you had a property management company: For example:
More money from fewer expenses
If you hire a property management company to manage your rental property, you’re going to have to pay them their monthly management fee.
But, if you decide to manage your rental property on your own – the property management fee you would have been paying a company is now additional cash flow you can utilize as needed.
More control over your rental property
A property management company’s primary job is to keep your rental business producing income. This is a great thing because it usually means the property management company is making decisions with your best interest in mind.
However, there are definitely times when the property management company will have to decide between replacing something that’s not broken but could die any day and getting the rental property rented asap.
Most property managers are going to rent the property asap and deal with the repair/replacement of things as they break. This is good, on paper – but it can lead to a frustrated tenant and a more difficult repair (especially if more problems are found).
However, if you’re managing your rental property – you may be able to make a better decision at that moment. For example, you may delay renting the property for 1-2 weeks so that you can repair or replace things when they’re near the end of their useful life.
That decision might delay rental income for that unit/property but could make managing the property easier during your new tenant’s lease.
Gain experience in all aspects of a rental property business
As a man of many things, this has been a big benefit.
I’ve been able to communicate with tenants, learn how to project manage renovations, learn how to find and screen potential tenants, what needs to be fixed and when, and a lot more.
I love the feeling and confidence of knowing that should I stop being a digital marketer, I can go down the career path of property management or start a construction business using the knowledge and experience I’ve gained from being a DIY landlord.
Cons Of Being A DIY Landlord
I’d be lying if I told you that being a “do it yourself” landlord didn’t have any downsides. But it does.
Here are a few of the cons I’ve experienced that are associated with being a DIY landlord:
Requires more time investment
When you hire a property management company, your main job becomes saying “yes” or “no” to different decisions (for the most part). After you make those decisions you move on with your day.
However, when you’re managing the property yourself – you have to make those same (or similar) decisions and actually execute those decisions as well.
For example, if you’re using a property management company and have a roof leak – your property management company will get someone out for a quote, send it over to you, and ask you what you want to do. Once you give them your answer (you’re probably going to tell them to get it done), your role is finished. They get back to work and you move on with your day.
But, if you managing the property yourself and have a roof leak – you’ve got more work on your hands. You have to:
- Call and schedule quotes
- Meet the repairman at the property
- Schedule the repair
- Notify your tenant
- Verify the repair
- Pay for the service
To be honest, I’m probably forgetting a couple of steps in the process but I think you get the point.
When managing your property yourself, you’re going to invest more time.
You’ll probably make more mistakes
A property management company is likely managing many different properties all at one time. They’ve also likely managed properties for years.
So it’s possible that they’ve already made a lot of mistakes early on in the business and have learned from them. This means you get to take advantage of the fact that they know what they’re doing.
So, if you decide to DIY being a landlord – you’re going to make a lot of mistakes simply due to not knowing better. In the long run, you’ll become smarter and should make fewer mistakes.
But I’ve never heard any landlord say they’ve never made mistakes when managing their rentals.
You’re customer support
When managing your property, you’re the customer support. If a tenant has a problem, they call you.
Sometimes you might get a call at noon that something is broken. While other times, you may get a call at 10 pm on a Friday during the worst snowstorm of the season about the furnace not working.
All calls and complaints go straight to you.
This section may seem like an obvious responsibility of being a landlord but, if you had a property management company managing the property, all of those calls would go to them instead.
Tips For Getting Started As A DIY Landlord
Here are a few tips for getting started as a DIY landlord:
For landlords using a property management company
If you’re a landlord that currently uses a property management company and you’re interested in doing it yourself, here’s what I’d recommend:
Talk to your property management company or review your contract and see if it’s possible for you to take on additional responsibility until your contract is up (while still paying them their normal fee). If possible, this allows you to get your feet wet while not taking on too much at one time.
For aspiring landlords
If you don’t own any rental property and are interested in becoming a landlord, I’d recommend you start by house hacking.
The benefits of house hacking include being able to ease into the role of being a landlord (and making mistakes) without having to worry about managing multiple properties (your rental and the property you live in).
However, if for some reason, house hacking isn’t an option – I’d recommend purchasing rental property in an area you’re very familiar with. As a new landlord, you won’t have the experience and knowledge to confidently (and consistently) purchase great rental property deals. But, by purchasing a property in a neighborhood you’re familiar with, you can instinctively utilize your knowledge of the area to your advantage.
Even if you don’t know what makes a rental property a good deal, it’s likely you will subconsciously be able to determine a good or bad deal in an area you’re familiar with because of any extra knowledge you might have (rent prices, neighborhood sentiment, amenities, etc..)
I’d also recommend you learn as much as you can online in places such as this website and the BiggerPockets forum. You’re going to make mistakes (it’s inevitable). However, being surrounded by people who have been in your situation and made similar mistakes is a blessing for your mental health.
Tips For Analyzing Potential Rental Property
The easiest way to make money with real estate is to buy a good deal. The better the deal, the harder it is to lose money through mistakes and problems.
However, if you’re a beginner – you’re not going to know how to accurately analyze a potential rental property. There are simply way too many variables that are location dependent.
So, if you start your DIY landlord journey by house hacking, as I recommended above – I’ve already created a post about analyzing your potential house hacking deal that you can check out.
If you’re planning to go a more traditional route of buying a dedicated rental property – I’m going to give you a few tips for analyzing a potential rental property.
Know the area you’re buying in
I mentioned this same tip above but it’s very important for new landlords that are going to manage everything themselves.
If you were using a property management company and had a network of successful real estate individuals to fall back on for advice – you’d have more flexibility in where you purchase.
But, since that’s not likely to be the case – choose an area you know well so that you can take advantage of your experience in that neighborhood.
Recommended Reading: Why I Won't Buy Out-Of-State Rental Property
Set a goal before purchasing a rental property
It’s very easy to get caught up in the online hype of finding the “best” rental property.
Although it’s not wrong to try to maximize your rental by purchasing a good deal, it can lead to “paralysis by analysis” – meaning you get so caught up in analyzing and trying to get the “best”, that you end up never purchasing a rental property at all.
I’ve seen paralysis by analysis happen so many times that I rarely ever recommended anyone that’s new at something to aim for the “best”.
Instead, I recommend you set a financial goal that would satisfy you and aim for that.
It’s better, as a beginner, to purchase an average, but profitable, rental property and leave money on the table; versus never purchasing a rental property at all because you can’t find a great deal.
Analyze your cash flow
Cash flow is one of the most important aspects of owning rental property.
If the cash flow is good, I know that the rental property is profitable. That doesn’t mean that I’m making the best ROI on the money I invested but, for the sake of keeping my life simple and lower stress, I don’t worry about “best”.
I’d recommend you analyze the cash flow of your potential rental property from many different perspectives, for example:
- Is your property profitable if you hire a property management company?
- Is your property profitable if you only put down 3.5%? What about 5% or 10%?
- Does this property have any potential problems that would kill cash flow?
I mean, there are a lot of questions you can ask (you’ll learn more of these questions as you become more experienced and learn more).
The more perspectives you use when analyzing a potential rental property, the more clarity you’ll have on knowing what options are available to you if you purchase that specific property.
Tips For Finding Tenants
Here are a few tips that will help you find tenants for your rental property:
Word of mouth
Your ability to use this tip will be based on your local area and the people you know.
However, in my area – I can post about an available unit for rent on social media and get applications that same day since there’s not a lot of quality rental property available in my area.
Use online rental listing websites
I’m talking about Redfin and Zillow.
It’s common to find apartments or some properties managed by property management companies on those websites. But I rarely ever see independent landlords posting on these websites.
Maybe I never see rentals from DIY landlords on those websites because they get filled too quickly ;)
Build a waiting list
This is another common strategy of apartment complexes or property management companies.
The goal of this strategy is to build a private list of potential renters so that the next time your property becomes available, you can send an email to everyone that was waiting and let them know that they can submit an application.
Although this strategy isn’t as “cool” as listing your rental property online – it’s a relatively easy way to help your property get rented quickly after tenant turnover.
Recommended Reading: How To Find Good Tenants
Tips For Managing Your Property
Managing your rental property is where most of the work is for a DIY landlord. The majority of the work you do in any one year will revolve around managing contractors, tenants, and the overall well-being of your property.
So, here are a few tips that can help you:
Make sure your lease agreement is legal in your state
One of the most important steps to take as a landlord is creating your lease agreement. All the rules a tenant needs to follow will be in that document. If your lease isn’t legal, this could make evicting a tenant difficult and could increase the likelihood of you being sued by your tenants.
This is one of the few areas I recommended hiring someone who has the knowledge to make sure you don’t make a huge mistake.
Set up an appointment with a local real estate attorney that knows your state and local laws. That knowledge will allow them to create a lease that’s legal and will hold up in court.
Accept rent in multiple payment methods
Not every tenant will want to pay rent the same way. Because of this, you should accept multiple different payment methods that give tenants options (especially older tenants who prefer to stay off the internet).
I allow tenants to pay rent via check and online (bank account or credit card).
This allows me to cater to both older tenants and younger tenants. And I recommend you do the same.
Don’t make it hard for people to pay you.
Provide a good living experience
When I was still renting, it was frustrating to move into a new place only to have something break within the first week. I mean, I understood that things break but it always made me feel like the landlords didn’t check anything before I moved in.
That experience, along with conversations with friends, led me to try to provide a good living experience for the first 12 months of a tenant’s lease. This usually means that I replace/fix anything that looks like it will break within 12 months instead of waiting until it breaks and inconveniencing the tenant.
I can’t prevent everything from breaking but by fixing things before tenants move in, I reduce the chances of something going wrong and causing major problems (like flooding or the tenant needing to leave the property.)
So, with that said, I recommend you do what you can afford in order to make the property a relatively stress-free living experience for the tenant.
This also improves your life as a landlord because it reduces the number of phone calls and emails you’ll receive – making your job of managing the property much easier.
Recommended Reading: Guide To Self-Managing Rental Property
Mistakes To Avoid
Look, you’re going to make mistakes. You can’t avoid them all. However, here are a few mistakes you should avoid if you want your life to be easier as a landlord:
Avoid major renovation projects
As a new DIY landlord, you’ve already got a lot on your plate. The last thing you need to add is a major renovation.
A major renovation will drain your savings, delay your ability to generate rental income, and cause you to spend most of your time trying to properly manage contractors (or do the work yourself).
If possible, I’d recommend you avoid major renovations unless you have experience with renovating or someone experience that can help you.
Avoid “too good to be true” deals
If it looks too good to be true, it probably is.
There are plenty of real estate agents and people, in general, that will happily take advantage of your inexperience.
So, I recommend you avoid those deals completely unless you feel confident in your ability to accurately analyze the deal. However, if you’re a beginner, you probably don’t have the ability to accurately analyze the deal.
And, if you follow the tip I mentioned earlier in this post about setting your own goals, that will hopefully help you avoid falling for the traps that hide behind being “the best” rental property.
Avoid low-income areas in the beginning
As someone that was born and raised in low-income areas, I think all new landlords should avoid them.
Listen, I’m going to keep it real with you. Investing in low-income areas increase your odds of things of bad things happening. That’s just the way it is.
Does that mean all low-income areas are bad? Of course not. But, in my opinion, you’re more likely to find bad low-income areas than you are to find good ones.
Low-income areas tend to have a lot of “too good to be true” deals as well. And sometimes, unless you know the area, you won’t even be able to tell it’s a low-income area until the nighttime or the weekends.
So, I recommend new landlords avoid low-income areas – at least in the beginning while you’re still building confidence.
Instead of purchasing rental properties in low-income areas, I think new landlords should purchase boring properties in average neighborhoods. You want average problems. And if average (or slightly below average) cash flow is a consequence while still building your confidence and skills – that’s not a big deal, in my opinion.
Is It Worth It?
Yes, being a DIY landlord is worth it.
You get the benefit of being in full control of your investment and can make decisions that are in your best interest.
You’ll also gain skills in the process that will allow you to be a better landlord in the future.
