Property Management Tips

By
October 12, 2021

What you need to know as a landlord

In the last year or more, the cost of renting an apartment or home has gone up significantly in the Western Montana Market which has brought a flood of new investors and landlords to the area. The average 3-bedroom apartment in Montana is $1200/month. When done properly, being a landlord can have excellent tax advantages, provide monthly income and build your financial security.  When done poorly, being a landlord can bring about legal proceedings, loss of income, and potentially crippling monetary damages. So here are some tips for people that are looking to maximize their potential on their investments:

1.        Find a good property manager

Many people choose to manage their property themselves and it certainly can be done. Keep in mind a good property manager will provide you added security against legal risk, give you good and detailed financial reporting, and have established relationships with contractors, plumbers, electricians, etc. Most people find their rental properties are more profitable when managed by a professional property manager.

Interview potential property managers, ask for references. Ask specific questions on their maintenance process. Ask about their eviction process.

 

2.      Protect yourself and your investment

Make sure your insurance is adequate for the property. Don’t be afraid to tell your insurance agent that you are renting the property out, often you will see a reduction in premium for a rental property vs. a home you live in.  Ask about loss of income coverage if the property becomes uninhabitable for a period. If you have a property manager, consider adding them as an additional insured.

Require renters to obtain renters insurance and name you/your property manager as an interested party.

3.       Educate yourself

If you have a competent property manager, this process is much simpler. Landlord/tenant laws change frequently, and licensed managers are required to keep up with the changes.

There is a ton of misinformation out there about what landlords can and cannot do as well as what tenants can and cannot do. But you should always refer to the law itself. Montana Landlord/Tenant Law can be found here.  Violations of this law as well as Fair Housing Laws can come with very steep penalties and are one of the most common ways private landlords get themselves in legal trouble.

4.       Select the right tenants

Typically, the two biggest costs to a landlord are vacancy and maintenance/repair. Both costs can be mitigated by proper tenant selection. Good tenants typically take better care of the property, and if you treat them well, they will stay longer. Taking a little bit longer to place a tenant may cost a week or two of vacancy up front, but it generally pays off in the end.

Perform background checks on applicants. There are many services that will do this for you for a small fee. Make sure you have clearly defined standards that you are looking for when performing the background/credit check.

WARNING! You might think that renting to friends or family might be a great idea. Friends and family have a high likelihood of ignoring certain aspects of the lease or the rules/regulations. Further, it makes it much more difficult to follow up on late rent or decline other requests you would not do for another tenant.

 

5.       Get a good lease

Out of all the tips here this is probably the most important. A good lease protects you and can make the difference between being a successful landlord and one that goes bankrupt. It might be tempting to write your own or download a generic lease for free or even a small fee. There may be some sites that seem reputable, or landlord associations that offer them but be wary. Any lease you obtain should be reviewed by a lawyer that specializes in real estate law.

Make sure your lease outlines the deposit amount, how/where it will be held and the requirements for the return of it. What does it say about past due payments and the eviction process?

What does it say about normal wear and tear? What does it say about pets (side note be incredibly careful about service animals and therapy animals and the legal requirements for them)?

 

6.       Keep up with preventative maintenance

You are responsible for maintaining the property up to code. You are responsible for repairing anything that deteriorates due to normal wear and tear. Keep in mind that normal wear and tear for you may be different than what a Judge considers normal wear and tear. Respond quickly to tenants when they call with maintenance requests.

It can be tempting to save money on repairs by performing it yourself, but keep in mind the laws for maintenance and repairs can be different for a home you own vs. a home you are renting. This is particularly true when dealing with plumbing and electrical issues. You may be legally liable for damages to a tenant/tenant property for maintenance performed by you improperly. It is best practice to hire licensed and insured professionals for safety related repairs.

Have a repair fund. It can be devastating to be caught with a major repair that you are legally obligated to perform and have no funds to complete the repair. Performing full repairs on major items can cost more up front than the quick “band-aid” type fixes but may be more cost effective overall.


While this list is certainly not all inclusive of what you need to know to effectively manage your income property, it will provide a foundation that you can build on.