Sometimes the most attractive real estate investments are located in a different area from where an investor lives. While it’s easy to purchase a rental property online, finding a good tenant and taking care of a remote property can be more of a challenge.
Fortunately, by having a system in place and using the right tools, remotely managing a rental property can be almost as easy as owning a rental right next door.
In this article, we’ll cover the 12 main steps to manage a rental property remotely, along with tools and tips to simplify remote real estate investing.
- Remote real estate is generally located in a different city or state but can sometimes be in the same area where an investor lives.
- Key steps to remotely manage rental property include having a trusted local representative, automating as much as possible, and making use of online services for screening, rent collection, and maintenance requests.
- Remote real estate investors may still wish to visit a property in person once or twice a year to perform their own inspections and meet with tenants or property managers.
What is a remote rental property?
A remote rental property—also known as a long-distance property—is usually defined as a home that’s located in another city or state. In other words, a remote rental property is one that isn’t located in an owner’s “backyard.”
Many investors today invest in remote rental property in smaller secondary and tertiary markets with strong job and population growth and affordable home prices.
A remote rental property also can be one that takes some time to travel to, or one that an owner simply doesn’t have enough time to take care of in person.
For example, in a city with a lot of traffic congestion, like Los Angeles, it could take hours to travel just a few miles in rush-hour traffic. Or, an investor with a property portfolio may not have enough time to visit each property in person.
12 steps to remotely manage a rental property
Regardless of how near or far a rental property is from its owner, it’s important to make sure that the property and tenants are taken care of. Otherwise, cash flow could suffer due to increased tenant turnover with a return on investment (ROI) lower than projected.
With the proper planning and processes in place, owning and operating a remote rental property is something that almost anyone can do when they put their mind to it. Here are 12 general steps to follow to manage a rental property remotely.
1. Have a local representative
Begin by having someone that lets a tenant “put a name to a face.” A local representative doesn’t have to be in charge, but they should be someone that a tenant knows is around, even if they never end up needing to contact the local representative.
Remote real estate investors often hire a local property management company. A property manager will handle tenant communications, perform periodic inspections, and coordinate maintenance and repairs to keep a rental property in good condition.
2. Build a trusted local team
Real estate investing is a team sport, and having the right players on a trusted local real estate team can make remotely owning a rental property as easy as having the home next door.
Members of a local real estate team may include an investor-friendly real estate agent, property manager, handyperson, contractors (for specialized work, such as heating, ventilation, and air conditioning (HVAC) maintenance and electrical work), landscaper, pest control specialist, real estate attorney, and real estate bird dog to periodically drive by the property and perform a visual inspection.
3. Figure out a way to do property showings
Floor plans, 3D models, and virtual tours make it easier for a tenant to visualize their new home and see how their furniture will fit into each room.
After a prospective tenant has been screened, a remote real estate investor can have their trusted local representative arrange for an in-person showing, or use programmable smart locks to allow one-time access to the home.
4. Have a tenant screening solution in your back pocket
They say that an ounce of prevention is worth a pound of cure, and that’s especially true when it comes to looking for a qualified tenant.
Tenant screening websites such as Avail, E-Renter, and MySmartMove automate screening with online applications, credit and background checks, and online security deposit and rent collection.
As part of a thorough screening process, a landlord should speak with a prospective tenant’s employer, previous landlord, and personal references.
5. Get a digital document signing tool
Signing a lease agreement is easy to do online. Many of the best tenant screening websites offer the option for a landlord to upload a lease document and addendums, or provide a library of state-approved forms.
The DocuSign Agreement Cloud for Real Estate is an option to consider for online document signing. According to the company, 80% of documents sent for signature are completed in one day, and the turnaround time on agreements is 25% faster.
6. Create easy lines of communication
Good communication makes it easier to develop stronger relationships, make better decisions, and anticipate problems. Set expectations with tenants by explaining how to communicate and when they should expect a response.
A landlord may consider setting up a second, dedicated phone number for business use rather than fielding emails or text messages that can be misunderstood.
7. Manage rent payments online
Accepting rent payments online is not only easy and free—collecting rent online can improve cash flow and reduce tenant turnover.
There are 4 main reasons for landlords to accept rent payments online, according to the tenant screening company Avail:
- Seventy-four percent of tenants under the age of 45 prefer to pay rent online.
- Tenants who use an autopay method are 5 times more likely to pay on time.
- Online rent payments are more transparent for both landlords and tenants, significantly reducing the chance of human error.
- Paying rent online is much more secure than paying by check or in cash.
8. Create a tenant portal
A tenant portal is a one-stop online hub for tenants. Renters can pay their rent online, monitor rent payments, place maintenance requests, receive notices such as lease renewals, and access important documents such as move-in checklists.
9. Automate bookkeeping
Free rental property financial software from Stessa, a Roofstock company, lets landlords get rid of old-fashioned spreadsheets. Income and expenses are automatically updated, and performance dashboards at the portfolio and property levels show financial performance in real time.
Landlords can run monthly reports like net cash flow and income statements, organize and securely store all real estate documents online, and track expenses on the go with the iOS and Android app. When tax season rolls around, the Stessa Tax Center can make tax prep a breeze.
10. Enforce the rules
Every now and then, a tenant may take advantage of a landlord who is “out of sight, out of mind.” The rent might be paid late, or a tenant might have a secret roommate or unauthorized pet.
To reduce the risk of a tenant breaking a lease rule, it may be a good idea to go over the entire lease agreement with tenants before they move in. If a rule is broken, a landlord may wish to have a zero-tolerance policy to demonstrate that the terms and conditions of the lease will be enforced.
11. Schedule property visits
Even when an investor has a local property manager, it still can be a good idea to visit the property once or twice a year.
In-person visits are a good way to perform additional inspections, meet tenants, and spend time with property managers. Business travel expenses are usually fully deductible, although an investor may wish to speak with a tax advisor to ensure that they follow Internal Revenue Service (IRS) rules.
12. Install security cameras
Although the demand for rental property is strong in many markets, there still may be times that a home is vacant, such as between tenants or when upgrades are being made. Installing a security system may deter vandalism or break-ins and provide a landlord with more peace of mind.