I’ve cried over piles of paper. Probably more than once but there is one time that stands out in my mind. I had an entire year of data entry / bookkeeping in front of me for a dozen or so properties. I used to do it monthly but that particular year I’d let it slide and so had my husband Dave.
Once we missed a few months, the task seemed so much more daunting the next month so we ignored it again.
Before we knew it, over 12 months had passed. It was tax time and we couldn’t put it off any longer. It was just paper – we knew it wouldn’t kill us – but it was awful and sometimes we felt like we were being buried alive.
After that debacle we agreed that we would revise our business processes so we were never faced with that again. We also agreed there were other areas of our business that needed attention too. Chaos was costing us money, wasting our time and making us miserable.
Part of the process involved switching to a more qualified accountant (we’d been using Dave’s family small business accountant but when we added rent to own it became clear we needed a real estate investing specialist), hiring a bookkeeper and then once I was full time, focusing on every area where we could make more money and reduce expenses.
Some investors get far more sophisticated with their systems and processes. They buy software, create elaborate check lists and hire virtual assistants. You can do that and for some it’s the right thing – but we tend to lean to the simpler and often easier to control options. It does depend on your personality and what you want to spend time and money on … but for us this is working and some of these ideas just might help you too – whether you’re going full time or not.
Our 4 Must Have Business Systems for Real Estate Investors
1. Simple but effective filing system
We used to use a binder per property but found that over the years the binder started to burst. Files are simpler and easier to manage. We have an “inbox” where all mail and documents sit until they’ve been processed (scanned so our bookkeeper can enter them in). Then we have 4 file folders for each property:
- Legal Documents (purchase agreement, mortgage docs)
- Tenants (their application, lease and any communications)
- Important docs like warranties and insurance
- Income, expenses & receipts (bank statements, repairs).
At the end of each year the expense file is labeled with the year and property address and put away into our “if we are ever audited” tax box for that year. Every tenant turnover results in the creation of a new file and the filing away of that tenant file. Every document is scanned and stored online as well.
Storing the documents online and creating a “virtual office” has been a huge help to us. No matter where in the world we are, as long as we have our iPad and internet connection, we can handle anything. There are so many options now from clouds to Dropbox to back up services to store your files online– it just depends on the security features and access needs you have.
2. Hiring Help & Bringing Property Management in House
The decision to bring most of our property management in house came as the solution to two major problems.
As we started buying properties more aggressively (going from buying 2-5 per year to 10 – 12 per year) we found ourselves drowning in paper. We had a good filing system by then but it required us to actually spend time filing.
That was part one of the issue. Part two was that the more time we spent evaluating the performance of our properties and the property managers – the more areas we identified for improvement. From ads placed in the wrong places or not at all, to pictures that would scare away good tenants, to missed maintenance work– we found all kinds of opportunities to do a better job managing our properties ourselves.
The problem was we didn’t want to take all the tenant calls.
We decided to take back control of most of our properties and then hire someone into our business to help us.
The math worked. We were paying most of our property managers 10% of monthly rent plus half a month’s or a full month’s rent to fill vacancies. If we no longer used a property manager that money could be used to pay a staff member – someone that could help us with property management, handle the filing problem and take over the basic bookkeeping tasks.
This has been the single most important change to our business and while it’s not always ideal to be self managing so many of our own properties – with help and simple systems – we are able to go away and not worry about what is happening with our tenants in our absence. We also do not have any stress at tax time because everything is organized, entered into Quickbooks and ready to ship to the accountant. And if something is missing it’s not us that has to track down the document!
Maybe hiring a full time person to help you isn’t going to work for your business (and quite likely it’s unnecessary) but most investors can definitely benefit from hiring a bookkeeper – and you’ll probably be surprised at how affordable it is to have someone come in once a month or once a quarter to help you get control of the paper monster! Your time is worth money and so is your sanity.
3. A Fantastic Real Estate Investing Team
To be able to do a large volume of deals requires a strong team. Even having a smaller portfolio of properties requires a strong team. Key members of our team today are:
• Great tradespeople
• Property manager (while we self-manage many of our properties we do need some help with a few of them!)
• Lawyer and a notary
• Our office manager / assistant
• Broker and/or banker
• Home inspector
• Insurance Broker.
I chuckle at the training programs out there that basically say things like “first, you build your team.” 11 years into it, we’re still building our team. We had a reliable electrician and then he moved to Afghanistan. We had to start over. We went through seven realtors to finally find one that gave us the information we needed, returned our calls quickly, worked hard and was fun. We worked with her for a couple of years and then she became a flight attendant for West Jet. We had to start over again.
Without the right advice or the right person you’ll over pay for work, make mistakes and possibly even get into bigger issues like legal challenges. I’d much rather spend $500 on the right advice than try to do it cheap or for free and take unnecessary risks.
Here are three things to keep in mind when you are looking for a new team member:
- Find someone that is recommended – ideally from more than one person
- Create a database (we just use an Excel spreadsheet) that notes how you found out about them, what properties you worked with them on, what they charge and what type of payment they will accept (some are ok with credit card but many want cheques – you’ll often want to know this).
- Work on getting back ups for trades, insurance and brokers/banks. Sometimes your favourite is busy or the job is bigger and you need quotes. You need to have options so you don’t scramble in the heat of the moment and work with someone that isn’t one of your top choices.
4. Making Real Estate Marketing Magic with Marketing Systems
How many times do you start from scratch when you have to write an ad? Or worse, how many times do you just go onto Kijiji and copy some other poorly created ad to place an ad for a tenant or find a deal?
We used to be badly organized with our photos and ads so we’d always have to recreate them every time. It slows things down and often something that worked well in the past will work well again so it’s better to just use it again and again until it doesn’t work.
Have a marketing file for each property on your computer where you store GOOD pictures (free from tenants junk, clean and with good lighting), ads that worked and any of the property details you’ll need when you advertise it (size, features, heating type, rough utility cost if applicable). Keep a scanned copy of the MLS listing if you bought a listed property. The details on the listing sheet will come in handy for years to come!
I have noted 3 other marketing systems for real estate investors on our blog. Check it out and share YOUR MUST HAVE system for real estate investing.
We could have made things easier on ourselves from the beginning by implementing simple systems but the reality is that it’s so easy to not make it a priority.
I’ve also seen investors go the other way and be system crazy when they don’t need to be.
For most real estate investors, I think a balance between outsourcing as many of the tasks you despise while ensuring you can still control the process and the costs will be the best solution. And really the best way to figure out what you will and won’t put up with it is to start simple and add more systems as you go and grow. It makes sense for us to have an employee in our office now but we have a sizeable portfolio and are adding around 10 new homes a year. That won’t make sense for most investors but many could use a part time bookkeeper, a great filing system and some spreadsheets to track their team members.
Whatever you choose to implement make sure it’s helping you and may you never have to feel like you’re being buried alive by the paper.