- Real estate experts know investment properties are a great way to generate passive income, but they come with a lot of responsibility.
- Eachan Fletcher is the CEO of DIY property management app NestEgg, a platform seeking to help landlords by streamlining the tasks and services that come with owning property.
- A real estate investor himself and the former CTO of Expedia, Fletcher is an expert when it comes to property management, and says 5 strategies play a key role in a landlord’s ability to be successful.
- Visit Business Insider’s homepage for more stories.
Investing in real estate can be a great way to generate passive income.
But being a landlord entails responsibility.
Managing a property isn’t as easy as it might seem, and landlords are often faced with drawbacks from unpredictable expenses to significant operational overhead costs.
Despite these, there are some ways to streamline the landlord experience, according to Eachan Fletcher, the CEO of DIY property management app NestEgg, and former CTO of Expedia.
“The income is not as reliable as it might appear on the surface, especially at a time like today, and the month-to-month cash flow is super-volatile,” Fletcher said of the experience many landlords have with rental properties in today’s market.
“Many expenses, such as maintenance events, are unpredictable and always seem to happen at the worst moments. Operational overhead is also a big problem for the independent landlord space, as most owners in this segment also have day jobs and families — busy lives that time-consuming property management tasks don’t easily fit into.”
“My wife and I are ‘mom and pop’ landlords ourselves,” Fletcher said of his experience in real estate prior to founding NestEgg. They’ve had a small portfolio of 11 units for over a decade (now managed through NestEgg) and they’ve “tried everything else. This is how we know the limitations of today’s products so well, and the messy, awkward hacks independent landlords have to live with to get by.”
Working alongside one cofounder who’d been in a similar position and another who ran her own property management company, Fletcher said he’s gained access to an insider’s view to how the property management space works.
And having become an expert in the field personally and professionally, Fletcher says there are five strategies landlords should live by when it comes to managing their properties, and he shared his advice with Business Insider.
1. Establish a good working relationship with tenants
While there is a lot of legislation and local code governing long-term rentals and there are contracts and leases in place, Fletcher said “ultimately it comes down to two or more human beings working together on a day-to-day basis.”
Understanding and mastering that is a key aspect of being a good landlord.
“The landlords I know who have the easiest journey are the ones who think about what they’re doing as win-win cooperation with their residents. This means a less confrontational relationship, better care of the property, and more reliable income.”
2. Have a system
“Running rental properties is a complex operation with a lot of moving parts and, if you don’t put structure into it from the start and just be reactive, it’s going to be a lot more work and a lot more intrusive on your personal time than it needs to be,” Fletcher said.
He said to establish a plan for how you’re going to run the units and keep track of information, handle maintenance including a communication system for how your tenant can reach you, what happens if you’re out of town, and the like.
3. Build a team
New landlords quickly realize that they’re constantly searching for reliable contractors and other professionals to deal with the constant stream of upkeep and maintenance issues that rental properties need, Fletcher said.
“This is especially tough in the mom-and-pop space as they typically own single-family and small multifamily assets — unlike institutional investors who have the advantage of owning hundreds of units in luxury high-rise buildings and can hire their own full-time crews.”
Fletcher said to proactively research and vet a handful of reliable local options near each of your properties, so that you know right away who to call and you’re not rushing through expensive repairs under pressure.
4. Structure financially
Even though most mom and pop rental owners are only part-time landlords alongside a regular day job, “it’s important to think of it as a business,” Fletcher said.
Doing so will encourage good record-keeping — and save tons of stress at tax time — and focus your attention on how your properties are contributing to your financial health, not taking from it. “A lot of smaller landlords aren’t properly accounting for everything that happens in their portfolios, and as a consequence don’t realize the income they should be seeing.”
5. Get good advice
Since launching NestEgg, Fletcher sais he’s been really encouraged by the organic support in the community for it. “Most small landlords know how difficult it is, and are willing to help newer landlords and share their property management tricks and traps,” Fletcher said.
“There’s a lot of groups and forums where you can learn from others and avoid making all your own mistakes.”