8 Ways to Get More Passive Income from Your Rental Properties

0:00Want to make more passive income? Look, investors get into real estate for financial freedom, not to be attached to their rentals at the hip. If you're constantly answering the phone, coordinating repairs, chasing rents, putting out fires, you don't really have control over your time. You just have another job. Thankfully, there are ways to make your rental significantly more hands-off. While no rental property is 100 % passive, you can get pretty close with the right tools, systems, and processes, giving you more time, flexibility, and freedom to do the things that you actually want to do. Today we're breaking down through eight different strategies, how to make your rental portfolio work for you instead of the other way around.

0:40Because the goal isn't just to have more rentals, it's to build a portfolio that helps you live life on your own terms.

0:51This is the Real Estate Rookie Podcast. I'm Ashley Kerr. And I'm Tony J. Robinson. And with that, let's get into strategy number one, which is honestly one of the easiest ways to make your rental more passive. And it's to hire a property manager. Now, I'm sure most of you understand what a property manager does. But for those that aren't aware, there's a few things they handle. They handle what happens before the tenant gets into your property and they handle what happens after the tenant gets into your property. So before, they're going to post a listing and market your place for people to actually find it.

1:28They're going to screen all of the potential applicants to weed out the people who maybe aren't going to be great fits based on income, criminal backgrounds, whatever it may be. They're going to show the unit to the people that are potential good candidates. They're going to create your leases and make sure that you're compliant with local and state regulations. They're going to execute the lease and deliver it and hand over the keys and do the initial walkthrough. So everything that's required to actually get someone into the unit, a good property manager will take care of. And then once the person's actually inside, they take care of everything else, collecting the rent, an important one, dealing with maintenance issues, helping you understand maybe some things you should focus on from a preventative side, working with vendors to to make sure that in between tenants that someone's taking care of the turnover that needs to happen.

2:16So really every element of working with the property manager means less work for you. And you're really just there to give approvals on the things that you need to give approvals for. But that is like the lowest hanging fruit to make a rental more passive. And I think too, Tony, like your last statement there that you just said is kind of oversee things and like give approvals on things. So, you know, some property management companies, you know, have it set where, you know, anything under$500, they can go ahead and do that maintenance item or make their repair, but anything over needs your approval.

2:49So I think my biggest point is even though the property manager can do a lot of that day-to-day stuff for you, you still need to do asset management. You still need to oversee your property and you also need to oversee their operation that it's working effectively and efficiently and your property is still performing well. So as we go through a lot of these tips, a lot of these aren't going to be your solution to 100 % passive that you never have to pay attention to it again today. These are just ways to get more passive than if you did everything yourself. Tony, I think too, we should also highlight that some of these don't even just apply to long-term rentals.

3:31Like a short-term rental, you can hire a co-host to actually manage your property like you would a property management company for your long-term rental. Yeah, 100%. And really any strategy, really, like we have some investors that we've interviewed on the show that do assisted living, but they don't actually manage the assisted living facilities themselves. They have people who manage it for them, right? And they're just like the NC that owns the real estate and they built the right structure, but someone else is actually running the business. So really, across a lot of different strategies, it can apply.

4:02But Ash, you brought up a good point that I just want to highlight quickly about property management versus asset management. And I'll give a few examples so rookies can see the difference. A property manager is going to take the maintenance request for the leaky faucet. The asset manager is going to say, well, guys, this is the third time in the last 90 days we've had someone report the same leaky faucet. What do we need to do to actually repair this to make sure that doesn't happen again. The property manager is going to maybe make sure that the insurance is paid. Good asset manager is going to say, well, hey, when have we last kind of shopped to get the best rates for insurance to make sure that it's working correctly?

4:50So the property manager is really there to focus on execution. As the asset manager, it's all about strategy and reduction of costs and how do we make sure that we're running efficiently. and both of those things work together. And oftentimes property managers are really, really good at property management. They're really good at quickly knocking out maintenance requests. They're really good at making sure that things get solved. They're less so focused on if we zoom out 30 ,000 foot view, are we actually solving the root cause of these issues and bringing the overall operational cost of the rental down?

5:22So you as the owner, so you have to make sure you're wearing that hat. And me, I was a terrible client for my property managers because they would ask me questions that I wouldn't get back to them fast enough, right? So you still have to make sure that you're involved to kind of give them the resources and the guidance to take care of things the right way. Now, number two is purchasing a property that is turnkey or brand new. So we've done a couple episodes recently on new construction homes, and this would apply to that too, where you're not going to be expecting a lot of maintenance to happen in the home because it's freshly remodeled or it is a brand new property where things should be working correctly.

6:00So less maintenance calls is definitely less work for you when the property is more passive. Plus, if you're buying turnkey, usually you're purchasing the property with a tenant that is in place that has already been screened, their credit check, background check, and they should qualify, have the good debt to income and be able to afford the property. So I think that having that all set up for you already, as much as we like talk sometimes about inheriting tenants, sometimes it can be good. Sometimes it can be bad. I've definitely had both. Usually when you're purchasing from a turnkey company, they have gone through the proper vetting process, or at least you hope so.

6:43And you can kind of verify that with them as to what is your process to screen a tenant before actually signing a lease with them and moving them in to actually see if there's anything that they are actually missing from that process is kind of a red flag. But if you're just buying a property from some guy off the street that's selling it on the MLS, like you can also ask what their screening process was. You can ask for a copy of the lease agreement. You can ask for if they're current on rent, which in New New York State at least, you put that onto the rent rider. When you sell a property, you're putting on if they are current with their rent or not for the tenant.

7:21But obviously, people could not disclose that, could lie about that, things like that. So I would say turnkey about their process, but more likely you're going to get a tenant that they've already got in for you. That's also one less thing you have to do as the landlord is do showings, take an application, take the time to find someone to actually get the unit rented out. When you actually close on the property, it's already somebody in place for you. Do you, do you have any in your portfolio, like, like brand new construction rentals? No, I don't. I do. And I love them. I like love them so much more than the properties that we purchased and we renovated because even the ones where we did renovations, like none of them were truly like down to the studs, right?

8:08So there, there's still always some level of things that we have to go back and fix. And Sarah, my wife and I, we talked about this before. It's like, man, if we could just have nothing but new construction, unlike the management side of things, things would be so much easier because there's just less that happens in new construction. There's just generally less things that break or kind of go wrong with new construction. It's our older properties where we tend to have that. So if you are someone who is looking for the passiveness, you can definitely increase that by simply buying something that's new or building something and building to rent instead.

8:46Number three is to invest in good tools and software. And again, this translates not just to long-term rentals, but across almost every asset class at this point, whether you're doing short-term rentals, mid-term rentals, self-storage, even flipping for that matter. Almost all of the asset classes now have some level of software. If you're wholesaling, some level of software that's going to help make you more efficient. And I think it's the real estate investors who are still relying on, God forbid, pen and paper, but even just Excel spreadsheets and Google Docs. there's so much software out there that can streamline and make more efficient a lot of the things that aren't really exciting as a short-term rental or as a long-term rental, as a medium-term rental owner.

9:36I'll give some examples on the short-term rental side. Ash, I'll let you give some examples on the long-term rental side. For short-term, super simple, super, sorry. For short-term rentals, a super simple example is getting people into the property. Long, long, long ago, like 2018, a lot of short-term rentals, you still had to use a physical key to get inside. So like when you book the place, the host would say, hey, there's a lockbox on the side of the house. You got to jiggle it this certain way to get it open. And don't forget to put the key back before you leave or else we'll have to charge you.

10:11Now, when someone books one of our properties, they immediately get sent a four-digit code. And that four-digit code matches the last four digits of their own phone number. And they also get a backup code. So if their main code doesn't work, they get a backup code. And that code is set to automatically activate on the day and time that they're supposed to check in to their property. And it deactivates on the day and time they're supposed to check out of their property. And all of that happens with zero intervention or action on my part. But it's because we set up the right systems, tools, and processes to make sure that those things happen automatically.

10:46What about on the long-term side? What's like a super like low hanging fruit that would take a lot of time that's automated for you now? I would say the easiest thing is maintenance requests. You, instead of getting maintenance requests texted to you or your tenant calling you and then you're in the middle of doing something, you're busy, that how easy to forget that he texted you and needs something repaired or taking care of at the property where a maintenance requests. If you use a software, like I use TurboTenant, you're a BiggerPockets Pro member, you get rent ready for free. You can have it all the time just in your dashboard whenever they submit a maintenance request, the status of it.

11:25So if you've sent it to somebody, you know, to a vendor to take care of, if it's in progress or if you finished it. The thing I like the best about this is if issues happen later on down the road, it is so easy to go back and look at the history of this property to see what's already been done or has this been fixed before. So instead of scrolling back through text messages with a tenant that moved out a year ago to see what the problem was with this or how it was fixed last time, something like that, you have it all in one place. Like TurboTenant, they also have a maintenance AI now where when somebody submits a maintenance request, the AI will actually ask it more additional questions such as, can you include photos?

12:15Where is it leaking? Is it an active leak? Different things like that. Because I've definitely got tenants that text me, faucet leaking. Is it the kitchen? Is it bathroom? Is it gushing water? Is it a small drip? What is actually happening? Instead of me trying to take the time to troubleshoot all this and figure it out, the AI response. So I'd say maintenance request, low hanging fruit, along with rent collection. You shouldn't have to get the mail. You shouldn't have to get paper cuts opening the mail. You shouldn't have to put deposit only on the back of your check. You shouldn't have to enter it into any bookkeeping.

12:49You shouldn't have to, you know, take it to the bank to deposit it. Of like my 40 tenants, I think I have four that still mail me a check and that's because they don't have Wi-Fi. They don't have smartphones. They just have no way of actually using a tenant portal. So I still get theirs every month. But other than that, rent is just paid. I don't have to do anything to get it. Even if they don't pay their rent, late notices are automated and sent to them that their past due late fees are automatically added. Like these are all things I used to do manually. It's like, I would have to send everyone an invoice that didn't pay rent.

13:28When I manage a 40-unit apartment complex, print out the invoice. You're late. Here's your late fee that's due. It was so much work. Definitely getting some kind of software really helps automate and make your rentals a lot more passive. Ash, I love that you're such a real estate mogul, that you're getting paper cuts from opening up all the rent checks coming in. Oh, God. I still probably have scars on my desk. You know what changed the way I invest? Realizing that scaling rentals shouldn't mean creating more work for yourself. If you're trying to build that kind of system, Baseline is giving away$10 ,000 to help investors build rentals that run themselves.

14:13I own and manage dozens of properties. I travel a lot and I still work a W-2 job. And there was a point where I was checking multiple bank accounts, chasing rents, and updating spreadsheets just trying to stay organized. Even on vacation, I was constantly checking if rent came in. Now, everything runs through Baseline. It's BiggerPockets' official banking platform that automates my rental cash flow. Rents get deposited into dedicated property accounts, transactions get automatically categorized, and everything stays organized without me constantly managing it. That's the difference the right systems make.

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15:25RentReady does it. And oh, you want tenant screening that doesn't overcharge your applicants? RentReady also does this. Basically, if you've ever complained out loud about your property management software, RentReady probably already built the fix. It's$12 a month. You're welcome. Sign up right now for$50 off your first year of RentReady with promo code BPCASH. BiggerPockets Pro members get it completely free. Sign in through your pro account at rentready.com slash biggerpockets. That's rent, R-E-D-I dot com slash biggerpockets. Some listeners may wonder why their insurance quote only took 30 seconds.

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16:48So I think we all understand, to Ash's point, like a maintenance request comes in and we go fix that thing. Preventative maintenance is the other side, where can we service these things before something goes wrong to extend the life of what they look like? And Ash, you actually have, I believe, like a proactive maintenance checklist that you created at some point. right? Yeah. So basically here's the things that need to be done. There's really not anything monthly, but like quarterly, bi-yearly, yearly, every couple of years. Like one thing that I really want to get on my preventative maintenance schedule is power washing.

17:26I recently had a couple of properties done for that and I cannot believe the difference that it made the property look. So like, I just want to like keep up on that and then it will just be cheaper each time that I do it because I'm not waiting, you know, 10 years before I ever power wash it again, you know? So that was just like one new thing. But I think just having these things, like if you have an air filter, um, for your furnace, you have a furnace making sure that it's staying replaced because it's just going to make the life of your furnace last even longer and less recur, you know, less maintenance that you'll have to do.

18:04Hopefully it will last longer before you have to replace it. All of these little things can really add up. The gutter is like making sure that gutters are cleaned out so they're not getting full and kicked in. And then water is just running down, you know, the side of your house because the gutters are overflowing and then it's going into your foundation and into your basement and, you know, just causing more issues. For setting these preventative maintenance, you're probably thinking, well, actually, this seems like I have to do more work. I have to do all of these things. But if you're setting this stuff up in the long run, it's actually going to be more beneficial for you and be less work you're going to have to do because you already have these tasks kind of set up and organized instead of being reactive and like, oh my God, scrambling.

18:48I have to get someone in to do this or that. And then it becomes a bigger issue. Trust me, we'll be way more work for you. So even if you're not the person doing these things, can you set these ahead of time, like calling an HVAC company and say, hey, every year I want just like a tune up on my hot water tank and my furnace. What would that cost to do it in this property? I have five properties. Would you give me a discount if I do it on all five properties? And you can just go ahead and set those up as recurring things that happen yearly where maybe they send you a reminder and just say, hey, just, you know, we're headed out to the property.

19:25And this time we've contacted your tenant, let them know and moved on to, you know, with your day. So there is a lot of things like that that you can do. What about on the short-term rental side? I would assume that you're probably doing a lot of the same preventative maintenance, but it's probably harder working around guest bookings that are coming in because at least a tenant, it's one tenant I'm contacting and can say and not having to figure out who's the actual guest of the property or waiting until there's an opening. We do quarterly maintenance inspections across all of our properties.

20:01and it's at that time and they're just scheduled, right? It's like our maintenance team knows how to do them. We have virtual assistants that help schedule it so that they know when to schedule it. But to your point, that's when we go through and we try and identify issues before they become a guest facing issue. So we're like retesting every single outlet. We're like checking all the appliances to make sure that they work. We're doing the basic things like the aero filters and we have mini splits in some of ours and there's like things we need to do there. We have tankless water heaters need certain things done on a maintenance side, right?

20:32So we're checking all the big things, but then we're also double and triple checking all of the elements that a guest might interact with to see if there's anything that's broken there. So just getting into that rhythm helps identify things before they become a bigger issue. And to your point, Ash, proactivity is typically less time consuming than reactivity. Because if we can identify and fix it quickly, it's a short thing. But if a guest calls it, you know, now it's impacting their state, it becomes a bigger issue for us. I also have a proactive maintenance recurring checklist. I don't remember officially what it's called, but you can go over to biggerpockets.com slash resources.

21:05And we'll just give you a starting point of some of the things that I do at my properties. And I've even added more things that don't even apply to my properties, just in case you're in another region or something where maybe there's something you have on your property that I don't have. But you can go ahead and use that as like a template and kind of make it your own and add things on there and use that. The last thing that I kind of want to add here is, and this may be more, I guess it applies to both long-term and short-term rentals, but your amenities. So for me, I like properties that don't really have common areas because as much as I'd love to say all the tenants that live there, you guys are responsible for keeping the common areas clean.

21:48I don't want disputes because someone says, oh, he came in with muddy boots and now I have to clean it because he didn't clean it. And I don't like shared responsibility. I like either one person's doing it or they're not. And so I don't like to have common areas. In one property, I do have a common area. I pay a cleaner to go in and clean the common area, but that's an additional expense. Lawn care. I don't unless it's a single family home I don't want a big yard I wanted a small yard so either if I'm paying a tenant to mow the lawn or giving them a rent credit or I'm hiring someone I want it small manageable I don't want extravagant landscaping it's a single family home I just have them take care of everything so it's a bigger yard that's when they rent the place they know that they have to maintain it.

22:40So a lot of those things, but in short-term rentals, like Tony, you have hot tubs, like what is the recurring maintenance? Like, do you think that like, there are some things that are better that can make your property more passive or even these things that recur, you know, or even these things that require a lot of maintenance, are there ways to make them more passive? Like, you know, cleaning of the hot tub and stuff. Yeah, to an extent, right? I mean, a lot of it comes down to people and systems, right? Like you create a system, you train people in the system, and you hold them accountable to following the system, right, or to the process.

23:15So for us, our system is that for the hot tubs, for example, every single one of our Airbnbs has a hot tub. And our process is that as part of the cleaners cleaning checklist, they have to take a photo of the hot tub and have to put like a testing strip in the hot tub water to show it that it's that it's like balanced the right way. So we get the visual to make sure that it's clean and clear, and then we get the kind of safety portion of like, hey, is it balanced correctly? And if any of those fail, if the water's cloudy or the test comes back as a fail, then our VA is good to then go reach out to our hot tub tech and try and get them out there that day.

23:50And then if they can get it done before the guest checks in, awesome. If we feel like it might impact or happen after the guest checks in, we just notify the guest who's coming in. Say like, hey, unfortunately, the last guest didn't take the best care of the hot tub. our tech's going to be there it'll be shortly after you arrive so just know for maybe the first hour or so you might not have access to the hot tub but you know what we're working on getting them repaired for you right so for us it's like i don't know if it's necessarily more you know it's not necessarily preventing the issue because sometimes it's unavoidable but it's if we have a very repeatable process in place everyone is trained on that process and we hold all those folks accountable to that process it makes it less of an issue when it does happen and and i'm generally not even alerted now if those things do happen because the team just handles it Do you ever notice how every passive investment somehow turns into a very active lifestyle?

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