property management
As any landlord with more than one or two rental properties can tell you, managing them is a trying and frustrating process. Some landlords simply throw their hands up and sell their rental units, others lose hair over them, and others hire property management companies to manage them. We’ll try to answer a few questions about what these management companies do, don’t do, and why many landlords turn to them.
Property management companies exist to do exactly that: manage the day-to-day headaches that arise from owning a rental investment property. They screen tenants to fill vacant rental units, sign rental agreements & disclosures, receive rent, keep accounting records, oversee legal obligations like lead paint tests, act as a contact for maintenance and repairs, and for any questions from tenants.
That all being said, there are some tasks that management companies can’t or don’t perform in most circumstances. Typically, they don’t pay property taxes, or maintain rental property insurance (although your mortgage lender may be able to handle that for you in the form of escrows). Management companies usually don’t make payments on your behalf, except to contractors or handymen. Lastly, they don’t usually handle rental property registrations with local municipalities or government entities.
At about this time, you might be wondering what property management companies typically charge for their services. As a landlord, I’ve usually paid 7-10% of gross rental income; so, if a property’s rent is $1,000/month, a management company may charge $80/month for that property. Therein lies the disadvantage of hiring such a company, as many landlords have only slim cash flow margins each month on their rental income.
The primary advantage of using a property management company, aside from the obvious time and expertise that they bring to the table, is simply this: they will take on the recurring headaches and sleepless nights brought on by the stress of managing real estate. Keeping all of the accounting, laws, tenants, repairs, contractors, and vacancies straight is a full time job for anyone managing more than a few properties, and the fact is most landlords just don’t have the time or inclination to be responsive and available. The answer? Let someone answer the 2:38 AM phone calls.
Property management can be a tough job to run by yourself. Ideally, we would like for a building and/or tenants to be able to operate and live as smoothly as possible without having any problems to deal with. However, this is never the case, as there is always something that needs taking care of around a property. If you are in need of a property manager, then read on.
When searching for someone to hire to take care of maintenance and assistance for a space you own, you want the overall experience to be as beneficial as possible. As far as considering whom to hand this job to, do not choose your cheapest option. This decision should eliminate a lot of work and stress from your life and create a job for someone else. So, make the best choice based on character and work experience an individual or company has.
To help you with weighing decisions, definitely ask for references from those you are interviewing. Make trips to places that all potential hires are currently managing. Observe how these places seem to be taken care of and contact residents or owners to ask about how well the area is maintained. If there are buildings that a managing business has operated in the past, be sure to contact these as well to find out how well of a job was done and why the company no longer manages them.
If the real estate in question is to function as an apartment complex, ask about the procedures your potential hires practice. You will want to know how thorough they are in regards to rent collection, resident screening, leasing processes, response times to tenant requests, and eviction notices.
Before signing any property management agreements or hiring anyone, be thorough and work out overall budgets for all areas concerned, such as monthly repairs. Checking with other management companies for estimate comparison for these amounts is a good place to start. It is also a good idea to constantly monitor the costs of repairs.
Upon hiring, agree on an account to place all rent deposits. Have the business sign on to this account along with your name. This way, you will have access to all funds, should there be any disputes.
In order to avoid rent being pocketed by your managing company, request that a monthly roster be made all tenants with current contact information. Some companies may say an apartment is vacant when a resident still lives there and keep the rent money.
These are a few tips and precautions that can be taken to find quality property management and maintain a good business relationship. A lot of work is necessary for keeping an area of real estate operating optimally, so take this into consideration before assigning anyone the job. Trust is a key issue when handing over the care-taking duties to another party, but you should still take measures to assure that your premises is running legitimately.