Property Management Considerations
Choosing the right property management company from among the dozens in your area can seem like a daunting task. But with some careful planning and good interview techniques, you'll be well on your way to turning the complex, time-consuming job of managing your rental property into a passive (for you) revenue stream.
Before deciding which companies to put on your short list, sit down and identify your needs and goals for the property in question. Do you need full property management services, or do you want help with only certain aspects of your business, such as leasing? Do you need a manager to live on-site? Would you prefer to work with a large company that has multiple locations and lots of resources, or would you rather work with a more boutique business, where you'll likely receive more personal attention?
Once you've decided on your criteria and narrowed your search, take a close look at the following aspects of any property management companies who make your final cut:
When you're evaluating a property management company, you'll want to make sure that your interests and those of the company are aligned.
If you've owned income property for any length of time, you know that managing a rental can be financially rewarding. At the same time, you've also likely discovered that property management requires a large commitment of time and effort.
While it may make sense to take the do-it-yourself approach if you're a handy person, live close to your property, and don't mind devoting several hours per month to the task, in many cases this just isn't practical---especially if you hope to expand your business. With this in mind, here are some critical tasks a property manager can help you with:
- Setting the right rental rates:While looking through the classifieds to see what other landlords are charging for similar properties is a fine way to ballpark your rent price, a good property management company will conduct a thorough market study in order to set a rental price for your property, ensuring that you achieve the perfect balance between maximizing monthly income and maintaining a low vacancy rate.
- Collecting and depositing monthly rent payments on time:If you've ever worked in a billing department, you know that securing payment from clients can be difficult, not to mention awkward. Property management companies have efficient, tried-and-true systems in place to effectively collect rent and maintain on-time payments. You'll find this particularly important if you have a limited number of properties, and collecting payments on time is crucial to maintaining your cash flow.
- Marketing and advertising your property:Through long experience, a property manager will know exactly where to market your property and how to craft compelling advertising materials---a significant advantage when it comes to filling your properties quickly and avoiding long vacancies.
- Finding the right tenants:Experienced property managers are experts at finding good tenants, and will take care of all the details, including the securing all criminal background and security checks, running credit reports, verifying employment, and collecting previous landlord references.
- Managing tenants:In addition to finding good tenants, a property management company will manage all aspects of the tenant-landlord relationship. The property manager will handle both routine and emergency maintenance, take care of routine inspections, and manage any situations where conflict resolution is required.
- Managing vendor relationships:Property management companies have relationships with maintenance workers, tradesmen, contractors, suppliers, and vendors that it's almost impossible for an independent landlord to duplicate. Not only will your property manager get you the best work for the best price, they'll oversee any necessary maintenance projects.
- Ensuring that you're in compliance with housing regulations and property laws:There is a multitude of applicable laws and regulations to abide by when renting and maintaining your rental property. These include local, state and federal regulations, as well as fair housing regulations (such as the ADA). A property manager can help you avoid lawsuits by keeping your property up-to-date and in compliance with these regulations.
- Enabling you to invest in geographically distant properties:If you manage your own properties, you're pretty much limited to investment opportunities within a tight radius of your own home. By hiring a property manager, you can take advantage of investment deals in any location you wish.
- Maximizing the profitability of your time:By having a property manager take care of the day-to-day aspects of running your income property, your free to spend your time identifying further investment opportunities or otherwise furthering your career.
- Maximizing the profitability of your money:Most property managers charge a by hiring a professional to take care of your property.
- Fees: Percentage of your property's monthly rental rate in exchange for their services. The rate typically runs anywhere from 4-10%, which is generally less than the money you save