Do you own an investment property that you’re renting out, and you’re currently handling all of the chores of being a landlord yourself?
Are you thinking about investing in rental properties, but you’re not sure if you’re up for the task of being a landlord?
If you answered yes to either of those questions, whether you are holding onto or considering investing in a single-family rental (SFR), duplex, or triplex, you should think about engaging a professional property management firm to take the work off your shoulders.
Let’s take a look at what property management is, what a professional management company handles, and how to decide not only if it’s time to hire one but also how to hire the right property management firm.
What is Property Management?
Let’s start off with getting an understanding of what a property management firm does and doesn’t do. There are several critical tasks a property manager can help you with.
Setting the right rental rate: You can always ballpark this by looking through the classifieds, but a good property management company actually conducts thorough market studies to set a rental price for your property. This makes sure you have a great balance between maximizing your monthly income and keeping a low vacancy rate.
Collecting the rent: One of the most difficult aspects of being a landlord is collecting the rent. Property management firms have efficient, tried-and-true systems that will do a great job of collecting the rent and maintaining on-time payments.
Marketing and advertising your rental unit: When vacancies occur, you want the rental unit occupied as quickly as possible. A professional property management firm has experience that helps it market your property in just the rate way to make sure someone moves in quickly.
Finding and managing tenants: The property management firm will take the work out of finding and managing tenants for you. This means screening new tenants for criminal and credit checks, collecting references, and getting the lease signed. Once the home is occupied, handling routine and emergency maintenance and inspections are part of what a professional management company will do for you.
Managing relationships with contractors and other vendors: Do you have deep-seated relationships with all of the maintenance workers, tradesmen, contractors, suppliers, and vendors needed to properly manage your rental? Probably not. But a property management firm does and can get you the best work for the best price, while handling the burden of overseeing necessary maintenance projects for you.
Keeping you in compliance with the laws Housing regulations and property laws are complicated and confusing when you’re renting and maintaining your rental property. These can include local, state, and federal regulations, along with fair housing regulations like the Americans with Disabilities Act. A property manager can keep you out of hot water by keeping your property up-to-date and in compliance with all of these regulations.
Allowing you to invest from afar: If you’ve moved to a place where investing in rental units don’t make sense, you might think that investing in SFRs or other rental properties isn’t possible. With a good property management company by your side, you won’t be so limited in your investment opportunities.
I only have one property; so why do I need a property manager?
If just reading through all of the tasks that a property manager can handle for you isn’t convincing enough, consider this: do you want to be able to go on vacation without interruption? Do you really enjoy phone calls about backed up plumbing at 3:30 in the morning?
Chances are, you want the freedom to leave town for vacation or just have uninterrupted time with family for the holidays. You don’t relish the task of dealing with emergency maintenance chores in the middle of the night, and you probably dread the thought of trying to find a good tenant when your existing ones move out.
Even if you only have a single investment property that you’re renting out, you can benefit strongly from hiring a property management service. They have decades of experience that you’d be hard-pressed to match yourself, and can ensure your property is maintained impeccably while still maximizing your profit.
Okay, I’m convinced, but how do I know who to hire?
The best way to find out about quality management companies is based on the experience of others. If you are local to your rental property, attend your regional real estate investment association meetings to get recommendations from other landlords.
You want to make sure you find out how many units the company is managing, and how many employees they have doing the work. A trained employee with the right tools and proven processes can successfully manage between 30 and 40 units, as long as they’re not also playing accountant.
When you’re interviewing different qualified property management firms, here are the questions you should get answers to:
What is the cost? Generally, the monthly fee for property management is between eight and twelve percent, plus expenses. Remember you get what you pay for, so it is important to balance the cost and services.
How well do they communicate? You want someone who uses email, but is still responsive to the telephone. If you don’t get a response in a timely fashion, it’s time to walk somewhere else.
How easily can I terminate the agreement? If things work out, what will it take to terminate your agreement? Make sure you know this up front, along with any penalties.
How experienced are they with Section 8? This can be supremely important, since Section 8 housing and tenants are great income opportunities. Make sure they have adequate experience with such properties.