I came across this really well written article over at roofstock that is worth your read. Many landlords self-manage their own rental properties. We think this is great we are here to help self-managing landlords. If the landlord has the time and the attention to detail to manage their own rentals in a legal, effective and cost-efficient way, then that is probably a good route.
Most real estate investors realize that owning a rental property is owning a business. Businesses are designed to give a return on your investment. Finding the right property manager is supposed to be a value add, not a liability. Imagine if you bought a restaurant and were deciding between hiring a restaurant manger with years of experience or to run it yourself. Your decision might be based upon how much you could save if you managed the restaurant yourself. You could probably learn how to do it very well. But consider the costs in involved in learning how to run it yourself efficiently. You might be loosing profits while you learn how to run a restaurant. The experienced manager might be an expense on the business, but that manager is there to maximize profits so the manager adds value.
The same goes for having a good property manager who not only knows how to managed properties and tenants, but has an eye for the investment performance of a property. Read more on this below from the article from roofstock.
Think property management companies just collect and cash rent checks? Think again.
From staying on top of federal, state, and city regulations to answering calls about broken dishwashers, property managers protect your investment while also ensuring your passive income actually stays passive.
For an insider’s view into the full range of services that property managers provide, we consulted with three experts: Mike Nelson of Excalibur Homes, Charles Thompson of Specialized Property Management, and Chandler Janger of Suncoast Property Management. They explained the many ways a property manager can save you time and money, so you can separate investing from operations.
Here are some of the top things property managers do for you:
1. Enable you to invest without geographic barriers
When it comes to operations, real estate will always need a local presence. But with a residential property management company, you don’t have to be an expert on home ownership or the area where your investment is located.
For example: If you’ve lived in Miami your entire life, you probably don’t know what kind of winter preparation and maintenance a house in Chicago will require. A local property manager will know how to best optimize the maintenance and marketing of your property for where it’s located.
Working with a residential property management company also gives you the flexibility to expand your search footprint and own in real estate markets that offer the returns you seek.
If you live in San Francisco or New York City, you may not be able to afford the high cost of investment properties in your area. Or perhaps you seek diversification, and want to invest in a market outside of where you already own a home. Hiring a residential property management company allows you to own in markets that fits your investing goals — without geographic limitations.
2. Know landlord-tenant laws and regulations
Keeping abreast of landlord-tenant laws can feel like an overwhelming task for property owners, especially if they own rental homes in multiple locations.
Not only will your property manager have strong expertise of current laws, regulations and ordinances, they’ll also know how to correctly address them. This will help avoid issues from the get go, and having to deal with them down the road.
3. Respond to maintenance requests
For many landlords, maintenance requests are often the biggest pain point. The promise of passive income no longer seems so alluring when you’re trying to get a raccoon out of a tenant’s chimney in a safe and humane way at 3 a.m.
“No matter how ideal the tenants, appliances break, systems wear out, and little things will need attention,” Thompson says. “Your tenants will feel valued when you respond to their needs, and they are more likely to care for the home if they see that you do, too. Landlords who are slow or non-responsive to maintenance requests are the No. 1 cause of tenant turnover, which is expensive.”
Your residential property management company will eliminate this hassle by proactively handling tenants’ requests or complaints, including after-hours emergencies, solving maintenance issues, and preventing any code violations.
4. Control maintenance costs
Staying on top of regular maintenance helps control costs and prevents bigger problems from flaring up down the road. Your property manager will conduct periodic property inspections in order to (1) fix anything in need of repairs, and (2) ensure the tenants are complying with the lease.
A larger residential property management company often has an in-house maintenance team and receives preferred pricing and volume-based discounts from vendors, allowing them to pass additional savings on to you.
This also spares you the stress of searching for a trustworthy repair person. Your property manager may already have relationships with proven vendors who are certified, bonded, and insured.
If something does go wrong on your property, you should expect to receive pictures of the damage; an itemized estimate of the repair costs; and an itemized statement after the repairs are completed.
You can also ask your residential property management company if it’s possible to establish a threshold for authorization. For example: Do you want to approve repairs that cost more than $100? $200? Define a cost threshold that prompts this kind of teamwork, and ask if it can be included in your property management agreement to avoid any confusion.
5. Market your property and fill vacancies
For every day your property sits empty, it costs you. Property managers reduce or eliminate this potential loss by proactively attempting to renew a current lease, or marketing the home for lease soon after the current tenant gives notice. A well maintained property with a market-appropriate rent rate can quickly attract reliable tenants.
“More than half the time, we have an approved applicant before the current tenant even vacates,” Nelson points out.
Property managers make sure the home is rent-ready by taking care of any necessary repairs and remodeling, replacing worn-out appliances, and rekeying the doors.
When it’s ready to be shown, you can rest assured the management company will aggressively market the house with photos and video walk-throughs on its website as well as all the major rental listing sites, such as Zillow, Trulia, and RedFin. Agents will also be available to show your home to prospective tenants in person seven days a week.
6. Screen tenants and collect security deposits
A thorough screening process can reduce your risk of financial loss. This is why professional property managers perform a range of background checks, including credit, employment, rental history, criminal and terrorist lists, and pet information. They’ll also make sure everything is conducted in compliance with fair housing and discrimination laws.
When an applicant is recommended for approval—and you as the owner have been consulted on the approval as desired—the property manager will collect the security deposit and hold it in escrow so that, in accordance with the rules, those funds are never co-mingled.
7. Reduce the cost of management
New rental property investors often wonder if they’d save more money by managing a local property themselves. As Thompson points out, “The first question is whether you have the time, and what your time is worth. Proper management requires continual attention and around-the-clock availability.”
Administrative and maintenance help on your property generally will range from $10-25 an hour, Thompson adds.
Mike Nelson encourages owners to multiply their regular hourly wage by the number of hours a month they’d likely spend managing their property. “That’s how much it’s costing you, from an opportunity cost perspective,” he says.
For example, Nelson recalls this scenario: “We had an emergency room doctor who was going to turn his own property, because he didn’t want to spend the $2,000 it would take to paint and clean it. Our contractor would’ve been in and out in three days. The doctor took four weekends, so he lost an entire month’s rent. Also, he makes probably $250 an hour while he’s working in the ER. Why not do 32 hours’ work in the emergency room instead?”
And as mentioned earlier, a professional property manager can also help save you money by avoiding problems that could lead to legal fees, vacancies, and damages related to mishandled repairs.
8. Collect rent and handle delinquencies
Your property manager is responsible for collecting rent and making sure the check clears. Some property management companies can even help you receive payment faster by allowing tenants to pay online, and then transferring the funds electronically to your account.
Property management companies take care of all landlord-tenant interactions, and communicate expectations up front through clearly outlined rent policies. Your property manager will also handle collections and evictions if such measures become necessary.