Property Management—Should I do it myself?
The great thing about investing in real estate today is the limitless information and advice one can find on the Internet. From applications that track rental income and maintenance costs, to blogs that promise daily secrets to wealth, you can essentially become a self-taught expert on real estate trends. But what the Internet won’t do for you is collect rent, or start legal proceedings when a tenant has consistently late rental payments.
If you are an investor looking to build wealth through the rental home market, you are more than likely to hear conversations concerning property management companies. What is a property management company, and how do you figure out if you’re going to need one?
Property management is similar to an insurance company. You pay a monthly fee, and hope to be taken care of in the event of an unforeseen emergency. A good property management company offers peace of mind for an investor, by resolving many issues, most of the time with no necessary communication to the investor.
Most individuals who purchase rental homes are looking for passive income. The problem with maintaining a rental home is that you are often held responsible for the things that can go wrong—toilets, hot water tanks, and garage doors all seem to always have issues at the most inconvenient times. If you have a property management company assigned to your rental home, you will never have to directly deal with these variables.
After spending some time in the property investment world, you begin to realize that many rental property developers have either formed subsidiary management companies, or have a network of management companies they recommend. How do you, as an investor, know which management company works best with your long and short-term financial goals?
The most telling sign of a property management’s ability to provide reliable service is a history of successful, repeat clients. Rental homeowners need a team they can trust to help build wealth, and the right property management can provide all that is required.
One great thing about dealing with a reputable property management company is that they will always have connections in the business. These connections can help lower costs to you, and keep your ROI where it should be. You do not have to search for an affordable, reliable maintenance man, nor will you ever have to worry about the possibility of dishonest work.
Some investors maintain that property management is the most important factor for their success in rental properties. In essence, a property management company has the ability to free up a lot of time that you can spend otherwise looking for more rental properties, or simply enjoying your wealth.
Annual return on investment relies heavily on rental collection, and missing one or two payments during the year can deal a serious blow to profits. The number one reason that landlords do not utilize property managers is because they claim they cannot afford it. Unfortunately, most landlords deal with too many unexpected costs during the lifecycle of their rental home, which leads me to my next big point—getting into blind rental home ownership is not a good idea! A property management company can keep you informed and up to date on the status of your home, along with possible leads for new properties.
Some individuals also claim that property management companies can get away with taking money off the top of rent for little to no work. In reality, the insurance that a property management company provides, along with the peace of mind is invaluable. As the market for real estate investing diversifies, the property management industry is adjusting to cater to the individual needs of different investors.
One of the biggest advantages of a property management company is the legal backup provided. A good property management company has an in-house lawyer, or at the very least, preferred legal counsel. The review of lease agreements, possible evictions, and assistance with future purchases may all be provided in your property management fee.
How the management agreement is set up will dictate the process that maintenance repairs, rental collection and evictions are processed. Some companies offer to repair small items without contacting the landlord, while larger more serious maintenance requests will warrant immediate communication. Knowing your management agreement is very important, to avoid any surprise fees or unwanted repairs. Documentation of all maintenance/repairs, real-time data based profit reports, before and after photos, along with detailed financial statements are all expected from a reputable management company.
Most typically, city citations, taxes, rental license renewals, water bills can be handled by a property management company. Property management companies often know what cities will require tenants to sign water affidavits, and can save you from paying bills that should not be your responsibility. While some cities require the actual homeowner to physically make a trip to the water department to request a change of bill, other municipalities require simple phone calls. A good property management company should know what’s required, and take care of all the issues for the investor. A good company can even handle winter/summer taxes! This doesn’t get you out of paying the bills, but will save you the trouble of contacting city services and visits to municipal buildings.
Average charges for maintenance, eviction rate and success, and how often they turn over tenants, are important things to know when hiring a property management company. The convenience of a monthly fee greatly surpasses the inconvenience of running around trying to find maintenance employees, along with chasing down tenants for rental collection.
The convenience of a management fee greatly outweighs the disruption of a rental-home issue. It is possible that you can suffer profit-loss without utilizing a property management company for an investment. It will take all the legwork out of your investment, and provide you with a monthly income. Although the property management company is still going to eventually send you a bill, the trouble of addressing the emergency is no longer your responsibility.
Along with home quality and location, property management is among the most important pillars of a rental property. A good attitude towards tenants, ethics, and available services are all important to recognize when choosing a property management company. They are your representatives in many matters, so choose a reliable and experienced management company, and watch profits climb. All of the data on the Internet does not amount to the value of knowledge and boots on the ground experience that a local, dependable property management company can offer.