Hiring a property manager to oversee your real estate investments is a big decision. It can be difficult to relinquish direct involvement, particularly if you’re offering to rent a property that has been your personal home.
First and foremost, understand you’re going into business. Therefore, it’s important to divorce yourself emotionally from the property. As a landlord, you are providing a dwelling to a tenant in exchange for rent. Like all businesses, there will be both profit and loss.
Property management companies come in all shapes and sizes from small, “mom and pop,” operations with limited resources, to very large firms with substantial investments in staffing, facilities, and technology. Finding a good balance of cost versus service is the challenge in selecting a property management firm to suit your needs and expectations.
Also, consider the laws governing rental transactions, including fair housing, the fair credit reporting act, and the service members civil relief act, as well as state and locality-specific law. Knowledge of the legal requirements, having solid contracts and accounting, as well as managing tenant relationships, are compelling reasons to hire a management company.
Some factors to consider when deciding whether to hire a property manager:
1. How far do you live from your rental property? Will you be able to perform periodic inspections to protect your investment? Inspections and monitoring condition of the property is critical to ensuring compliance by tenants. Owners who see their property infrequently have a much greater risk of damage, which can result in much higher costs, than issues that are resolved immediately.
2. Can you say no? How do you deal with conflict? Tenant relationships can be difficult to manage. Non-performing tenants will appeal to your goodwill to delay actions for non-payment, offer to perform maintenance in exchange for rent, and obtain concessions from you. Running your property as a business requires you to adhere to uniform policies and practices for all tenants. Failing to do so can expose you to fair housing claims.
3. Would you rather spend your time doing something else? If you’re not comfortable dealing with the inevitable headaches owning and managing rental property entails, why not take the aggravation off your plate and work with an expert? There’s a reason financial planners, insurance experts and others provide value to their customers. They have a depth of knowledge in their respective fields the average person doesn’t possess. Why not use your time on the things you enjoy? After all, isn’t the point of having investments to have them work for you, rather than you work for them? Is managing property the best use of your time?
4. Are you knowledgeable about maintenance? Do you have relationships with maintenance providers? Property management firms with sizeable portfolios can command preferential pricing from vendors and reduce or eliminate charges, such as after hours service fees or excessive trip charges. They will also generally screen vendors to ensure proper licensure, insurance, and research references when appropriate.
5. Do you have a strong marketing mechanism? Most private landlords are limited in what they can do to get exposure for their rental property. A well-run property management company will have a substantial investment in technology, strong web presence, syndication arrangements with other web providers, and relationships with marketing outlets to target specific groups such as military members.
6. Are you equipped to provide detailed accounting for your rental business? Can you supply tenants with periodic statements of their account? What about forms, such as late payment notices, which conform to legal requirements in your area? Do you have solid contracts and are they continually examined for conformity to current law? If you answered, “yes” to the previous questions, accurate accounting could be a real problem area for many private landlords.
7. Are you prepared to be available and on call 24/7/365? Murphy’s Law comes into play frequently with rental property. If it can go wrong, it will, and usually when you’re on vacation with spotty cell phone coverage. If you aren’t available to handle emergencies when they occur, a problem can become much worse in a short time. Tenants who are used to picking up the phone when something doesn’t work often aren’t well informed about steps to take when emergencies occur. Your leaking water heater or burst pipe can go for hours before the water supply is turned off causing thousands more in damage than if it was addressed immediately.
8. Do you know the process for dealing with delinquent tenants, property damage, or breaches of the lease, such as unauthorized pets? Steps must be taken in a particular order to successfully address such issues. Occasionally leases must be terminated and/or tenants evicted for serious breaches. Taking the wrong actions, or doing so in the wrong order, can jeopardize your ability to resolve the situation, particularly if you have to go to court where the burden of proof and conformity to process is yours.
If one or more of these questions gives you pause, consider hiring an expert. The property management team at The Real Estate Group has many years of experience managing hundreds of rental homes for landlords. We have the personnel, technology, and processes to handle any situation that might arise. Whether you are a seasoned investor or a novice landlord, hiring a property manager is a sound decision to ensure your rental assets produce profits, not problems.