A Landlord’s Guide to Property Management

Property Management_DPI

Owning rental properties can make a great investment, often with returns that far outpace the stock market, but real estate must be managed well to perform. Real estate income is considered a passive form of income but investing and managing a portfolio of properties is anything but passive.  A property and its tenants need to be managed and maintained properly to ensure a well performing portfolio. As a professional investor I have chosen to use a property manager for my rentals, which allows me time to focus on other areas of my business. The choice to use a property manager is up to you but I strongly encourage individuals to seek out a high quality property manager to make your real estate investing easier.

Property Management Overview

So what goes into managing a rental property? A well managed property is professionally run in all aspects. Accurate records are kept and rules are uniformly delivered and enforced during a tenant's residency.  The truth is a whole list of things go into managing a property well. This includes the following :

  • Evaluate the property to determine rent : A property manager should walk through a property before recommending the rent to charge. An experienced manager may also make recommendations about the property regarding safety or maintenance concerns.
  • Market the vacant Property : When a property goes vacant a manager will advertise the property to find a new tenant.  Managers that are really on top of their game often prepare for properties going vacant and advertise them before the current tenants leave. This requires a tenant to give notice they are not planning to stay, can’t be one of the tenants that just stops paying and is gone in the middle of the night.
  • Show the Property to prospective tenants : I know I have better things to do on the weekends than sit in an empty rental property, your property manager will arrange to meet and show the property to prospective tenants for you.
  • Screen prospective tenant applications : A property manager should also screen your new tenants for you. They should call previous landlords and possibly conduct criminal background checks and run credit reports. If you are managing without the help of a manager there are plenty of services that can help you. I recommend  Cozy at https://cozy.co/. This site helps with screening and rent collection.
  • Coordinate lease and move in with tenant : Property managers will negotiate anything that needs to be addressed for the tenants on leases and coordinate move in with the tenant.  If you are out of town...or in town, you might want your property manager to take photos of properties before and after tenants move in and out and post them to a shared location.  That way you can see the condition of the property and if you ever needed the photos in court, you will have them.
  • Answer and Respond to tenants : This is the biggest complaint or fear I hear expressed from non real estate investors. They claim they couldn’t handle having a tenant call with complaints about clogged plumbing and maintenance issues. Your property manager is your first line of defense and should be able to easily remedy most small maintenance issues without bothering you. You can set the spending limit a manager has before they have to contact you.
  • Maintain property : In my experience this is an area that most Property Management companies don’t address very well for single family residences. I encourage you to fully evaluate your properties and discuss your long term maintenance plans with your property manager. This can help save you money if your property manager knows you are planning a kitchen update after a tenant moves out. They may make smaller repairs etc.
  • Collect rent, pay bills, and owner : This has evolved with the internet and become a much easier task with e-bill payment and websites and services like Cozy.co
  • Keep accurate records and report : An effective property management company will keep records of rent collected, bills paid, and all other activities related to your property. They also balance the need to notify the owner with every activity and what the owner wants to know. As you build a relationship with a property manager they will learn what types of things you want to know.
  • Evict tenants : Unfortunately, this will happen eventually.  Even with a good screening process in place eventually you will have to evict a tenant. Event the best meaning of people fall on hard times or circumstances and may not be able to afford to live in your property anymore. It becomes your property management companies job to free up the tenant to live somewhere else they can afford. I had to evict 2 tenants in 2015 and the process is time consuming but both were out in around 60 days from the time we initially decided they needed to move. I recommend filing within 10 days from the time rent is due. This is a business transaction and the legal process to evict a tenant (like many legal process) is time consuming.
  • Rehabs and Clean or flip property when tenants move : A property management company not just an individual that manages properties will likely have a maintenance staff to help clean out and repair your property when tenants leave. This helps speed up your turnaround and decrease your vacancy rates. Vacancy is one of the biggest avoidable expenses and the speed with which you can prepare a property for a new tenant is very important.

This is by no means a comprehensive list but is meant to give you an idea of what a property manager is juggling on each property. Each of these requires time, attention to detail, and skill to perform well.  If all are done right a property will perform better than if they are not done well...this means more money in your pocket.  While property managers typically charge between 8-12%...an effective property manager will more than pay for his or herself in improved asset performance. Effective property management is a skill and requires a certain temperament when dealing with tenants. Not everyone is suited to property management and I recommend you find a property manager that works well for you.

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