When you put most of your eggs into a real estate investment property, you are making a life-altering decision. It’s true, real estate has created many wealthy people around the world, so it’s not crazy to think that managing equity is a sound investment, right?
It depends really. Are you a hands-on, or a hands-off type of person when it comes to big projects? Can you repair a drywall? Unclog drainage? Do you have time to prepare your unit so it’s ready to rent? How are you going to manage finding tenants to rent from you? Can you keep your records and reporting accurate and stay within compliance during tax season?
And that’s just the tip of the iceberg on the expectations of being a property manager. If you’re someone who is hands-offs, but loves to profit, then looking into what a property management company can do for you might be in your best interest.
So, let’s go a little deeper into what the expectations are if you’re considering taking on the management role of the investment property you purchased, over hiring a professional property management company to oversee it for you.
What Does an Individual Property Manager do?
If you decide to go the way of acting as the landlord for your investment property, then you will be responsible to oversee the following operations:
- Analyzing and determining rental rates
- Marketing and advertising your property
- Screening tenants
- Managing preventative maintenance
- Collecting rent
- Repairing broken items as needed
- Preparing the lease
- Mitigating issues between tenants
- Enforcing the lease
- Evicting unruly tenants
- Replacing tenants when vacancies happen
If you must do all this for one property; imagine what managing multiple properties would look like. Aside from the demanding responsibilities you will surely be weighed down with, there are few other variables to consider before deciding on acting as your own property manager.
Are you able to juggle the time constraints of your everyday life with cumbersome, time-consuming responsibilities? Have you considered the potential health effects of being a landlord such as spiked stress levels? You will be needed at a moment’s whim if anything happens to the property. For example, imagine being called at 3 a.m. in the morning during a sweltering stretch of heat in the area because your property’s A.C. unit broke.
Another issue to consider is that, currently, you may be inexperienced. What do you know about the legal regulations of the city and state where your property will lie? How will you handle your first tenant eviction? Are your leasing agreements at risk for loopholes, or possibly non-compliant?
Finally, you may put yourself in a bind if you set your rent too high or too low compared to market standards. You could be sitting on an empty property for a long time, without any return on investment due to you overpricing yourself out from prospective renters. On the other hand, if you’re low-balling yourself, then you’re simply losing out on potential income right there.
It’s simple really. With an experienced property management company managing your investment property, you can avoid the hassle and stress that come with being a landlord – aka, make money and have less worries.
What Does a Property Management Company do?
If you’re someone who is considering the more hands-off approach to equity management, then enlisting a property management company to supervise your investment should be right up your alley. So, what does a property management company do? Whether you want one task outsourced, or all operations, hiring a third-party company can help you take on the following responsibilities:
When it comes to the management of rent, there are three stages of responsibilities that need to be focused on that an experienced property management company can handle. Those include:
- Determining rent—The property manager analyzes the market, compares properties and then determines the optimal rent price to list out.
- Collecting rent—A system of collection is created by the company you hire. They set the dates of required payment and enforce late fees to tenants with tardy payments.
- Modifying rent—After each lease year is completed, the property management company overseeing your property can increase the rent each year, according to state and/or municipal law. They can choose to decrease it if they decide it is necessary to do.
Another area of focus that can be enhanced with the help of a property management company is the management of the tenants who rent from you. Like with managing rent, there are a few specific areas that need to be highlighted. Those include:
- Searching for tenants—The property manager oversees creating attractive advertisements to entice prospective renters to view your property. They can also offer you sound advice on makeover tips to make the property stand out better.
- Conducting background checks—Your third-party hire will screen tenants, run credit and criminal background checks for you. As they are experienced, they will have more foresight into who would make quality tenants to rent from you.
- Handling leases—Setting lease terms, managing legal clauses, determining the security deposit amount are all specialties that are easier handled by professionals.
- Reacting to complaints and emergencies—You won’t have to worry about late night calls, or crazy scenarios involving your basement leaking. Your property management company will take care of any complaints by tenants or emergencies that occur.
- Managing the move out process—After a tenant alerts the property manager that they will be moving out, the manager will then oversee the move out process. They will inspect the unit, checking for any damages that will need to be repaired. They will then determine how of the security deposit will be needed for repairs and cleaning. Finally, they will find a new tenant to fill in the vacancy.
- Handling evictions—When a tenant becomes unruly due to non-payment or they breach the terms of the lease, the property manager will handle the eviction process.
When you let a property management company take the reins on governing your property, they will be required to ensure that the property is in a safe and livable condition for the tenants living there. They make sure that regular maintenance of the property is conducted and that emergency repairs are addressed as soon as the problem is known.
An example of regular maintenance to a property could be the scheduling of garbage and landscaping to pest control and HVAC checkups.
One huge benefit to hiring a property management company is when it comes to maintenance and repairs, they often have a reliable network of contractors including builders, plumbers, electricians and other skilled tradesman.
Manages records & reports
If you’re not a numbers person, and/or do not have very good project management skills, then hiring a property manager to oversee this area of your investment property might be a good idea. Because, when it comes to records and budgets, there is a lot to account for.
For example, when managing records, the property manager will oversee and audit the process for you, ensuring that the following materials are up-to-date and easily accessible. Those records should include:
- Income and expenses
- Maintenance requests and costs
- Leases signed
- Inspections signed-off on
- Complaints submitted
- Repairs recorded
- Insurance costs
- Rent collected
Also, another benefit includes when tax season arrives. Your property management company will be able to assist you with filing your taxes on your investment property.
Keeps up-to-date on landlord-tenant law
You won’t have to worry about city, state or national laws when it comes to the management of your investment property. The property management company you hire out can assure that all compliance is met when it comes to your assets and who it houses.
Your property manager will have extensive knowledge navigating the various laws including:
- Evicting tenants
- Complying with property safety standards
- Terminating leases
- Screening tenants
- Managing security deposits
When Should You Hire a Property Management Company?
If you are considering hiring a property management company, you should see if you fit within the following circumstances beforehand:
- The idea of hands-on management turns you off—You’re someone who views your rental property strictly as an investment and want nothing to do with the day-to-day.
- You don’t have enough time to manage it—Life is life and you don’t always have the time to focus on being hands-on during this current period. Maintenance, tenant communications, emergencies can be a handful. If you’re considering expanding your investment into a business, your property manager can take care of that for you too.
- You don’t live near your investment property—Even living just 20 minutes out from your property can be a hassle to manage. Driving to and from the property is time-consuming and potentially having to deal with emergency situations from a distance can a huge stressor too.
- You’re not interested in becoming an employer—You could go the route of hiring someone to work for you to manage it, but that would require you to oversee payroll. There are a lot of laws and regulations when it comes to payroll, and the management of it and employee(s) in general can be daunting. If you’re not about that life, a property management company is considered an independent contractor, so you won’t have to worry about any of those requirements.
- You don’t want to deal with the complexities of an affordable housing program—Navigating compliance laws of affordable housing programs can be tricky. Typically, in these programs, landlords receive financial aid, in the form of low-interest rates, a grant or tax credits. These benefits are only granted if you agree to rent part of the property to tenants earning below a certain income level.
When it comes to the management of your investment property, it makes sense to hire a professional, well-regarded property management company like Century 21 Northwest Property Management to handle the nitty-gritty of overseeing it for you. Companies like ours will be your best defense against having to deal with time-consuming maintenance activities, navigating compliance laws, communicating with tenants and much more.
Wouldn’t you rather sit back, relax and watch the equity rise on your investment(s) property then deal with the stress and hassle of being hands-on yourself?