Hiring A Property Manager
When it comes to investing in real estate, you can be a passive or active investor. Active real estate investors are responsible for what’s going on at their property, but how closely they want to manage it is up to them. If you are short on time, and your energy is shot taking care of your OWN home, you should consider hiring a property manager.
Here are the most common tasks a property manager is responsible for:
1. Setting Rent
The property manager is responsible for setting the right rent to attract stellar tenants to your property. They understand the market in and around the location of the property, have looked at comparable properties in the area, and have determined that sweet spot between a good deal and charging too much for rent. You run two risks by setting your own rent as a real estate investor. If you price it too high, it could take you months to attract a good tenant. On the other hand, if you price it too low, you could cost yourself thousands of dollars in lost rent opportunity.
2. Collecting Rent
They keep your cash flowing by setting a date to collect rent each month and strictly enforcing late fees. In other words, they’re the heavies. If you aren’t interested in being a past due bill collector, they will handle this for you. A property manager will collect the rent checks, and they may even run them to the bank on your behalf!
3. Adjusting Rent
The property manager can increase the rent by a fixed percentage each year, according to state and/or municipal law. This is another risk you run by setting your own rent. If you are not familiar with the average rent in your area, you could be missing out on potential increases. It is not uncommon to increase rent by 3 to 5% per year based on the demand for the property. On the other hand, if you don’t know what you are doing and you hike the rent you could lose a perfectly good tenant!
4. Finding Tenants
Property managers find the right tenants for you. They know where to advertise the rental and what to include in their ads. They also understand what attracts tenants, so they can offer ideas to help makeover the property to reach its full potential. Property managers are also familiar with the Fair Housing Act. If you don’t know what you are doing and you turn down a perfectly good tenant, you could end up with a discrimination lawsuit on your hands. Yikes!
5. Screening Tenants
This includes running credit checks and criminal background checks. Experienced property managers have seen thousands, of tenants, so they have a better idea of how to pick the right tenants. They know those who will pay their rent on time, stay longer and have a lesser chance of throwing wild parties that disturb neighbors. This screening process could take hours per tenant. It is not uncommon to get a dozen or so interested candidates when you offer a place up for rent, especially in a hot market!
6. Handing Complaints And Emergencies
They are paid to deal with emergency calls around the clock for maintenance requests, noise complaints and they have a long list of contacts to handle emergency situations. If you don’t want to deal with the late night phone calls and small maintenance repairs, they will handle it. Each month, they typically send you an itemized list of repairs and emergency calls that were made.
7. Taking Care Of Vacancies
When a tenant moves out, the manager is responsible for inspecting the unit, checking for damages and determines exactly the amount of the security deposit will be returned to the tenant. After move out, they are responsible for cleaning the unit, repairing any damages and finding a new tenant. This can be a lengthy process, so having a property manager to do this for you is a huge plus!
8. Dealing With Evictions
When a tenant does not pay rent or otherwise breaches the terms of a lease, the property manager understands the proper way to file and move forward with an eviction. There is a legal process involved with evictions, and tenants have more rights than most people think. If you don’t follow the eviction process to the tee, you could end up in hot water. It is best to leave this one to the professionals!
9. Property Maintenance
This includes performing preventative property maintenance to keep the property in top condition. For example, they are personally in charge of, or must hire someone to exterminate, check for leaks, landscape, shovel snow, rake leaves, clean gutters and remove trash. This maintenance keeps current tenants happy and helps attract new tenants. If you have a property manager, you can keep your mower and rakes in the shed.
10. Facilitating Repairs
When there is an issue, the property manager must fix the problem or hire someone else to do it. They often have a large network of reliable plumbers, electricians, carpenters and other contractors. They often get discounted rates with these tradesmen because of the volume of work they send them. For example, if you call a plumber it might be $150 an hour. If a property manager call a plumber it might be more like $100 an hour.
11. Knowledge Of Landlord Tenant Law
Good property managers have an in-depth knowledge of statewide and national laws regarding the proper ways to:
- Screen a Tenant
- Handle Security Deposits
- Terminate a Lease
- Evict a Tenant
- Comply with Property Safety Standards
12. Maintaining Records
The property manager should keep thorough records regarding the property. This should include all income and expenses; list of all inspections, signed leases, maintenance requests, any complaints, records of repairs, costs of repairs, maintenance costs, record of rent collection and insurance costs. These records will be very important come tax season, as there are countless write offs and deductions for real estate investors.
At the end of the day, a good property manager is going to cost you. It may not be feasible for you to hire a property manager when you own just a handful of units. As your real estate portfolio grows, you might want to consider hiring one. They understand the local real estate market better than anyone, and they know how to follow the laws. You should always interview a few property managers before making a final decision on hiring one!