Property management seems like a pretty straightforward process on the surface, especially to homeowners. Find a tenant, get the contract signed, collect rent and make sure the house stays in good shape. Easy, right? Boy oh boy, homeowners with this mentality are in for a surprise. Property management isn’t for everyone. I am not saying that homeowners can’t manage their own properties successfully, they can, and some might even find it enjoyable, but the majority of homeowners aren’t built for this or don’t know the fundamental principles of property management. It’s not a job for kind people who place a lot of value on their gut feelings when it comes to filtering potential residents and one day would inevitably get stuck with a terrible tenant. It’s a stressful job in which you have to get your hands dirty.
Real estate property management isn’t a neat and clean business because you are dealing with people from all sorts of backgrounds, motivations and needs. You need to have a keen eye and management skills because these are the only two things that can either help you make money on your property or lose it. Property managers do this for a living. They deal with residents on a daily basis. They take away the headache of managing your property, its residents and appreciating its value. In a way, they do all the grunt work, so you don’t have to.
1. Finding Tenants
The biggest advantage that professional property managers hold over homeowners is that they already have an established client database. They can tap into this database for potential residents and pick the right ones for you. Having a customer database plays a huge role in successful property management because the longer your house stays vacant, the more it will cost. Property managers can reduce the vacancy time significantly and that alone can have an enormous impact on the overall revenue you get on an annual basis, especially if you have multiple rental properties. Another benefit of having a property manager is that you can get insights on what the optimal rent should be because of their exceptional local market knowledge.
2. Filtering Tenants
One of the factors that determine the overall value of property in a neighborhood is the kind of people living in it. You need to have a keen eye to judge a person and even if you feel at ease with the individual or the family, it’s important to run thorough background checks. After all, you wouldn’t want someone with poor credit history or a sociopath living in your house. Property managers can take on the role of filtering applicants by running thorough background checks which can include work history, criminal records, and credit reports (through credit check services). Just implying that you will be running background checks can deter a lot of applicants with shady backgrounds.
Once you finalize a candidate, it’s time to take them onboard. But there is a critical step before they move into the property. They have to sign an airtight lease, so you are legally safe. This legal document isn’t something you or your property manager should write. Your property manager can work with an attorney to create a draft with the clauses which can protect you in the case of legal action. Do you have certain rules and policies that need to be followed by residents? Include them in the contract because once they sign it and move it, you can’t revisit this step.
4. Collecting Rents
Let’s face it, landlords and property managers aren’t the most welcome of guests for residents. They don’t want to see them at all if possible. It’s just that kind of relationship. Having a property manager means there is a buffer between you and the tenants. It’s property manager’s job to visit residents and collect rent on time. If rent payment slips, having this buffer can ensure that you won’t be put in an awkward position of dealing with a troublesome resident.
5. Evicting Bad Residents
As mentioned above, property management isn’t a clean business. You have to interact with all kinds of people and get your hands dirty. Making difficult decision is part of a property manager’s job description. At times, you will get a resident you aren’t happy with, and the only solution would be to evict them. It can be because the tenant is slipping on rent, damaging property, using drugs, playing loud music late at night or is involved in criminal activities. It’s where a property manager would play a huge role by taking timely action of evicting such resident(s), so your property and the value it offers won’t be impacted.
6. Repair and Maintenance
Repair and maintenance is an ongoing process for any property. As the property owner, you wouldn’t want your tenants to call you in middle of the night to fix something. Property manager can not only fix the issues that residents are facing but also utilize their professional network for repair and maintenance services at a discounted rate. For multiple unit properties, property manager can supervise the professional on-site staff to ensure that your residents get the very best customer support possible. Also, whenever a resident decides to move out, the property manager is responsible for inspection, taking the measure of property damage and getting that signed by the departing resident. Having a property manager means that all the repairs would be done in a more streamlined manner and shorter duration, so the house doesn’t remain vacant for long.
7. Enforcing Rules and Regulations
One of the most important responsibility of a property manager is to visit the property and its residents regularly. It’s critical to have someone with knowledge of the local market to take care of your property, especially if you are in another city or state. Property managers enforce the rules and regulations on the residents, which is easier said than done. These rules and regulations are also known as the Declaration of Covenants, Condition, and Regulations (CC & R’s) and are meant to protect the best interest of the community. In addition to rules of occupancy provided by the homeowner, property managers also have to enforce the CC&R’s provided by the Homeowner’s Association.
8. Overseeing Legal Actions
Property management is fraught with the risk of legal action. It can be something as simple as evicting a tenant or something as scary as a lawsuit against you. Also, the state laws differ from one another so it’s important to have someone on top of this who can ensure that you don’t lose more than you earn in a legal action. A property manager can prove invaluable in working with an attorney to document everything so you can sleep easily. Professional property managers don’t make amateurish mistakes, so the overall legal process is much more streamlined. Whether it’s sending the eviction notice, complete documentation of all communication with residents or overseeing legal action in court; a good property manager can tackle all this in an excellent manner, so you don’t have to.
Overall, crunching numbers for your property isn’t that difficult, dealing with people for sure is. The choices made in property management determine the profit your investment would make. Poor management means poor profits and devalued property. You WILL get some residents who are difficult and unstable and believe me, you will be happy to have an excellent property manager who can deal with them when it happens.