Property Management Kit For Dummies. Robert S. Griswold
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alt="Tip"/> Even if you hire someone to manage your property, you may be better off choosing the maintenance contractors yourself than turning over the decision — and your money — to a professional property management firm. Some management companies have related companies or get referral fees from their select vendors; thus, you pay higher charges than you would if you’d hired the same contractors directly. A limited number of professional and ethical property managers can offer recommendations, however, and they don’t use maintenance and repairs as a hidden profit-center. Either way, develop a list of reliable and insured fix-it and landscape personnel who do good work and charge reasonable rates.
The drawbacks
If you’re just starting in the world of property management, you may be thinking of it as a part-time venture — something you’ll do in addition to your day job. After all, rent collection is just once per month, and what else could possibly be required? If that sounds like you, be sure to check out the following list of the cons of self-managing rental property:
You can damage or interfere with your day job. If you’re a higher-income, full-time professional, rushing off on weekdays to handle some minor crisis at your rental unit is not only impractical, but can also be downright damaging to your career. Most employers or clients have little tolerance for your need to handle the responsibilities of rental-property ownership, particularly when the demands are often unpredictable and unscheduled.
You can spend far too much time. If you earn your living from something other than managing your rental property, managing that property may not be worth your valuable time. Rental management can take up more time than you anticipate, especially if you buy additional properties. Remember that residential property management often requires working in the evenings and on weekends, when most prospective tenants want to see your vacant rental units and when current tenants are home to allow access for repairs. Also, maintenance issues, such as plumbing backups or no electricity, seem to occur when you have finally left town for a long-overdue vacation. Property management is a 24-hour/7 days per week/365 days per year commitment that has zero respect for your personal schedule.
You run the risk of increased liability. If you’re a part-time property manager, you may not keep abreast of the latest laws or issues affecting the rental housing industry. Just one lawsuit over a situation that you handled improperly can quickly turn your dream of retiring early into the year’s next big horror flick. Many new residential rental unit owners underestimate how detailed and complicated property management has become, as every year, new laws protect tenants from unscrupulous landlords (who unfortunately do exist). I highly recommend that you add Landlord’s Legal Kit For Dummies (John Wiley & Sons, Inc.) to your personal property management library.
The distance factor
If you own rental property in another city or state, you may initially consider managing your unit from afar. As long as your tenants have lengthy tenancies (giving you minimal tenant turnover), faithfully mail their rent checks, and make only a few maintenance demands, this arrangement can work — but it’s a fragile one. When looking at the cost for a property manager, you might want to know the time requirements and travel costs for even a single unplanned trip to your rental property. One major problem or a few minor ones can turn the job of managing the property into a nightmare.
Exploring Professional Management
Property management companies typically accept responsibility for all operations of the property, including exterior or common-area maintenance, preparation of rental units, marketing, showing the property, setting rents and security deposits, tenant selection, rent collection, maintenance, and accounting.
Many rental property owners who are just starting out drift blindly into self-management by default because they assume that they can’t afford a management company. Others simply don’t want to give up part of their profit; “Why pay someone to manage my rental property when I can keep the money myself?” is a common refrain. Other owners would prefer to hire a professional management company, but they’ve heard so many horror stories that they don’t know whom to trust. Many of their concerns are real; some property managers mismanage properties and lack any semblance of ethics.
Luckily, you can avoid hiring the wrong management company by following my advice on how to choose a good property manager. The following sections touch on some important points for you to consider if you’re contemplating using a professional management company.
Eyeing the pros and cons of using a pro
The pros of using management firms are many. Namely, these firms
Have the expertise and experience to manage residential rental property.
Stay up to date on federal, state, and local laws — plus such liability issues as mold and fair-housing policies — so you don’t have to.
Are fair, firm, and friendly with tenants.
Have screening procedures and typically can evaluate potential tenants more objectively than you can.
Handle property management issues throughout the day and have staffing for after-hour emergencies.
Have contacts and preferential pricing with many qualified, licensed, and insured suppliers and vendors who can get work done quickly and efficiently.
Handle all bookkeeping, including rent collection.
Have well-established rent collection policies and procedures to follow when tenants’ rent is late.
Have an online presence, with websites that provide detailed information and photos of all their available rental properties.
Handle all aspects of hiring employees so you don’t have to process time sheets, calculate and submit payroll, generate paychecks, or oversee all the legal requirements that come from having employees.
Can be excellent sources for purchasing additional income properties because they’re often the first to know when their current clients want to sell.
Management companies have numerous downsides as well, of course:
Using a management company for small residential rental properties that you’ve