What is in Property Management
What is in property management is an extraordinarily useful service to property owners.
Property managers handle the day to day business operations, oversight, and control of apartments, single family homes, mobile homes, condos, hotels, motels, and other commercial, and industrial properties.
Property managers are hired by investors, and owners to relieve them of the hard work, and associated headaches of dealing with renters and rental property.
I will explain to you what property management companies do, how much they charge for their services, the questions you should ask before you hire one, and the 5 best states in the US to be a landlord.
Hire Property Management or Do It Myself
The big question that investors will eventually ask is, do I really need to hire a property management company or should I manage my properties myself?
If you own just a few single family homes, or a small apartment building, it may make more sense to manage your properties yourself.
You will save the fees associated with hiring someone or hiring a company to manage your small portfolio of properties for you.
Of course, this will depend on a few factors, even if you don’t own much rental real estate.
These factors are: If you live in a different town than your property, and/or if you are so busy with work or other projects that you don’t have the time, or want to be bothered with day to day management issues.
Most small owners will choose to manage their properties themselves. Normally, it doesn’t take a lot of time or effort to deal with just a handful of renters, even if you live out of town.
However, if you own a lot of properties, or a larger apartment building or complex, and you have a full time career that deals with something other than real estate, it can make sense to hire a property management person or team to help you out.
Doing so will take the mundane duties and responsibilities of handling a large amount of units, and tenants off your plate, freeing you up to deal with what you may consider to be higher priorities.
Nothing like getting phone calls in the middle of the night to unstop a toilet for a tenant whose 3 year old threw her doll in, to make you appreciate the value of a good property manager.
What exactly do property management companies do?
The most important job that these fine folks do is to find you tenants. As with any business, sales is the life blood, and in the real estate rental property game, the equivalent to sales is putting rent paying tenants in the vacant units, and get them generating income.
In order to find tenants, the property manager will place advertising, answer phone questions, show vacant homes or apartments, and handle the rental paperwork.
To find the right, dependable tenants property managers do a thorough check of the prospective tenants before deeming them rental ready.
They check their work history, income, their credit, past rental history, and background as it relates to any criminal offenses.
They also remove tenants which entails a legal process, and coordination with the local sheriffs office. This is known as evictions.
This is an eventual fact of life, and unfortunately the steady non paying tenants have to removed to make room for the steady paying tenants.
Property managers also handle collecting rents, and fining those tenants that are late with their rental payments in accordance with the rental contract.
They keep tenants informed of any changes or disruptions to the community rental area such as paving, renovations, or pool closings.
In addition, they enforce regulations of the rental agreement such as parking, trash, and complaints from other tenants.
Property managers also coordinate needed repairs to the property they handle. For larger rental communities such as apartment complexes, there is often a maintenance department that takes care of issues within the units, and outside the units.
The maintenance workers, whom are supervised by the property manager, take care of many jobs around the property.
Due to the fact that problems with a tenants property can arise at anytime day or night, the manager must have a 24/7 emergency maintenance program in place to take care of these issues.
Often this is done by having a member of the maintenance department on call by phone to respond to tenant’s urgent requirements.
On occasion, there may be larger, more involved needed repairs that will require an outside contractor be brought in handle.
What do property management companies charge?
Knowing how much you will have to pay a property management company in relation to the amount of rental income you generate is, needless to say, a very important consideration.
A general rule of thumb is that property management companies will charge approximately 10% for their services. This can vary somewhat, and you may see fees in the 7% to 13% range depending on various factors.
These factors include, strength of local economy, type and extent of work required, particular location, reputation of company, other fees that may be added, and willingness to negotiate the percentage.
In most cases, however, you can expect to pay right at 10% to hire a property management organization.
Questions to ask before you hire a Property Management Company
If you have made the decision to hire someone to manage your properties, or are considering doing so, here are some questions you should ask before you decide on the company.
How are tenants vetted or screened?
They should be verifying employment.
A thorough background check should be done to check for any criminal or illegal activities.
Previous landlords should be contacted to find out the type of tenant they were. Did they pay on time, and were they an otherwise problem renter? Any late payments or evictions on their record?Employment should be verified.
What are the fees and charges?
Find out what the charges and any fees will be for their rendered services. As previously explained, the charges normally run about 10%, with some slight variance.
If they charge a lot less than 10% or a lot more than 10%, you should delve deeper into why this is, or find another company that charges in this 10% range.
How are evictions dealt with?
Although unpleasant, evictions are part of the rental business. You want a landlord that is well versed in the eviction process.
They should know how to handle paperwork, and how to file it at the county courthouse.
They should know how to communicate with the tenant regarding dates, and times pertaining to the eviction.
In addition, they should know how to bring in the local authorities, usually the local Sheriff to ensure that the tenant is removed at the eviction date if they don’t move on their own.
They should also know how to handle any tenants belongings that are left behind.
What is their turnover process when a tenant leaves the property?
How are units treated when a tenant moves out? Do they use the same materials such as paint, drywall, and carpet and keep them on site?
How long does it take to bring the unit back to move in condition?
Keeping these needed materials on site usually means they can turn the apartment over quickly, and have it rented in short order.
Are there extra fees involved? If so, how much? How are the fees broken down? Ideally, you don’t want a property management team that has a lot of extra charges. Some charges are acceptable, as long as they are reasonable, and justifiable.
What is the rate of vacancy in this city, town, or part of town? This is a question that you should have received the answer to before deciding to buy a rental property in this area, but, nontheless, you need to know the answer.
The national average for vacancies, or vacancy percentage is about 7%. The lower you can get this number, the better. Of course, a property management company can help reduce, or raise this percentage based on how they go about their business.
Obviously, the lower the vacancy rate, the closer you can come to maxing out your rental income, and overall profit as a rental property owner.
The 5 states that are treat landlords the best
If you are a real estate investor that owns rental properties, you may want to know which states are the most landlord friendly.
This is important so that you will know if evictions favor the tenant, or the landlord. Tenant friendly states can draw out evictions into lengthy, and costly legal situations that will cost you time, and money.
You want to own in a state that enables you to evict problem tenants quickly and seamlessly so you can put paying tenants back in the property as soon as possible.
You also want to be able to hold onto security deposits, and rents if warranted. You want to be able to word leases in such a way as to protect yourself, and your investment in a landlord friendly manner.
For instance, if a tenant sues the landlord, you want a situation where the tenant is limited to the amount of money they can recoup from the landlord.
Colorado Although it is an expensive state to buy rental property in, generally speaking, Colorado is very landlord friendly.
If you are non paying tenant, you can be removed relatively quickly compared with most other states. In addition, the landlord can access his property with little notice to the tenant, if need be.
Arizona Having lax rent control laws, and landlord friendly conditions, Arizona is another great place to own rental property.
For instance, if a tenant makes a false statement on the rental contract, called non-compliance, and the landlord discovers it, the tenant is subject to near immediate eviction.
The lax rent control laws allow landlords to raise rents with little worry about limits.
Florida Also with a lack of rent control laws, Florida is quite landlord friendly. This makes it difficult for tenants to sue landlords, and make demands that they are not entitled to.
Indiana Another very pro landlord state is Indiana. Judges will favor landlords over tenants regarding legal matters, and have little tolerance for non paying tenants.
The legal environment is such that landlords can hold owed rents, and security deposits for longer periods, and tenants have less to gain from lawsuits.
Texas The great state of Texas may be the most landlord friendly state in the union. Very little tolerance for tenants that don’t pay their rent, and the eviction process can happen very rapidly.
There are also other laws on the books of Texas that make the lone star state a landlord’s favorite.
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