How to determine if using a property manager makes sense for you
Property management companies traditionally charge 10% of your monthly rent roll as their fee for their services. However, it’s not a rule, so by all means shop around. With traditionally tight margin levels in investment properties, their fee could be the difference between running a positive cash flow or a negative one on your property. So you should first crunch your numbers for each of your rental buildings, to ensure you can afford their services.
Are you tempermentally suited to property managing?
Once you’ve considered the economic effect of hiring a property manager to manage your real estate investment portfolio, and as you develop your property investment strategy, you’ll need to determine if your personality type works well interacting with people, because you’ll be dealing with loads of people if you choose to act as your own property manager.
You’ll need to be showing your units for rent, screening tenants, choosing them, and then make monthly rent collections. In addition, you’ll be dealing with a list of trades people when it comes to basic maintenance on your property (landscaping, lawn cutting, snow plowing), as well as repairs (mostly plumbing and electrical). Sometimes, hiring a handyman you’re comfortable with can suffice, as he can perform many of these tasks as a general all-in-one repair/maintenance service person who‘s “on call” for you.
Also, you’ll need to ask yourself if you’re okay with emergency calls from tenants – whether in the daytime, or in the middle of the night and on weekends. If you’re a calm person who’s good at “putting out fires” without it taking an emotional toll on you, then by all means you’ll be a good property manager for your own real estate holdings. If not, look towards hiring a professional property management company.
The basic responsibilities of a property manager
Deciding on choosing a property manager, the supervisor of all your property investments, is no simple task. Here are the most basic responsibilities of property managers:
1) Maintaining your rental property – Managers will be responsible for regular on-site checks on your building(s) to ensure proper safety and regular upkeep/maintenance. They’ll also be responsible for all emergencies (ie. – emergency calls from tenants), and making sure the right tradesperson is called to fix the problem, as well as follow-up to ensure the problem was fixed properly, quickly, and resolved to the satisfaction of your tenant – all at the most affordable cost to you.
2) Advertise, locate, screen and approve all tenants (usually with owner’s approval). Show your rental units that are vacant. Prepare all leases, and have them signed.
3) Collect rent from all tenants. Make all collection calls on delinquent tenants.
5) Keep all accounting for each property – including the holding of bank accounts for security deposits, rent, and debiting the rent account for all expenses incurred on the building.
How to choose the best property manager for your situation
Make sure you use a very local management company – an agency very close to your property (or properties). You’ll really want to choose a managing agent that knows your area very well, and the vagaries of each neighborhood too. This will be invaluable when they need to show your vacancies, as well as help choose the best tenants for your units.
In addition, be sure to do your homework on each potential managing firm. Make sure to get references from them, and speak directly with those clients to get a good idea just how responsive (and responsible) each managing agency has been with their clients.
View other buildings they manage
It’s also a good idea to drive by several properties your prospective property manager actually manages, to get a sense of how physically well kept up each property has been. Are they attractive ? Do they have curb appeal? Or, are they run down, and in need of repair. If the latter, ask the property manager why they remain so run down.
Once you have gathered all this information, you’ll be able to make a proper decision as to the clear-cut choice for your property manager. And it’s a major decision, like most of the decisions outlined in this investment property information series, since they will act as the main overseer of your entire rental real estate portfolio.
photos courtesy of propertymanagersandiego.com, denalipm.com, homeguides.sfgate.com, dcmud.blogspot.com, carterrealtyagency.com, sanpedrosquareproperties.com