We are excited to announce that our company has been selected to represent two great companies.
Our new General Store has been created at our sister site
http://www.expert-landlord-resources.com when there click on General Store. I will be reviewing services, products, and books, offering my opinions. Some products and services will reviewed on our review site, but not in our general store. We want to offer this service to clients, potential investor/landlords, friends, tenants, and agents.
Our new offerings are Landlord Protection Agency offering a membership site with a ton of benefits. It also has a DeadBeat data base.
Our other offering is American Home Shield. A founding company of Home Warranty Service. Check out these two fine companies and read my reviews
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Chris came to Software Advice after working in politics and with international non-profit organizations. He’s originally from Kansas City and is a huge Kansas City Chiefs fan. In addition to blogging for Software Advice, he’s been blogging about the Chiefs at ArrowheadPride.com since 2006. He enjoys writing, talking politics and keeping up with the latest tech trends. Currently, Chris resides in Austin, TX, with his wife Nichole and dog Winston.
What To Consider When Hiring a Property Management Company
If a property owner has a growing number of properties, it’s inevitable that a day will come when they ask, “Should I outsource the day-to-day operations of my business to a property management company?”
Deciding when to outsource and which company to hire is one of the most important business decisions a property owner can make. Choose wisely, and an owner will be rewarded with the peace of mind that comes with responsible property management. Choose incorrectly, and an owner will be working harder after hiring a property management company.
Whether an owner has one or one hundred properties, it’s important to consider whether or not they’re prepared to hire a property management company. Handing over the management of property is a major decision. Before making that choice, owners will want to make sure they understand the following:
The implications of self-owned management;
The pros of outsourcing management to a third party;
The corresponding cons; and,
The alternatives to outsourcing.
Let’s take a look at each consideration in detail.
What’s Involved in Effective Owner Management?
Owning and managing property require two different skill sets. Unfortunately, many property owners purchase property not knowing the full responsibility that management entails. Before a person jumps into purchasing rental properties, they’ll need to understand what is going to be required of them.
Knowledge of landlord/tenant law. Familiarity with the state laws that govern the landlord/tenant relationship is a must for any property owner. If owners aren’t comfortable with their level of knowledge or experience in this area, they could be leaving themselves open to lawsuits and fines. For example, the federal Lead-Based Paint Hazard Reduction Act requires the disclosure of lead-based paint and hazards before the lease of most units built before 1978. Owners can face a $10,000 fine if they fail to do so. Airtight contracts and leases are also extremely important for protecting owners from lawsuits and recouping lost costs.
Time and expense spent visiting properties. Rental properties are going to require regular visits to check on the condition of the property, perform emergency maintenance or show vacant units. If owners’ properties are far away from home or each other, they will spend a lot of time in transit. If owners attempt to self-manage too many properties, they run the risk of spending all their time performing routine visits instead of managing the company.
Responsibility for repairs and maintenance. A landlord needs to have a diverse range of skills to perform maintenance themselves. At the very least, a landlord needs to have basic plumbing, electrical, carpentry and landscaping skills to properly maintain a property. If they’re not well-versed in these areas, they’ll be spending revenue on repair services. While family members and friends can be labor outlets, relying on such help comes with inherent risks.
Effective tenant screening. An owner will quickly need to become good at weeding out problem tenants during the screening process. If an owner only has a few units and has to replace a problem tenant a few times a year, their profit is likely going to drop dramatically. Credit checks, employment verification and collecting references are key in this process.
Ability to deal with difficult tenants. Even if landlords screen tenants thoroughly, they will inevitably interact with unhappy or unruly tenants. Whether the tenant is simply unhappy or in violation of rules and facing eviction, a landlord needs to stand firm in the face of adversity and enforce the rules of the lease. If they’re not able to confront people, a property owner risks being taken advantage of by tenants. In the most extreme cases, landlords may even need to rely on lawyers or courts to settle issues and pay hefty fees.
Good property management software. If an owner is managing a decent number of units, they’ll want to invest in software to manage their properties. Investing in a robust property management system has the ability to increase efficiency by:
o Accepting rental payments online;
o Performing credit and criminal background checks;
o Decreasing advertising costs by automatically posting units to popular listing sites;
o Automatically reminding tenants to pay their rent;
o Eliminating poor record keeping by automating certain processes; and
o Creating letters and tax forms automatically from pre-existing data.
A solid property management system can be a good tool to have, especially for a novice property owner.
Benefits of Hiring a Property Management Company
If a property owner decides that they’re not able to properly manage their property, it’s important to understand what side effects they should expect. In general, a well-run property management company will yield these results for owners:
Increased revenue. A property management company is more experienced at advertising and usually has access to larger pool of potential renters, meaning units typically stay vacant for shorter periods of time. A property management company also has a better understanding of the local rental rates, putting them in a position to maximize the amount you can charge per property.
More free time. Naturally, once an owner hands over the responsibility of managing its properties to a company, they’re going to have extra time on their hands. This is perhaps the most obvious – and enjoyable – benefit of hiring outside help. The property management company becomes the owner’s one point of contact for all things related to their property, eliminating the need to juggle a number of different vendors and services. A property owner can also use this extra time to expand their portfolio and focus on growing the business.
Reduced direct costs. A property management company is be able to perform preventative maintenance, reducing the direct costs to the property owner. Furthermore, a management company will likely have extensive knowledge of local landlord/tenant laws, helping shield the owner from costly lawsuits. One lawsuit avoided may pay for years of property management fees. Finally, the management company likely has more experience screening tenants. This reduces vacancy cycles and damages from poorly screened tenants.
Drawbacks of Hiring a Property Management Company
Of course, outsourcing management involves risks that need to be considered. A property management company that is negligent in responsibilities could cause more headaches for their owners. The most common downsides include the following:
Cost. A property management company will charge an owner between 3%-12% of the property’s gross monthly rent to manage it, depending on the level of service. For a property with a large number of units, this can be a significant cost.
Keep in mind that management fees aren’t the only fees that may be assessed by a property management company. Many companies charge additionally for creating or renewing leases, performing maintenance, and advertising vacant properties.
Possibility of developing a bad reputation. The most vocal tenants in any community are those who are unhappy with management. Unfortunately, as more and more tenants flock to web sites to voice their disapproval with property managers, a property owner can can earn a bad reputation that will be displayed online indefinitely. Many rental property rating web sites have been around for nearly a decade now, which means bad reviews exist long after management has been changed or improved.
Potential for inadequate record keeping. In most cases, a property management company is solely responsible for all record keeping, including accounts payable and receivable, service records and tenant complaint records. If the management company does a poor job keeping records, the owner may be completely lost once they part ways. Inadequate record keeping can also leave an owner with no ground to stand on if a tenant files a legal complaint.
Vulnerability to lawsuits. It was mentioned before that a good property management company can help an owner avoid lawsuits. The opposite is true with a poorly run management company. A company that doesn’t keep up to date on changes in landlord/tenant law, or worse, doesn’t have a good understanding of the law in the first place, is leaving the owner open to a lawsuit. A single lawsuit could cripple a owner.
Ultimately, a property owner must determine if the benefits of hiring a property management company justify the expense. Owners who are able to outsource to effective companies and focus on growing the business would likely agree that the pros of outsourcing outweigh the costs.
Not Ready To Hire a Property Management Company?
An in-between option that exists between outsourcing and owner-management is hiring a residential manager. A residential manager is a person who lives on-site in one of the units and takes care of basic tasks related to the management of the property.
These basic tasks may include:
Showing vacant units to prospective renters;
Performing light maintenance and clean up; and,
Coordinating with repair persons to fix maintenance issues.
If owners find themselves stretched thin but still not ready to hire a property management company, hiring a resident manager can be a good bridge between those two options.
Choose Wisely
Whichever route a property owner decides to take, a firm understanding of what property management entails will be essential for success. For the owners who choose self-management, they’ll need to become property management experts. For the owners who outsource their management, not knowing the industry will only lead to trouble down the road.
The lesson here is know the ins and outs of an business, no matter who manages it.
Today we have a guest bloggger Chris Thorman. We encourage others to be our guests. In turn we offer our blogs as your guests
2. We have discontinued comments because of irrelevant comments and link
hookers. If you wish to contact me I welcome you to do so at propertymanager@arbourpm.com
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This book contains the buying rules that are Ignored, Unknown, or Untold and includes a chapter never talked about
(PRWEB) April 2010 — “As a veteran real estate investor consultant and property manager, I see so many new investors come to us and tell us what rent they want for their properties. However, once we tell them the market conditions, they realize the rent they are asking for isn’t feasible. They have bought properties that are the last to rent or do not rent. They buy in poor neighborhoods that attract poor tenants. It is obvious they haven’t done their homework,” Munz says. “I wrote ‘House Investor’s Manual’ to help prevent others from suffering the same mistakes.”
Many real estate investors purchase properties in neighborhoods and communities they are unfamiliar with. Investors are also apt to purchase real estate systems from gurus who make the process of real estate investment seem easier than it turns out to be. They use inexperienced agents who are commission-driven and who suggest unrealistic rental rates or houses that attract poor rental prospects. Investors also often don’t know what makes a good product for rent or what renters are looking for. “House Investor’s Manual” discusses these and other little known and rarely discussed facts about rental investing and home buying.
Among other topics, the book discusses the topic of maintenance. Oftentimes, prospective landlords are so drawn to the idea of earning money though rental properties that they pay little heed to the many updates that may need to be made to a property while it is occupied. “The fact is maintenance is here to stay and must be addressed if you want a successful rental business, but many real estate agents and gurus do not discuss this topic,” Munz says.
“House Investor’s Manual” also discusses the importance of consulting with a property manager before buying and using a buyer’s agent to represent the buyer. Consulting a property manager is an opportunity to counsel with someone who knows the ins and outs of the industry and who can offer sage advice and insight “Most new investors listen to everyone else first, and those in the trenches last. This is a mistake. They need to contact a property manager with real-world experience first,” Munz says. In addition to speaking with a property manager, investors need representation from a buyer’s agent. Working with a buyer’s agent ensures investors are properly represented in a real estate transaction and receive a fair deal for their investment.
Odell Murry, a licensed real estate broker and mortgage banker and President and Founder of MAI Financial Services, Inc., had this to say about “House Investor’s Manual”:
“Lambert Munz’s explanatory guide about the do’s and don’ts of buying properties to flip or rent is complete with valuable and useful information for the first time property investor.
“As he notes for the investor, it is imperative to spend wisely, knowing which properties to choose enables success. Concurrently, it is important to buy carefully and intelligently. Munz details the pitfalls to avoid always reminding the buyer to stay focused on the purpose of the venture: to make a profit.
“Munz distinguishes between buying to flip verses buying to rent as each venue comes with its own distinct set of parameters. He likewise offers sound advice to the rental property buyer by outlining strategies from pricing, marketing, and maintenance issues..
“In conclusion Lambert Munz knows and understands this business and willingly shares his expertise. Enjoy his book, follow his wisdom, and reap the rewards befitting a wise and sound investment.”
For more information about “House Investor’s Manual” and to view chapter one, visit:
