What Is Investment Property Management?
Rental property management is the practice by which a third party is responsible for maintaining a residence’s status quo and appeasing its occupants. Therefore, property managers are traditionally hired by rental property owners to oversee the daily operations of their real estate assets and deal with any questions or concerns the tenants may have.
If a property or unit becomes vacant, it’s the property manager’s job to fill the vacancy with a good tenant as quickly as possible. As its name suggests, a property manager takes care of every aspect of a rental, from marketing vacant units and signing leases to collecting rent and calling for repairs. Few strategies, for that matter, are more beneficial for a rental portfolio than hiring a third-party property manager, which begs a simple question: How do property management companies work?
What Does An Investment Property Management Company Do?
The cost of investment property management is a major consideration, but your investment can pay off in various ways. A great property management company can easily provide a greater return on the cost. Here are some of the merits of hiring an investment property management company:
- Property managers will collect rent from tenants.
- Property managers will listen and respond to maintenance requests..
- Property managers can deal with tenants that are behind in rent.
- Property managers will market upcoming vacancies and fill them as quickly as possible.
- Property managers will keep detailed records of everything happening at the property.
Rent Collection
Collecting rent is one of the key tasks of a property manager. If rent collection was the only duty of a property manager, then you may think you could do it yourself . This is especially true since many tenants pay rent through online portals.
However, property managers are helpful when things go awry, which they often do. They can deal with tenants when they begin to default on their rent. They also have a working knowledge of landlord-tenant laws for when things get sticky, such as during an eviction process.
Regular Property Maintenance
Managing property maintenance and repairs is arguably the biggest driver for hiring a property manager. Keeping up with routine maintenance is time-consuming, yet the biggest hassle is often fielding complaints from tenants.
Sometimes their needs will be urgent and come at inconvenient times. This can quickly get irritating for a landlord. Dealing with clogged toilets in the middle of the night doesn’t exactly lift the spirits. Over time, this can create tension between a landlord and a tenant. Because rapid and responsive customer service contributes to the desirability of a rental property, it is sometimes best to hand over these responsibilities to a neutral third party.
Property managers will deal with these requests, alleviating you from the burden. Smaller requests may be handled internally. Larger and more complex issues may be delegated to outside specialists. Sophisticated property investors normally authorize their property manager to handle repairs up to a certain dollar amount without needing express permission first. This streamlines the process and ensures issues don’t get worse if you can’t be reached.
Property management companies can call for regular inspections and routine maintenance such as:
- Lawn Care
- Pressure Washing
- Preventative Maintenance
- Plumbing Issues
- Fixing Appliances
- Drywall Patching
- Anything Else A Tenant Might Need
Dealing with Defaulters
This goes beyond slow payers to those seriously in breach of their leases. They could be more than a month past due or be risking the condition of your asset, or the police could be involved in a criminal issue. Sometimes these things can be worked out directly with renters. It may require lawyers or even going to court in other cases. A property management firm can handle this for you and save you a ton of time and stress in these situations. Having a professional third party in between can often speed up better solutions than a DIY landlord that may appear an easier target for malicious tenants.
Sourcing Tenants
This is a lot more work than some understand at first. A good management company is taking on the cost of marketing for tenants, showing units, and screening prospective renters. There is a lot of expertise brought to the table here, and it may be the most valuable thing property management companies offer. Then there is supervising move-in and move-out activity.
Bookkeeping
Bookkeeping is probably the least fun part of real estate for most investors. At the same time, great bookkeeping and invoice handling are critical for minimizing taxes, keeping the best vendors, and generally keeping the cash flowing. If your property manager offers to run the books for free, you had better take advantage of it. If not, there’s no reason you can’t hire someone to manage your books. Rental properties are best left as a passive investment, after all. Conduct the appropriate research to uncover a good bookkeeper in your area, and determine whether or not their services will bring value to your own business.
What Does Investment Property Management Cost?
The cost of investment property management remains the primary concern for those sitting on the fence.
Although property management fees vary, the industry standard is in the ballpark of 10 percent of collected rent. Anywhere between 8 and 12 percent isn’t out of the question, and often depends on the quality of services provided.
For some investors, forking over 10 percent of their rental income may simply be out of the question. For others, paying a fraction of their rental income is well worth it. Otherwise, they’d have the opportunity cost of the other income-producing activities they could pursue in their free time.
Is An Investment Property Manager Worth It?
Many property investors find that hiring an investment property manager is worth the cost. First and foremost, some investors simply don’t want to be a landlord. Dealing with tenants and maintenance issues successfully requires specific skills and character traits. Many investors would also argue that the day-to-day responsibilities of property management would prevent them from pursuing new business ventures.
Aside from these two main points of consideration, property managers can add value to your business in a variety of ways:
- Marketing expertise:Most investment property management professionals offer their marketing expertise. This means that they can attract good-quality tenants and fill vacancies efficiently and effectively, thus protecting your bottom line.
- Local market knowledge:An experienced property manager will know how to price a unit in a way that will bring you the most profit without ostracizing tenants.
- Showings:Having a local property manager will pay off in a variety of ways, especially if you’re a long distance investor. For one, they can physically show the property to prospective tenants so that you don’t have to visit the premises unless absolutely necessary.
- Working with tenants:Managing tenant relations is hard work, even when you have stellar tenants. Investment property management firms can screen prospective tenants, deal with their complaints, collect late rent, and even manage an eviction process if they have to. A good property manager provides you with a degree of separation from your tenants so that you can focus on the big picture of your business.
- Maintenance and repairs:All properties require routine maintenance, plus any repairs that come up from time to time. Property managers typically work with a trusted team of professionals who take care of things quickly and efficiently.
Benefits Of Hiring A Rental Property Manager
Sometimes in business, it’s just better to pay a professional to do it. For investors, a property management companycan add significant value to your investment as they deal directly with prospects and tenants, helping to save you immense amounts of time and stress. They also bring a wealth of know-how and experience to your property, giving you peace of mind that your business is running like a well-oiled machine. Duties and responsibilities of a property management company include, but are limited to:
- Setting rental rates
- Collecting rent
- Assigning maintenance
- Marketing/advertising
- Managing relationships
- Finding new tenants
For investors, adding a property management firm can be very advantageous, especially for those with multiple properties or with limited time. However, it comes at a cost ranging from eight to ten percent of the monthly income or a flat annual fee. Here are a few of the ways property management companies earn their keep:
- Higher Quality Tenants:Management companies employ rigorous screening processes to pinpoint reliable tenants and shield your investment from the bad ones. These professionals have experience analyzing information about candidates to ensure your property has the best tenants possible.
- Shorter Vacancy Cycles:A good property management company will shorten the amount of time your property sits vacant, working around the clock to improve and prepare it for rent. Experienced companies will have a time-test tenant retention policy to keep clients happy and situated for the long term.
- Better Processes:A property management company can streamline and improve the processes of your rental property, especially when it comes to collecting rent. As the difference between success and failure, collecting rent on time is the only way to maintain consistent cash flow, and a property management firm can significantly upgrade this.
- Fewer Legal Problems:A good property manager has the knowledge of the latest laws as well as experience to ensure you’re not leaving yourself vulnerable to lawsuits. A management company can help investors avoid costly and time-consuming legal problems with a stringent screening process.
- Less Responsibility:Probably the biggest benefit of hiring a management company is less responsibility. Along with less stress, investors will have more time and freedom to invest in other aspects of their business or future endeavors.
