The choice of whether or not to us a property management company is a tough one for many real estate investors. Some wouldn’t dream of investing in real estate without a property management firm in place before closing. Others struggle to break free of the DIY mindset that prevents them from accomplishing more. Most of this argument, and rightfully so, revolves around cost. However, few actually understand what it is that property managers actually do.
In order to give you a better idea of what it is that property management companies can do, we have provided the following:
1. Rent Collection: Collecting the rent is one of the most obvious tasks of a property manager. If that’s all property managers did, however, it would certainly be harder to justify hiring one – especially with online payment capabilities. Of course, that doesn’t mean collecting rent is easy by any means. If all of your tenants are paying their leases up font in full and you don’t mind paying a great law firm when things don’t go right, you might wait to evaluate all of the services. Yet, most real estate investors are not in that situation. Some operate in markets where it is a battle to reel in the rent every month.
2. Servicing Maintenance Calls: Dealing with tenant maintenance calls is perhaps the biggest driver for real estate investors to enlist the help of a property manager. It isn’t just about the maintenance, however: dealing with the tenants can often be the biggest challenge. Sometimes their needs aren’t big or expensive, but the timing and urgency is. It may be blocked and back flowing pipes on the weekend, or being locked out in the middle of the night. A lot of these calls can be irritating to a landlord, but if they are always treated that way, bigger issues with renters and rental property performance are sure to arise. Rapid and responsive customer service is needed to optimize income properties.
Property managers will deal with these requests, alleviating you from the burden. If it is small, the requests may be handled internally. Larger and more complex issues may be delegated to outside specialists. Sophisticated property investors normally have a property management agreement which authorizes the company to handle up to a certain dollar amount of repairs without needing express permission first. This just streamlines the process, and ensures issues don’t get worse if you can’t be reached.
3. 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. In other cases, it may require lawyers, or even going to court. 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 compared to a DIY landlord that may appear an easier target for malicious tenants.
4. Regular Property Maintenance:
Property management companies can call for regular inspections, routine maintenance such as lawn care, pressure washing roofs, and other proactive items to prevent code violations and to preserve real assets. That way, you aren’t expected to keep up with every rental property you own.
5. 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. It may be the most valuable thing property management companies offer. Then there is supervising move-in and move-out activity.
6. Bookkeeping: Bookkeeping is probably the least fun part of real estate for most investors. At the same time, great bookkeeping and invoice handling is critical for minimizing taxes, keeping the best vendors, and generally keeping the cash flowing. If your property manager throws this service in for free, you had better take advantage of it.
7. Buffer from Liability: One of the little understood perks of having a third party property management firm is the buffer from liability. Despite all of the best screening and learning the best practices, it is easy to mess up when it comes to property management. That’s on top of those problem renters that are out to take landlords for whatever they can get. It’s too easy for opportunistic tenants to make false accusations about your rent collection tactics, illegal eviction practices, and negligent maintenance if you aren’t covered. A third party manager can deflect most of that instantly, like a shield.