Being a landlord is not a laid-back enterprise
Who Needs a Property Management Company?
They call it passive investing. You buy an investment property, find tenants and collect the rent. Sounds so easy doesn’t it?
But the reality is that there is a great amount of work involved when you purchase a multifamily building or even just a single-family home to rent out. And when your property is located in another city or state far from where you live, the job becomes even harder. Being a landlord is not such a laid-back enterprise after all.
What keeps a landlord so busy?
Landlording is certainly not a nine to five job. Plumbing emergencies do not ever occur at a convenient time and tenant disputes seem to escalate late at night.
Here is a list outlining some of a landlord’s duties throughout just one day:
- Market the property and advertise vacancies
- Run rental background checks and credit checks for landlords on prospective tenants
- Prepare rental agreements and meet with new tenants
- Ensure that the property is clean and empty when a new tenant moves in
- Collect rent and security deposits
- Handle accounting and finances
- Take care of maintenance requests and repairs
- Maintain the grounds
- Communicate with tenants, including settling tenant disputes and complaints
And that’s just one day. Being an absentee landlord for a property outside your immediate area adds even more time-consuming responsibilities.
Enter the Property Manager
If you find this all a little overwhelming, it might be time to interview some property managers. That is deliberately plural because not all property managers think alike or do business in the same manner. You may need to interview more than one to find the person or company that supports the same business principles that you follow. You want to know who you are going to trust to run the day-to-day business of keeping your tenants happy while collecting rents, handling emergencies, signing new renters and dealing with maintenance issues.
In other words, you need someone who will make your investment a passive one for you.
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What Does a Property Manager Do?
A property manager is meant to make the life of an investment property owner easier and less stressful. According to Investopedia, “Property managers are generally responsible for the day-to-day operations of the real estate, from screening tenants to arranging for repairs and maintenance.” They can be hired to perform specific rental services or they can take on all of the landlord’s duties for the property.
Investopedia notes that “Owners pay property managers a fee or a percentage of the rent generated by the property. Every state has its own laws regulating the activities of property managers.”
The following list represents a broad description of the services most property managers offer. It is up to the property owner to decide which of these responsibilities they want to hand over to them.
- Marketing: Even before you have a unit available to rent, a property manager can help create a brand for your property. They can market your property through your website, social media and by word of mouth. Then, based on the overhead numbers you have supplied to them, they can help you determine the amount of rent you will need to charge for each rental unit.
- Advertising: Aside from bringing in new leads from their own sources, the manager will post listings about your available unit on the property website and internet listing sites. They will also take care of running local ads and put a sign up on the property.
- Screening the applicant: Screening prospective tenants is a part of any standard property manager’s job description. AAOA tenant screening services may include a credit report with score, past address history and criminal, eviction and sex offender information as well as bankruptcies, liens and civil judgments.
Some landlords prefer to do most of the management activities themselves and only hire a property manager to conduct new tenant onboarding. That would include reviewing tenant rental applications and handling the screening and decision-making process, although some owners prefer to make the final decision themselves.
Another advantage is that property managers always adhere to laws, such as the Fair Housing Act. This means that when interviewing prospective tenants, the right questions will be asked without intruding on the applicant’s right of privacy.
- Leasing: Once the new tenant has been chosen, the property manager will prepare the lease and any addenda for signing. They should have the keys ready to hand over once the papers have been signed and the deposits are paid. The property manager can perform tenant orientation, reiterate property policies and share important information.
- Preparing the property for a new tenant: The property manager will make sure that the unit is ready for the new tenant by ensuring that it is clean, the lock has been changed and all window and floor coverings are in good shape. If there are any appliances that are not working properly, they will contact the appropriate service people.
- Collecting rent: This is one of the main reasons many landlords hire a property manager. Typically, a property management company will handle everything from managing rent payments to contacting tenants about late rent and fees.
- Move-outs: During move-out, the property manager will conduct a walkthrough of the unit and assess damages. They can then note things that need repair and send the tenant a calculation of the charges. The property manager will also receive the keys, refund the security deposit and make sure that all of the tenant’s belongings have been removed.
- Accounting chores: In addition to handling rent collection, a property management firm will pay vendors, reconcile bank statements and handle all other accounting matters, such as budgeting and record keeping.
- Managing the tenants: Keeping your tenants happy is a key part of the property manager’s job. It is critically important that they promptly respond to any complaints, requests and conflicts between tenants.
- Manage maintenance requests and repairs: Along with cleaning units, the property manager will see that the property is well maintained and that the landscaping is cared for. As for general maintenance problems, they will communicate with tenants to create maintenance requests and hire and pay vendors.
- Handling evictions: Dealing with the eviction of a tenant is one of a landlord’s most painful chores. However, the property manager can be delegated to send the required notices and file a lawsuit at the court. They can represent you and provide the required evidence to support the tenant’s eviction.
Should I hire a property manager?
If you are a remote landlord, the benefits of employing a property manager could outweigh the cost. Calculate how much it costs you to travel to meet with potential tenants and prepare the rental for new people. You could eliminate gas (or airline fares if your property is very far), hotels and other travel expenses. You would also have someone to oversee your property to make sure that it continues to be in top condition and that all your tenants are happy.
The more units you have, the more valuable hiring a company to help you manage them would be. In the end, it’s a matter of how much control over your properties you are willing to turn over to a manager and how much it will cost you. The main sticking point for most will be the price and the main benefit would be the time saved.
If you can justify the price and it fits in the budget, it’s worth seriously considering.
Disclaimer: All content provided here-in is subject to AAOA’s Terms of Use. Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. AAOA recommends you consult with a financial advisor, tax specialist, attorney or other specialist who is able to properly advise you.
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