Owning rental property has long been a sound investment. However, not every rental property owner should opt to be a property manager, too. Those who own rental real estate need to find a balance between earnings and effort.
The best way to do that is often hiring a property manager or property management firm to make your life as a landlord much easier.
Weighing Dollars And Sense
Managing a property comes with multiple responsibilities – from repairs and safety considerations to dealing with tenants and vacancies. You need to decide how much you value your time, particularly if managing the investment property is not your only job.
For a novice investor, it can be tempting to be hands-on and manage the building on your own. For an inexperienced real estate investor, ownership of a rental property may be seen as a simple math formula: rental income – (mortgage + expenses) = profit. However, this equation does not include your time and the considerable experience they can bring to bear.
Property management companies typically charge 7 to 10 percent of monthly rent. Specific deals can vary based on the size of the property. In exchange, here are important tasks and potential headaches that the property manager takes off your shoulders:
Knowledge and professionalism
Property managers understand Fair Housing laws and other state regulations. They are trained and even licensed in some states, as well as typically staying current on policy changes, the rental market and other concerns through industry associations.
Maintenance of the property
Owning a rental property requires routine and emergency repairs and upkeep. Depending on the climate, there are seasonal items, such as cleaning out gutters as well as preparing or shutting down the heating and air conditioning systems. Good maintenance management does save money in the long run.
Looking for possible tenants
Advertising for tenants, showing the property, screening applicants and doing a thorough background check (credit report, criminal history, income verification and calls to references as well as past landlords) takes time. A good manager will be interested in filling the vacancy with someone bound to stay and strive to avoid a future eviction situation.
Tenant relations beyond collecting rent
A property manager will periodically check in with tenants, so their sole interaction is not limited to collecting rent and handling issues. Establishing a relationship makes tenants feel welcome and that the building and the residents are important.
A property manager will be more knowledgeable about lease rules, notice requirements and evictions.
A good landlord inspects the property at least once a quarter. This gives you an opportunity to inspect the entire premises and chat with tenants. If you are too busy to visit the investment property regularly, you are too busy to manage it yourself.
Two other situations that necessitate hiring a property manager are:
- Owning several properties, which multiplies problems and required time as well as cash flow.
- Owning rental property in another region or state, so you cannot possibly give the building the attention it requires.
In both these situations, hiring an experienced property manager makes sense.
For a property investor who is just starting out, learning as you go can become very expensive and time-consuming. Not knowing great repair contacts or filling a vacancy too slowly can quickly eat into your investment income. Likewise, it is also important to thoroughly vet potential property managers. LCI Realty works with its clients on how to continue to get the most out of their investment real estate. They offer education on dos and don’ts on both commercial and residential rental properties and help clients build strategies for their asset.
For more information, contact LCI Realty.