You’ve decided to rent out your property and now it’s time to decide if you should manage it yourself or hire a property management company. At first blush, the work may appear relatively simple: find a tenant, collect the rent, have someone fix a few things here and there.
And it is possible to manage your property, just like you can learn to fix a leaky toilet or lay tile. But just like with the tile and the toilet, doing that seemingly simple job well takes time, practice and a willingness to learn the tricks and tools of the trade.
Property management may cost more upfront than managing it on your own, but paying for professional expertise eliminates many of the hassles of owning rental property and may save you money in the long run. Here are some of the main benefits of hiring a property management company:
Avoid legal issues
Managing rentals requires a strong knowledge of all local, state and federal fair housing and landlord-tenant laws. Innocent mistakes, such as taking too long to make certain repairs or asking the wrong question during a showing, can lead to hefty fines, lawsuits and other legal problems. For example, owners often find themselves in legal disputes over security deposits when they charge tenants for property damage. But what the owner considers damage, the tenant and the law may consider normal wear that tenants aren’t responsible for.
Property management companies have years of experience making determinations like those in accordance with the law. And that can save owners the significant costs and hassles of a lawsuit. Part of a manager’s job is to track changes in the laws, and many companies (such as ours) will consult regularly with real estate attorneys to ensure their practices remain compliant in all areas, including:
- Lease administration, including addendums and terminations
- Collecting, holding and returning security deposits
- Rent collection and enforcement, including late notices and fees
- Inspections and entry of the rental property
- Eviction processes and procedures
- Repairs and condition of the property
Every month the property is vacant is a month without rental income. But attracting the most qualified tenants isn’t as easy as posting an ad on Craigslist. Professional property management companies tend to lease properties more quickly for several reasons.
- They make sure the price is right.
A fair market price is the number one key to getting a property rented quickly. Professional property management companies have seen and leased hundreds of properties, study market trends, and have access to data that helps them prepare an in-depth market analysis, tools and experience that help them find the optimal price to both attract tenants and provide strong rental income.
- They know how to “sell” properties
Top companies know that great professional photos make your property stand out to busy online searchers. Experience working with many renters means they know what amenities they’re looking for and how to highlight the strengths of your home.
- They know how to make the property shine
A few minor upgrades can vastly increase the home’s marketability and rental income. An experienced company will know what to recommend to get your rental ready for tenants.
Higher quality tenants
A comprehensive screening process is the best defense against problem tenants who don’t pay rent, cause damage to the property, and can make a landlord’s life miserable. Professional property management companies will have a thorough screening process in place that ensures selection of qualified tenants who will take care of the home.
Managers not only have the tools in place to easily check credit, criminal history, work history, bankruptcies and evictions, but the time to call prior landlords and other references. And they know what questions to ask and what red flags to look and listen for in the reports and phone calls, ensuring they’ll eliminate problem tenants before they ever move in to your property.
A professional’s screening process has typically been vetted by lawyers to ensure all applicants are screened consistently and will be chosen by legitimate qualifications, which protects owners from possible housing discrimination charges.
Better tenant retention
Calmly handling complaints, making timely repairs and providing responsive, friendly customer service takes time and patience, but it is key to keeping good tenants happy and making them want to stay. Avoiding frequent turnover saves the costs and hassles of preparing and leasing the unit, such as cleaning, painting, repairs, and marketing, as well as lost revenue from the time it is vacant.
Professional property management companies have the time and resources to respond to calls and e-mails quickly. Relationships with reliable contractors allow them to fast-track repairs. Companies have the professional distance to remain calm but firm when faced with challenging issues or complaints about the home, objectivity that can be difficult for owners dealing with their own property.
Lower maintenance costs and better ROI
When your rental’s dishwasher breaks or the bathroom faucet needs to be replaced, a professional property manager will know exactly who to call for fast, quality work. And, because companies often work with preferred vendors or in-house maintenance staff, they typically get a better price than the general public, which means you keep more of your rental income.
You also save by keeping the property in top condition. Good property management companies regularly schedule preventive maintenance and inspect frequently to catch issues before they become costly problems. Professionals will be able to suggest small upgrades that could bring increased rent. Quality repairs, cost-effective upgrades, and a focus on prevention will improve short-term returns and increase the property’s value.
Systematic rent collection
Hounding tenants for the rent is no fun. But collecting the rent on time each month is the only way to cover your expenses and profit from your business. Despite this, owners may give in to requests for a few more days to pay or feel stumped about what to do when a check doesn’t arrive. A property manager is an effective third-party, shielding owners from dealing with the tenants while enforcing the lease terms and on-time payment.
Many property management companies now use sophisticated web-enabled software that encourages tenants to pay rent online and sends automatic reminders. Instead of writing checks, tenants can schedule automated payments, making it faster, more convenient and harder to forget. Online systems also mean payments get processed more quickly so owners receive their money sooner. And owners can look at income and expense records online anytime.
Better record keeping and help with taxes
Keeping accurate, complete records of repairs, payments, receipts and any expenses related to your rental is essential for tax purposes and for tracking how your investment is performing.
Professional property managers keep comprehensive records of all income and expenses for your property organized and accessible, and many post them in a secure online “portal” where you can view them any time. In addition, companies create monthly reports that provide a visual snapshot of investment performance and issue necessary tax documents annually.
Investment properties offer many tax benefits. In addition to providing accounting and needed documentation, experienced managers can point out deductions and benefits you may qualify for.
More time and less stress
Your time is valuable. Using a property management company means you don’t have to answer emergency calls at 2 a.m., scramble to find a qualified contractor in the middle of the workday, or spend nights and weekends showing the home or doing paperwork.
That’s time you can spend on your career, family or other pursuits. You can relax and leave the stress of collecting rent, responding to complaints, and keeping up with ever-changing laws to the experts, knowing your property is in good hands.
Because of the many benefits, professional property management makes the most sense for many owners. Others prefer to handle things on their own and enjoy the challenge of learning a new business. We hope this guide will help you consider the costs and benefits in your own situation.
At Gordon James Realty, we strive to create mutually beneficial partnerships with owners. We believe in great communication and customer service, so our owners always know what’s going on with their properties. And, instead of dictating what clients should do, we believing in coaching them to make decisions most beneficial for them and their investment. Our advice is based on extensive experience managing single family, multi-family, and commercial properties, as well as condo associations throughout Washington, D.C. and Northern Virginia.
Need to know what questions to ask when you’re searching for a qualified professional property management company? Here’s a link to suggested property management interview questions to use when selecting the best company to care for your home.