Owning rental property can be an excellent investment. A good source of steady income, rentals can offer the opportunity to increase your personal portfolio through real estate holdings.
If you own one or several rental homes or apartments, the care and maintenance required is time-consuming, to say the least! Hiring a reliable property manager can help take the burden of management away, leaving you time to enjoy the benefits provided by your investment.
Here are 10 tips to follow when hiring someone to manage properties for you:
- Hire a licensed property manager. "Licensed" means that this person has taken an approved property management course and passed a state licensing exam. The person may be a licensed property manager or a licensed property manager in charge. What's the difference? The PMIC (Property Manager In Charge) can run his/her own company and manager other licensed property managers. The licensed property manager must work for a PMIC or a BIC (Broker in Charge, if she/he is affiliated with a traditional real estate firm.) Most importantly, the licensed property manager will have a state-regulated procedure in place for handling your rental income and security deposits.
- Look at a representative sample of the properties currently managed by your candidate. Ask for the addresses of a few of the other homes/apartments the person is responsible for and go take a look! Are the properties in good shape? Would you personally feel comfortable living there? If the answer to either of those questions is "no" - this person is not for you.
- Is the management fee reasonable? There is no such thing as a standard management fee. However, depending on your market area, you may expect to see fees ranging from 8 - 10% of the monthly rent amount charged as a management fee.
- Will your property be inspected on a regular basis? Make sure that your investment is checked on the inside at least once a year and on the outside every quarter. If you have tenant turnover, you can expect that the property manager will enter the home and assess its condition. If you have a long-term tenant, it is still important to see the condition of the interior to head off any major problems that the tenant either hasn't reported or noticed. (Example: Mold growing on the walls under a window that's covered by a piece of furniture. The resident most likely won't be moving the furniture very often, but your property manager would take notice of the issue during a proper inspection.)
- Ask your candidate how often they file for eviction on their current properties. A high rate of eviction can tell you that the candidate is not properly screening the rental applicants. A renter should be expected to pass a basic credit check and have satisfactory references from previous landlords.
- How are repairs and maintenance issues handled? Some property management companies hold back a maintenance reserve from your monthly rental income to cover minor expenses. Others will simply bill you for the amount of the repair on your next income statement. Be sure to set a limit on the amount that is spent on your behalf; you may feel comfortable letting the manager spend up to $200 without contacting you first. Anything over that amount - you must be called before the repair is made. Of course, certain emergencies can cause immediate action to be taken to protect both your property and your tenants (such as damage from a storm).
- Be clear on the timeframe and procedure for the monthly and yearly accounting of funds. If your tenant pays rent in July, do you receive your portion of July's rent in that month, or do you receive it a month later? If your property manager is going to pay you a month behind, make sure you're aware of his/her intentions. Insist on actual receipts for all repairs, not just a sentence or two on a generalized statement telling you that $90 was spent on maintenance. Be sure you know WHY and WHERE your money was spent.
- Review the details of the management contract. If your property manager is going to keep all of the late fees and the pet deposits, you need to know up front!
- Have a written agreement that includes a termination clause. If you find that you are unhappy with your property manager, there should be a pre-defined method for ending your relationship. Consider providing 30 days written notice via certified mail to the manager's business address with your intention of severing the contract. If the original management agreement doesn't address this point, then include an additional document to be signed by both parties. Even though you may like one another now, the day may come when you feel otherwise.
Make sure your property manager will be accessible. If you have questions about your monthly statement or items you wish to discuss, you should be able to reach him or her. You don't want someone who is too busy to respond, or is simply uncooperative. If you have to leave several phone messages or emails to get in touch with him, that situation is not favorable. If you call and the company's phone has been disconnected, dismiss them immediately!