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What is a Property management?
When a Landlord owns a property, they can either self manage the property or use a Property management for screening tenants, advertising the home, routine maintenance, repairs, rent collection, handling tenant contracts, eviction process. Property manager acts as an intermediate between the owners and renters, this is especially very useful for the owners who are out of state who won't be able to manage their property on their own.
Investing in rental property provides a passive income and increase cash flow through the rental payments collected from the tenants. Since being a landlord requires consistent effort as the property has to be maintained for the tenants, you can involve the Property Management Company to delegate your responsibilities. It reduces a whole lot of burden on your shoulders, thus making it a passive income with minimal effort.
Responsibilities of a Property manager
Handle vacant units
Property managers make sure the homes are occupied and they come up with the marketing strategies to market the property in an efficient way by fixing the right rental price, advertising and they may also provide ideas to revamp the look and appeal of the property. They help in maintaining the property in a good condition by making periodic inspections. This also reduces the occurrence of major repairs. Once the tenant vacates, they take care of fixing the repairs, painting and taking professional photos and post in a number of leading websites quickly and efficiently which reduces the vacancy rate of the property.
Fixing rental price
Fixing the right rental price is a very important task. If the rental price is higher, it is not favorable for the tenants and may result in delay of the property getting occupied. If the rental price is lower, it is not favorable for the landlord and it would not result in a good rental ratio. The property managers usually consider a number of factors before deciding on the rental price such as location, market data, amenities present, competing rental prices in the area, number of rental units vacant in the area, walk score of the property etc.
Advertise rental units
Property managers usually have an extensive knowledge in marketing and advertising. Marketing the right way is very important to reach a vast number of potential tenants. They advertise the property in a number of leading rental sites. This increases the interest in the property and thus helps to filter out the right tenants with good credit and rental history.
Showing and Leasing
If the owner lives out of state or even out of town, it is very hard to do showing for the potential tenants. Most of the tenants wish to see and tour the property before entering into a leasing agreement. Property manager helps facilitate in the process of fixing the home and showing the home to the potential tenants. They also take care of interviewing the tenants and providing a rental application if the tenant wishes to go forward with the property.
Lease agreement
As the tenant fills out the rental application, the property manager usually screen the tenants for their credit history, income and rental history to make sure the tenant is responsible and capable of paying the rental amount on time. If the results are good and comply with the terms of Property management and the owner, then they sign a Lease agreement which states all the responsibilities of both the owner and the tenant.
Handling repair requests
Emergency repair requests such as plumbing issues, Electrical issues, no heater in winter, no air-conditioning in extreme heat conditions, Sewer issues has to be taken care immediately. This can be hard especially if the landlord is out of town or unable to fix it immediately due to personal reasons. The property manager takes care of communicating the issue with the tenant, estimating repair costs and fixing the issue. They also manage and supervise onsite employees such as cleaners, painters, inspector.
Managing rental payments
Managing the rental payments are one of the important tasks of the property manager. This includes collecting the rent on time and taking action if the tenant fails to make a rental payment or makes the payment late. Policy regarding the late rental payment are usually outlined in the rental agreement.
Managing Budget, documenting and recording
The property managers not only collect rent but also manage the lease, repair costs and organize tenant leases. They document and record everything which helps in determining the growth and rental yield of the property. They may also document all the conversations occurred with the tenant regarding the complaints and repairs done.
Eviction and moving out Process
If the tenants refuse to abide by the rules outlined in the rental agreement or refuse pay the rental payments, then the process of eviction starts. This may be a long and daunting process depending on the situation and some property management takes care of all the legal processes saving a lot of time for the owners.
Pros of using a Property management
Property Management Experience
Property managers are usually very experienced and well versed in the local laws and regulations, soliciting the property, negotiating lease agreements. They are also good in marketing and advertising the property which reduces the vacancy rate of the property. They also make sure the rules and regulations outlined in the rental agreement are compliant with the State and Federal laws.
Laws And Regulations
The Tenant-Landlord laws, rules and regulations vary from state to state and it is difficult to keep track of all the rules and regulations followed according to the state. Using a property management is very helpful for the landlords who own multiple properties in different states. The processes such as screening tenants, security deposit charge, leasing process, eviction process usually varies from state to state. This avoids landlords from getting into legal issues for not knowing the local laws and regulations.
Save a lot of time
If an owner owns multiple properties, it might be hard to take care of all the maintenance and repairs of the properties in a timely manner and may also take away a lot of personal time. Having a property management makes managing the property hassle free. This might be a great benefit on the long run.
Quick Response Times
It is important to respond to the tenants in a timely manner especially in emergency situations. It might be a hassle for a landlord to respond in unusual hours, but the property management usually has a trained team professionals in electric, plumbing, repairs and they have a system in place which makes the immediate response and fixing the issue on time possible. This might give a peace of mind in the long run especially if the owner owns multiple units of property.
Marketing and Tenant Retention
Property managers are good in marketing and advertising the property which helps reach the potential tenants. This not only helps in creating awareness of the property but also increases the value and reduces the vacancy rate of the property. Tenant retention is another important aspect which can only be achieved when the tenant is taken care of in a timely manner. They help not only in finding a tenant but also retaining them which increases the rental cash flow of the property.
Cons of using a Property management
High costs and fees
The costs or fees of a property management company varies depending on the location and other offering. It is usually between 5%-12% of the monthly rental income of the property. In addition to that a number of other costs are also associated with the Property management company. Some management may also charge a flat fee instead of charging a percentage of the monthly rent and some provide discounts if the owners have more than a certain number of units under their management. This might impact the rental cash flow and rental ratio of the property.
Leasing Fee - Leasing fee is also known as the new tenant placement fee. The management company usually charges a leasing fee to cover the costs of marketing the property, screening and application process of tenants.
Lease Renewal Fee - Some property management companies may charge a flat fee or a percentage of the monthly rent to renew the lease. Some companies skip this as well. Usually a Property management is chosen after analyzing the quality of service provided and comparing and calculating the breakdown of all costs involved in maintaining the property.
Less Control for the owner
Some land owners may have a lot of knowledge in marketing the property, managing the property, skills to take care of repairs and they wish to take care of the property on their own. Some property managements don't allow the landlords to hire people to fix repairs and they use their own team of professionals while fixing the issue. It gives a very less control to the landlords in decision making regarding their property. Some managements doesn't involve the landlords in minor tenant and maintenance issues.
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