A knowledgeable property manager can add significant value to your asset, which is why many seasoned real estate investors will tell you that a good management company is worth their weight in gold. Here are several ways an excellent property manager earns their keep:
Higher Quality Tenants
It is certainly possible to get a bad tenant out of your home once they are in, but it’s a real hassle and you are so much better off never accepting them in the first place. A thorough screening process results in reliable tenants that:
• Pay on time
• Put less wear and tear on the unit
• Generally cause less problems
• Rent longer
An experienced property management company has seen thousands of applications and knows how to rapidly dig for the real facts about applicants and examine that information for warning signs. By permitting a management company to handle the screening, you are also protecting yourself from rental scams directed at owners, and discrimination lawsuits resulting from an inconsistent screening process. This kind of experience takes time, and insomuch as it means avoiding bad tenants, it is arguably one of the most important benefits a property management company will provide.
Fewer costly and time consuming legal troubles
Expert landlords know it only takes one troublesome tenant to cause significant legal and financial headaches. A good property manager is equipped with the knowledge of the latest landlord-tenant laws and will make sure that you are not leaving yourself defenseless to a potential law suit. Each state and municipality have their own laws, these plus federal law cover a number of areas including but not limited to:
• Tenant screening
• Safety and property conditions of the property
• Lease addendums
• Terminating leases
• Handling security deposits
• Rent collection
Avoiding a single law suit can more than pay for the property management fees, and save you time and distress.
Better tenant retention
While it’s simple to see the effects of lost rent, there are other equally grave problems with a high tenant turnover rate. The turnover process involves a thorough cleaning, changing the locks, painting the walls and possibly new carpet or small repairs, not to mention all the effort associated with marketing, showing , screening and settling in a new tenant. This is a time-consuming and costly process that can often be averted by keeping tenants pleased and well cared for.
A good property management company will have a time-tested tenant retention rule that ensures happy tenants with lengthy stays in your properties. These kinds of programs need a reliable, systematic approach, which is where a good property management company will shine.
Shorter vacancy cycles
A property manager will help you do three critical tasks that involve how long it takes to fill your vacancies:
• Improve and organize the property for rent - A property manager will advise and oversee cosmetic improvements that maximize revenue. Tighter rent collection process
• Establish the best rent rate - Too high and you are trapped waiting, to low and you’re losing cash every month the tenant is in the unit. Determining the best price requires knowledge of the local market, data on recently sold comparables, and access to rental rate tools.
• Effectively advertise your property - A skilled property management company has written hundreds of ads and knows what to say and where advertise in order to get a larger pool of candidates in a shorter period of time. Moreover because of their volume they can usually discuss cheaper advertising rates both online and offline. Lastly, they are familiar with sales and know how to close when they field calls from prospects and take them on showings.
The way you handle rent collection and late payments can be the difference between success and failure as a landlord. Collecting rent on time every month is the only way to maintain consistent cash-flow, and your tenants need to understand this is not negotiable. By hiring a property manager, you put a buffer between yourself and the tenant, and allow them to be the bad guy who has to listen to excuses, chase down rent, and when necessary, evict the person living in your property.
Assistance with taxes
A property management company can help you understand which deductions you can claim, as well as organize the necessary forms and documentation to make those claims. Additionally, the property management fees themselves are also tax deductible.
Lower maintenance and repair costs
Good maintenance and repairs keep tenants happy and preserve the value of your investment which make them a very important part of land-lording. By hiring a management firm you gain access to both their in-house maintenance staff, as well as their network of licensed, bonded and insured contractors who have already been vetted for good pricing and quality work. This can translate into significant savings compared to going through the yellow pages and hiring a handyman yourself. Not only is the firm able to get volume discounts on the work, they also know the contractors and understand maintenance issues such that they are capable of intelligently supervising the work.
Personal benefits for owners
• More liberty - Invest and live anywhere you want without the need to be near your properties. In addition, you can live and travel without the requirement of always being present in the event that your tenants have a need you have to tend to. Once you have found a good management company, it doesn’t matter if you live in the same state. Some landlords live in other countries and simply collect their check every month without ever seeing their rental units.
• More Time - Time is money, and for many businessmen, their time can be more profitably spent in areas other than servicing their properties. Also, you have more time to spend with you family and friends doing things you like.
• Less worries - Avoid having to deal with middle of the night emergencies, chasing down rent, evicting people from your property, tenants who wreck your property, rental scams, terrible vendors, piles of paperwork.
A last consideration
Of course, this is an ideal scenario. These results can only be expected if a management company is experienced, truthful and a good fit for your property. A poor choice of a property management company can create many dilemmas of its own.