If you own residential properties as investment or a source of income, you’re probably aware of the sheer amount of time and responsibility involved in maintaining them, renting them, and following local laws and regulations. The more properties you own, and the more spread out they are, the more difficult it gets to manage them. If you are starting to run ragged keeping up with your properties, it may be time to consider transferring the responsibility of managing your properties to a residential property management company.
Even if you've just bought your first property and you're only getting started with the business, it might be best to consult a professional. The reasons and benefits for hiring a property manager are endless, but Kellie from T-Square Real Estate Services, a professional real estate and property management company in Seattle says there are 6 big reasons why it’s a good idea to talk to the professionals.
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“Evicting non-paying tenants can be a nightmare, especially if you are hundreds of miles away in another state are not familiar with the state-specific process and laws for eviction,” says Gregory Suffoletto, founder of Standard Property Management in downtown Buffalo, NY. In New York State, for example, where Standard Property Management operates, first you must give the tenant written notice, where the tenant has three days to either pay or move out. Then, you must provide notice to cure, where the tenant then has another ten days to correct the lease violation. If the tenant fixes the problem, the landlord cannot move forward with eviction. This must happen each time a tenant is late or does not pay the rent. Then, the landlord gives the tenant a notice of termination, and the tenant then has 30 days to move out. If the tenant still hasn’t moved out, then the landlord can finally begin eviction proceedings through the court system, which is a whole other nightmare of a process that costs more money than you would even gain from the rent paid. We’re not even going to get into the tenant removal rules, which must be followed to a ‘T’, or the eviction is null and void.
So you can see why it pays to have a professional screening your tenants for you. A property management company typically hires someone specifically for tenant screening. This person typically runs a renter profile, which can include job history, rental history, income verification, and other information that establishes the prospective renter’s past of employment and rentals. The tenant screener also usually runs a credit check and background check. Red flags include a criminal history, past evictions, lack of references, lack of landlord information, etc.
This information is a pretty good indicator of how likely your tenant is to pay rent, not damage your property, not anger the neighbors, and other factors that make a good tenant.
Setting Rental Rates
Establishing a good rental fee is important, and can get tricky if your property is in another area or state. Good property managers can probably give you a pretty good idea of how much you can charge for your residential units in a certain area off the top of their heads, but good property management companies will perform a detailed residential market study of the neighborhood and area your units your located in. Factors include pricing for similar units located nearby, what the property values are, whether the area your units are in is on the upswing or downswing economically, whether there is increased demand to live in the area your property is in, etc.
Collecting rent, especially if you own multiple units, and especially if your properties are out of state, can be a job in itself. Good, modern property management companies will have an online payment system or direct deposit/withdrawal system set up. Then there is the process of collecting rent from people who are late on their rent payments. It can ugly and tiresome pretty quick. It can also get very awkward. In maximizing your return on investment for your properties, you will find that you are making much more money for your time using a property management company to take care of rental payments than if you were to go from unit to unit yourself and collect late rental payments.
Advertising, Marketing, and Sales
A good property manager will have a vacant apartment cleaned, inspected, marketed and sold the month that your units become vacant. A great property manager will have your units filled the same week. “With in-house maintenance personnel and modern technology, there is no reason that a unit can’t be filled within a few days,” says Suffoletto. “Our staff is cleaning and inspecting a residential apartment or loft within an hour of the tenant vacating your unit. Our marketing and sales team has that unit advertised before the tenant is even gone, so that we are showing that unit the day after the tenant has left. We have open-format apartment showings so that we can get as many people viewing the unit as possible, and a little bit of competition is fostered among the potential renters. Our goal is to have a unit filled within 48 hours of its vacancy.”
If you own a good number of properties, marketing and sales for all vacated residential units can be next to impossible. You have to take the time to list the units online. You have to take the time to set up appointments with people interested in looking at those units. More than half the time, the people making the appointments won’t even show. You can see how your ROI can best be maximized, and your time optimized, by outsourcing this process to a residential property management company.
Protection from Lawsuits
When you lease a residential unit, you must follow the residential laws and regulations for the state that unit is located in. Unless you’re a lawyer with a lot of time on your hands, doing this for a number of properties, and making sure those properties stay up to code, can be next to impossible.
Then there is the issue of protecting yourself from being sued. Slip and falls, cracked sidewalks, damaged property, and other issues can cause injury and lawsuits before you’re even aware of them. Property management companies are not only constantly upkeeping, maintaining, and repairing your property, they also protect you from lawsuits like slip and falls. Property management companies have insurance for such potential lawsuits, and attorneys either employed or on retainer, to get in front of these lawsuits, and shield you from them to the best of their ability.
Shoulder the Burden
Property management companies shoulder the burden of upkeep, maintenance, sales, and legal issues so that all you have to worry about is collecting the checks. If you have multiple investments in residential properties, especially spread out in other cities or states, it’s just not feasible to handle them all yourself. At best, you will be spending a lot of time keeping up with them and your tenants, at worst, you can get sued. It’s a good idea, both from a legal, time, and investment perspective to hire a good property management company. You will sleep much better at night knowing your investments and tenants are in good hands around the clock.