Should Property Owners Manage Their Own Properties
RES429: Property Management
Should Property Owners Manage Their Own Properties
Whether you own one property or a hundred, you will have to decide how and who will manage that/those properties. Often people find themselves becoming accidental landlords (a person who for one reason or another has to rent out their owned property). Moreover, then there are those who seek out the title of a landlord. Either way, they have all had that come to Jesus moment, where they have had a troublesome tenant that they wish someone else could handle. This type of situation has been the most significant catalyst for hiring a management company to manage rental properties. In this paper, I will visit the advantages and disadvantages of being your own property manager.
Because most property management firms have years of experience under their belts, they have a well-established set of rules when reviewing prospective tenants. A good property management company has a verified and reliable screening process. They also know where to search for the most desirable tenants to occupy the property they are managing. They have tools that have been developed and honed over many years and know what will and won’t result in the desired tenants — that type of hands-on experience you can not buy.
- Quality of tenant
Experienced property managers know that a single bad tenant can cause a great deal of legal and financial woes. A property management company has the working knowledge of these areas, and they can help protect the property owner from potential lawsuits and expose areas of vulnerability that may need to be addressed. There are federal law and state-specific laws that a good property manager will be well versed in. The proper Property conditions for safety and to meet legal specifications (lead paint, electrical, plumbing, etc.), Signing and terminating leases, Collecting and proper handling rent and security deposits.
- Less legal-issues
A property manager can be instrumental in getting your property renting fast. Renting out vacant units is more than 50% of their job. Most companies get paid per rented unit. So It Is their priority to have every unit rented as soon as possible. With that, they must get recently vacated properties ready for re-rental as soon as possible. They are also the catalyst in the proper rental amount. Again since they receive a percentage of the rental amount they are driving to get the highest rate possible while keeping An eye on the neighbor properties that may be competing for the same renter. Too high they have vacancies to low, and they lose money.
- Proper and timely rents
A significant part of the property manager’s duty is to collect deposits, rent, and late fees. Often this is done on specific days of the month and is settled with the owner with an accompanied report outline specifics per unit or property. This also allows the owner to have a buffer (property manager) as the bad cop, that strictly enforces the rules set forth and agreed to by the property owner.
- Collecting of monies
Because you have someone to handle to handle the day to day It frees up your time to vacation, work on the next big buy or what have you. It Is the property managers job to deal with the headaches that come with dealing with tenants and emergencies. Instead of getting several calls from multiple tenants you may now get one call, but only if you are REALLY needed.
- Repair Cost
- Because most property managers have multiple properties that they manage they have established accounts with repairmen and contractors. Because of this they typically have an established and competitive rate for standard maintenance and upkeep.
- More time and less stress
If you the property management company helps you avoid legal fees due to unlawful occupancy or evictions then are they not worth it? The money that you could save in time, energy, and legal fees alone could pay for a property manager.
Cost is one of the most significant disadvantages of hiring a management company. If you need every penny to make your month-to-month expenses, then you may want to steer clear of a property management company. Typically management companies charge anywhere from 8 to 12% of the rental amount. In the state of California where rents are historically higher than average that could be a considerable cost.
And, that cost is in addition to standard rental fees like credit reports, background checks, property maintenance, and upkeep, collections of late payments (on average this is 25 – 50% of the collected late fees) and if necessary evictions. And If you have fewer then five units, then managing your own property may be your best course of action since most property management companies have a minimum unit requirement. Because they are paid per rental unit, they often have a unit minimum they will accept to be cost-effective.
Not all property managers are as advertised. They may not be as honest or experienced as you initially thought and could cost you tenants, both existing and future. Some may even collect additional money from your tenants without your knowledge. People often think that checking the BBB (Better, Business, Bureau) is a good place to start and end their research on a firm. But what most people don’t know is that you can purchase your BBB rating. “To prove the point, a group of Los Angeles business owners paid $425 to the Better Business Bureau and were able to obtain an A minus grade for a non-existent company called Hamas, named after the Middle Eastern terror group.“
Describe the reasons property owners would choose to hire a property manager rather than manage the property themselves.
There are a few reasons an investor should consider hiring a property manager:
With a seasoned property manager, there comes working knowledge of tenant
- Fewer legal problems
screenings, evictions, proper handling of security deposits, inspections, and proper rent collections.
The proper rent collection and handling of late payments can make or break a properties profitability. So a property manager must have established rules and policies in place to ensure that funds are collected promptly.
- Tighter rent collection
Tenants that pay on time, rent longer and have pride in rentership (If that’s even a word).
- Better Quality Tenants
The turn times for improvements and repairs are a lot shorter, determining the best rental amount for the available units, and proper marketing of available units.
- Shorter Vacancy Cycles
A good property manager has proven tenant retention policies to ensure long term, happy tenants.
- Better Tenant Retention
Scheduled maintenance of major systems can save a ton of money. The savings will be reflected in the properties of net profit.
- Increase the value of an investment
Explain why a property manager should be concerned about
A successful property management firm has written agreements to deal with complicated ethical issues. National Association of Residential Property Managers is a good place to start. Adhering to a professional code of ethics helps individuals and companies build trust worthy relationships with their suppliers, employees, customers, and the communities they work in.
I believe if you have the time and the willing to learn I would suggest you initially manage your own properties. In California there is a “Property Management Certification” class that is geared toward Real Estate Agents, but anyone can take the courses. It will go a long way in helping you be a better landlord. It is also my suggestion that every property should have home warranty insurance, which typically covers what is considered normal wear and tear or real damage. And if you plan to own multiple properties I would suggest that you establish a rapport with a few handymen and or contractors. This will give you several people that you can call in an emergency that you know. The wrong time to look for someone is when you are in a dire emergency. The word “emergency” means dollar signs to most contractors. I have also found that annual maintenance is a good way to catch things that could become a problem. I would say that a quick one-page questionnaire that tenants complete is a good way to find possible issues. i.e., Do you have leaky faucets?, Do you hear any unusual sounds in the walls? Are you feeling cold air coming from your doors and windows?, Have you blown any fuses?, Are your smoke detectors beeping?, etc,
5 must-haves in a property manager. (2018). The Daily Mercury (Mackay, Australia). Retrieved from http://search.ebscohost.com.proxy-library.ashford.edu/login.aspx?direct=true&db=edsbig&AN=edsbig.A554731123&site=eds-live&scope=site
A property manager is key to a profitable investment. (2018). Khaleej Times (Dubai, United Arab Emirates). Retrieved from http://search.ebscohost.com.proxy-library.ashford.edu/login.aspx?direct=true&db=edsbig&AN=edsbig.A562030441&site=eds-live&scope=site
ROSS, B. (2010). Brian Ross Investigates. 20/20 (ABC), 1. Retrieved from https://abcnews.go.com/Blotter/business-bureau-best-ratings-money-buy/story?id=12123843
Woodson, R. Dodge. (2006). Be A Successful Property Manager. New York: McGraw-Hill.