So you took the plunge into real estate investing. Are you prepared to be a landlord? Is managing robbing your free time. Golf game suffering? Wife, husband, boyfriend, girlfriend, kids, dog, bugging you to spend more time living and less time managing properties?
Many investors don’t have the patience or expertise to manage properties. Do you know how to advertise properties, then find and screen tenants? What about collecting late rent, or dealing with problem tenants, evictions, collections? Is maintenance becoming a problem, costing you time and cash? Are stress and lack of knowledge pushing you to the brink of giving up?
It is time to seek professional property management.
Successful real estate investors know their time is better spent finding deals rather than managing properties. Ask management companies these questions during your search:
- First, ask how much the company’s services will cost. Pricing varies so be sure you understand what services are covered. Most management companies charge a monthly fee and a leasing fee. Some companies claim to not charge a leasing fee, but be careful. They may call it a set-up or sign-up fee, but there will be some expense involved. Nobody works for free. Be sure to ask about any mark-ups on maintenance and other services. Companies that offer “free” services will make up revenue in other ways.
- Next, ask about the company’s background. Ask what kinds of properties they manage, and where they are located. If you own a single family home in Highlands Ranch, find a company that manages such homes and works in Highlands Ranch. Ensure that the company is close enough to your property to care for it properly. Be sure the company is licensed and that they have experience in managing your type of property. Ask for addresses and drive by some properties. Ask for references from people who own the same kinds of properties you do.
- Third, ask when you will receive your rental proceeds and how. Do you prefer a check in the mail with your statement, or a direct deposit to your bank and an emailed statement? You should have choices. Some companies hold rents for several weeks. Seek a company that will disburse payment quickly. Ask how the company pays for repairs and expenses. Preferably, the company holds back a maintenance fund, and has your authorization to pay expenses up to a fixed amount, say $250. This way, you are not bothered by maintenance requests, and you are not constantly writing checks.
- Fourth, ask how the company mitigates vacancies. The biggest killer of return on investment is a vacancy. Do they charge a fee for showing vacant properties or new tenant move-ins? Do they charge the management fee when a property is vacant? The answer should be “no.” The first two services are included in the leasing fee, and if your property is vacant, no fee should be charged. Also, if a tenant renews a lease, no leasing fee should be due. Ask how much notice the company requires from tenants to move. A proactive company will require a 60-day notice, and will advertise the property as soon as notice is given. If done correctly, you will move one set of tenants out and a new set in with no vacancy or lost revenue. For a smooth transition, the company must require outgoing tenants to professionally clean carpets. If the house is clean, new tenants can move in quickly. Any repairs should be done in the last weeks of the outgoing tenants’ stay. Don’t wait for the property to go vacant. If the property needs painting, a good management company will make arrangements for a quick turn-around.
- Next, ask how the company advertises your property for lease. Most good companies use online advertising, taking advantage of free websites. However, smart investors pay for premium advertising on sites such as rentals.com and rentalhomesplus.com, both of which show in the top 5 in Google. Your property can be listed on the management company’s website with other properties, but it must be placed on multiple websites on its own. Ask how long a property stays on the market before a new tenant is found. A clean property, priced right, should take one to three weeks to rent. Properties priced between $1000 and $2300 a month go fastest, usually two weeks or less, with properties over $2400 a month taking a week or two longer to rent.
- And lastly, ask the company how many times per year they enter your house. Ask if they conduct inspections. You must physically inspect the property at least twice a year. Ask who conducts the inspection, what is covered, and how much it costs. A good management company will offer low cost inspections performed by a certified inspector, with a written report. Inspections are essential in keeping your property in top condition and your maintenance costs low.
If you are feeling overwhelmed by trying to manage investment properties, consider professional management. If you follow these six steps, you will find a great company to manage your investments.
Kevin Mackessy owns and operates Blue Olive Properties, a full-service property management company located in Highlands Ranch, and serving all of the South Metro Denver area. Kevin can be reached at 303-956-3507 on cell or via email email@example.com He works with new and experienced real estate investors alike, offering professional property management solutions.