Real Estate Blog

Good property management is an absolute necessity of real estate investing though, on a day-to-day basis it can be time consuming and just downright maddening. Not everyone has either the skills or the temperament to do the job. If you're not a "people person" with strong communication skills, this is not something you're going to like to do. Not liking what you're doing generally leads to procrastination. Putting off needed management tasks is not the way to get and keep good tenants.

However, it's a huge mistake to think that if you hire a property manager you're not going to be involved with the property -- and a bigger mistake to actually not be involved. Yes, in theory, with someone else overseeing the place all you really have to do is:

●      pay the taxes,

●      keep up the insurance,

●      and tend the mortgage.

But remember, there are always two risks with a manager: doing too little and doing too much. The real key to a successful owner / manager relationship is deciding, in advance, how responsibilities are divided and how and when information passes between the two.

Personally, I think it's a good idea if the owner retains the final responsibility for approving tenants. It's fine to let the manager handle credit and background checks, but you want to review that material and give the ultimate go ahead. (For one thing, you want to make sure you're in full compliance with fair housing laws, both state and federal.)

Additionally, set a limit on repairs the manager can approve. Over X amount of dollars, you will need to be called. Both of these areas clearly address things that could be future legal or financial hassles for you if you're not actively involved with the management process.

Think of the manager as doing the things that you don't have the time to do because you're running your own business:

●      rent collection,

●      tenant calls,

●      arrangements for minor repairs,

●      verifying the completion of repairs,

●      handling evictions, and

●      conducting property inspections.

The manager should also be the person who sends out tenant notices for things like late rents or violation of the property rules.

In the best case scenario, you should pay a property manager about 5% to 10% of the gross rents, although professional managers have fee schedules for all kinds of services you might take for granted they'd just do -- like actually visiting the property. I can't stress enough that when you are going to hire a management company, talk to several and carefully review and compare all fees. Ask for references and follow up on them.

Knowing a manager is taking care of day-to-day business frees you up to run your own business and even just to live your life. You can actually go out of town without worrying about that cranky AC unit in the property over on Thus and Such Street. Keep in mind though, just because you have a property manager in place, does not relive you of responsibility.  Choose a manager poorly? Your worries are just getting started.