Why Use a property Manager
How would you like to put that friendly murderer with terrible credit into one of your properties? After he stops paying the rent and you’re scared to evict him, you’ll be saying “Well, he sure seemed like a nice guy….” If you have a competent property manager, the likelihood of this situation goes down considerably. In my opinion, the number one reason to hire a good property manager is to find great tenants. They should do credit and criminal background checks on prospective tenants. If they have experience, they know what types of credit blemishes should exclude tenants and what types can be overlooked. You want them to balance placing a tenant quickly to reduce vacancy against taking the time to find the best possible tenant. In short you want someone who can place tenants who pay the rent every month and keep your place in reasonably good shape.
I pay a professional property manager to run all of my properties for me. I rely on Scott at Cambria Property Management. I realize that I don’t have the experience to get maximum rents from my properties and I don’t have time to do showings and all of the other interactions with the tenants. Also, I’ve been a computer professional my entire career and that means getting calls at obscene hours for down systems. Mrs. UtahDean, UtahMary, told me in no uncertain terms that I was not to increase that with property emergencies. In this article I’ll examine many of the reasons that you really do want an experienced property manager.
Maximize Income
Maximizing income from a property does not necessarily mean getting the highest monthly rent. How long your place sits vacant looking for the next tenant is also a large factor, so having a property manager who knows the area and how long it takes to rent units like yours at various rents is very valuable. It is a good exercise to look at advertised rents in your area to determine what to ask for rent, but this does not tell you how much vacancy to expect. The expected rent and vacancy are also key factors when deciding how much to pay for an investment property. As your real estate agent, I can help you with this when you are evaluating properties to purchase.
Time is Money
Like a lot of investors, I have a full time job. Therefore, I don’t have a lot or time to show my rental units, inspect my properties, deal with tenant complaints, collect past due rents and the like. However, if you want to get your place rented you need to let prospective tenants see your unit at THEIR convenience and you need to check their credit and references in a timely manner. A good property manager will take care of these things when they need to be done, including pursuing evictions immediately when needed.
Legal Liability
The federal Housing and Urban Development agency (HUD) has a lot of laws regarding discrimination in rental of housing. If you are like me, the only color that you care about when you rent to someone is green and whether the green going to continue to flow month after month. However, if you don’t have a written policy regarding minimum credit standards, criminal backgrounds and the like, you could get in trouble without even doing anything wrong. There are also laws regarding how deposits must be handled and many other things. By having a professional property manager perform all of these items your behind should be covered.
Dirty Work
Our society needs good, well maintained rental properties to provide housing to many segments of the population. I have been a renter at various times in my life and have been glad to have rentals available. I believe that the private owners provide the best units available at the best price. I have this opinion reinforced every time I see a story on large public housing apartment complexes. For the private rental market to continue it must be able to generate a profit. This means that those who do not pay their rent must move. However, I am not good at being the heavy, especially when there is a sad story involved. That is one of the big reasons that I have my properties professionally managed, because evections are sometimes necessary and must be pursued quickly to minimize expenses. I personally like letting the property manager be the bad guy when it comes to collecting rents, doing evictions and just saying “no” to unreasonable improvement requests.
Other dirty work includes fixing the plumbing, cleaning up after an evicted tenant leaves and doing all repairs that need to be done when they need to be done. Some property managers are contractors like Scott at Cambria and can do most or all repairs themselves. When they are not able to do those repairs they have an ecosystem of other licensed contractors with specialized skills. Just as you expect the rent to be paid on time every month tenants expect repairs to be made promptly. This is essential for keeping great tenants in your properties.
Documented Income
Each time you purchase a property using a loan, your debt to income ratio increases unless you can document the extra rental income. A professional property manager will send you regular rental statements and an IRS 1099-MISC form after each tax year. The 1099 is kind of like s W4 that shows how much income you received. You can include these documents in your loan application for your next property to increase your documented income like you do with your pay subs and your W2.
The Right Maintenance
An experienced property manager knows which improvements to make and can advise you on that. I’ve had some “interesting” ideas about how to improve my properties over the years. I’ve always run them by my property manager before spending money on them. He always has a good feel for which ones will have an adequate payback and which ones would mean throwing money away. The property manager should also have a good idea about which improvements should be done to avoid the expense of delayed maintenance and to keep tenants happy and attract new tenants.
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Many people do very well managing their properties themselves. My hat is off those people. For my experience level and circumstance having a property manager makes a lot of sense. This article is not meant to say that you must use a property manger, but to show the advantages and let you judge.