A competent Property Management Company can add significant value to your Investment, which is why many seasoned real estate investors will tell you that a good management company is worth their weight in gold. In this Video, I’m going to share a few ways that a good property management company earns their keep.
#1) Providing Higher Quality Tenants
Think of tenant screening as the moat and drawbridge around your castle. It is certainly possible to get a bad tenant out of your home once they’re in, but it’s a real hassle and you are way better off never accepting them in the first place. A thorough screening process results in reliable tenants that: Pay on time, Rent longer, Put less wear and tear on the unit, and Generally cause less problems.
An experienced property management company has seen plenty of applications and knows how to quickly dig for the real facts about prospects and analyze that information for warning signs. By allowing a management company to handle the screening, you will also be shielding yourself from rental scams directed at private owners, and discrimination lawsuits resulting from an inconsistent screening process. This kind of experience takes time, and insomuch as it means avoiding bad tenants, scams, and lawsuits, it’s arguably one of the most significant benefits a property management company will provide.
#2) Fewer Costly and Time Consuming Legal Problems
Veteran landlords know it only takes one troublesome tenant to cause significant legal and financial headaches. A good property manager is armed with the knowledge of the latest landlord-tenant laws and will ensure that you are not leaving yourself vulnerable to a potential lawsuit. Each state and municipality have their own laws that cover a number of areas including but not limited to:
- Tenant screening
- Safety and property conditions
- Lease addendums
- Terminating leases
- Handling security deposits
- & Rent collection
The amount saved from avoiding a single lawsuit can more than pay for property management fees, and spare you time and anguish as well.
#3) Shorter Vacancy Cycles
A property management company will help you perform critical tasks that affect how long it takes to fill your vacancies:
- One of these tasks is overseeing Improvements and preparing the property for rent – dealing with this month in and month out, a good property manager will have the experience to know exactly which improvements and upgrades will give you the best return on your investment.
- Another crucial task for cutting down on vacancy times is determining the best rent rate – If you price too high you could get stuck waiting, and if you price too low you could end up losing money every month that the tenant stays in the apartment. Determining the best price requires knowledge of the local market, data on recently rented comparables, and access to rental pricing tools.
#4) Better Tenant Retention
While it’s easy to see the effects of lost rent, there are other equally serious problems with a high tenant turnover rate. The turnover process involves a thorough cleaning, changing the locks, painting the walls and possibly new carpet or small repairs, not to mention all the effort associated with marketing, showing , screening and settling in a new tenant. This is a time-consuming and expensive process that can often be averted by keeping tenants happy and well cared for. A good property management company will have a time-tested tenant retention policy that ensures happy tenants with lengthy stays in your properties. These kinds of programs require a consistent, systematic approach, which is where a good property management company will shine.
#5) A Tighter Rent Collection Process
The way you handle rent collection and late payments can be the difference between success and failure as a landlord. Collecting rent on time every month is the only way to maintain consistent cash-flow, and your tenants need to understand this is not negotiable. By hiring a property manager, you put a buffer between yourself and the tenant, and allow them to be the bad guy who has to listen to excuses, chase down rent, and when necessary, evict the person living in your property.
If you let them, your tenants will walk all over you. They need to understand that they will be held accountable for following every part of the lease or else they’ll deal with the consequences. Property managers have an advantage because tenants realize that they, unlike the owner, are only doing their job and are obligated to enforce the lease terms. Many property managers will tell you that it is considerably easier to manage other people’s units rather than their own for this reason.
Regarding evictions, there are strict laws concerning the eviction process, and doing it wrong, or trying to evict a “professional tenant” can be a MAJOR fiasco. A good property management firm knows the law and has a good process for obtaining the best possible outcome given the circumstances. Never having to handle another eviction can be a compelling reason to consider hiring a property management company.
#6) Assistance with Taxes
A property management company can help you understand which deductions you can claim, as well as organize the necessary forms and documentation to make those claims. Additionally, the property management fees themselves are also tax deductible.
#7) Lower Maintenance and Repair Costs
Good maintenance and repairs keep tenants happy and preserve the value of your investment which make them a very important part of land-lording. By hiring a management company you gain access to both their maintenance staff, as well as their network of licensed and insured contractors who have already been vetted for good pricing and quality work.
This can translate into significant savings compared to going through Facebook posts and hiring the first name you see. Not only is the management company able to get volume discounts on the work, they also know the contractors and understand maintenance issues such that they are capable of intelligently supervising the work.
#8) Increase the Value of the Investment
Preventative maintenance is achieved through putting systems in place that catch and deal with maintenance and repair issues early on, before they grow into larger more costly problems. This requires a written maintenance check program, detailed maintenance documentation and regular maintenance visits.
The management firm can also offer you suggestions and feedback on upgrades and modifications, both how they will affect the rent you can charge, as well as their impact on maintenance and insurance.
#9) Personal benefits for Owners
Less stress, More freedom, and Freeing up more of your time – Avoid having to deal with middle of the night emergencies, chasing down rent, evicting people from your property, tenants who wreck your property, rental scams, lousy vendors, and piles of paperwork.
Also, With a PMC you’ll be able to Live and invest wherever you want without the constraint of needing to be near your properties. Additionally you can live and travel without the requirement of always being available in the event that your tenants have a need you have to tend to. Once you have found a good management company, it doesn’t matter if you live in the same state. Some landlords live in other countries and simply collect their check every month without ever seeing the property.
Time is money, and for many investors, their time can be more profitably spent in areas other than servicing their properties. When you focus on asset management you’re working ON your business, when you manage your own properties you work IN your business. Additionally you have more time to spend with family or friends doing things you enjoy.
A final thought
Of course, this is an ideal scenario. These results can only be expected if a management company is competent, trustworthy and a good fit for your property. A poor choice of a management company can produce many headaches of its own.