When is Property Management worth the Investment?
If you’re already a landlord managing your own rental property, you are probably already aware of the headaches that can be caused by property management. If you are an aspiring or soon-to-be landlord, be warned that property management can be an unpleasant experience at times.
While it is true that there are worst-case scenarios out there of tenants squatting, refusing to pay rent, destroying a property, sub-letting to strangers without owner approval etc., these are honestly rare and few and far between. That is not to say that this won’t happen to you or your property, but just that it is very statistically unlikely. The first way to improve your chances of preventing this type of behavior in a tenant is to have a great screening system in place. This is where a Property Management company can first come in useful. A professional Management company will have their screening process streamlined to be supportive of finding you the very best tenant in terms of income, credit score, landlord/employment references, and tenant history.
Inserting some distance between yourself and the tenant(s).
Property managers are built to tackle the dreary aspects of real estate leasing and administration. It’s basically like paying someone else to have your headaches. Among other things, property management firms have ready access to maintenance contractors, familiarity with local renters law, experience with the tenant application process, and financial reporting software. Additionally, property managers shield landlords from tenants, making it wonderfully easy to refuse a request for rent relief. The landlord simply says “no,” while the property manager is hired to be the bad guy.
What do property manger’s do?
The services performed by a property manager typically include:
- Managing the tenant application process with a thorough screening process
- Holding security deposit funds in escrows and ensuring compliance with local law
- Renewing, ending leases, re-renting vacant properties, managing evictions.
- Collecting and accounting for rent, including the assessment of late fees
- Addressing routine maintenance problems
- Periodically inspecting the property, including at the termination of the tenancy
- Cleaning and re-keying property at the conclusion of the lease
- Financial Bookkeeping, Providing Tax Reporting Documents
- Liaising with tenants over disputes and issues
- Overseeing Property Renovations
How much is a property manager?
The cost of hiring a property manager is typically a percentage of the monthly rent, plus various fees for incidental services. There may also be a vacancy fee (in case the apartment is not generating any income), a lease renewal fee or even an initiation fee. Typically, the base fee ranges from 8% to 12% of the monthly revenue (the cost is tax deductible.) At Lofty however, we charge a flat rate fee dependent on the number of units in a building so that owners are not limited by their rental value.
Landlords who live in a different city or even country to the property they rent to tenants, travel regularly, own multiple properties, or simply lack free time are all ideal candidates for property management assistance. If you’re a landlord, and you’re considering hiring a property manager, be sure to find out the following information while doing your research, to find out if they are the company for you:
- What makes you different from other management companies?
- Who will be assigned to manage my property? (It’s nice to meet/speak to the person you’ll soon be spending considerable time with)
- How responsive will you be? Can you be reached 24/7/365?
- What is your proposed fee structure? What functions are included within the fee and what functions entail additional expense?
- What types of relationships do you have with vendors? Do you have preferred contractors? If so, in what areas? Do you have any financial arrangement or understanding with any such contractors that is not disclosed to your clients?
- What software tools do you use and are they user friendly?
- Are you and your employees properly licensed under Illinois law?
At the end of the day, hiring a Property Management company is a personal/business decision that is intended to make life easier for the property owner. When problems outweigh the positives of owning property, or you want to proactively prevent this from happening, Property Management will be worth the investment. If you need help managing your property, there are plenty of high quality companies out there, like Lofty, to help you manage your investment to ensure you get the best returns out of it!