No matter what brings you to the business of renting out an investment property, you have one choice to make immediately: do you want to do your own property management work?
To Self-Manage or Not to Self-Manage:
If you self-manage your property, there are some upsides. You are able to personally interview your tenants, and you will probably keep a closer eye on the property condition than the average property manager. Additionally, you won’t have to pay the property management fee each month!
If you elect to hire a property management firm, there are also upsides. Your property manager takes on the responsibility of marketing your properties and screening your tenants. You also gain some flexibility, as you won’t have to be on call for maintenance issues that might come up in the middle of the night. However, the management firm will charge a fee. Depending on where you are in the country, that could come out to 3% to 10% of the base rent per month.
The Fine Print: What to Get in Writing
Your gut instinct may tell you that you’re going to have to manage the property yourself, at least to start, because of cash flow issues. You may be correct. However, I would suggest that you interview property managers at the same time you are self-listing the property on venues like Craigslist, Back page and Zillow. You have nothing to lose, and your potential gains could be significant: property management firms generally capture a higher base rent than you will be able to when recruiting tenants on your own.
When you’re interviewing property management companies, here are a few items to consider.
- The person your interview may not be the person your work with the most.
Under many circumstances, the property manager is fairly hands-off and assistants, lease administrators and accountants take care of the day to day work. However, if you’re talking with a small management firm, you may be interviewing the only person who works there! Either way makes sure that you are not only satisfied with the communication style of the representative, but be willing to ask who, specifically, will be performing operating functions on your property. For instance, will an assistant be responsible for quarterly checks of condition? Will a lease administrator or collections rep be contacting your tenants for rent payments? You want to meet the whole team, early in the process. - Get it in writing.
No matter how good your interview is, you need to get your agreement in writing. You will want to check to make sure that your property management firm is doing what they promised, and also that they are getting paid what they should. Don’t be afraid to make modifications to the property management agreement if you are not comfortable with anything, but do be sure that the changes are countersigned by the management firm. - Ask the tactical questions.
Find out how the management firm handles evictions, pre-leasing and transitioning from leasing to sales. You don’t know that any of these things will become pertinent, but you need to know the roadmap in case they do. - Speak your mind.
Make sure the property management company understands your expectations. Little things, like a preference for email instead of a phone call, can help you and your manager start of synchronized and build from that foundation.
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