If you have purchased an investment property and are planning to rent it for commercial or residential purposes, you might want to consider a property manager. If you’re a first-time investor, you may not realize how time consuming effectively managing that property can be- you may become overwhelmed in no time at all. Even if you’re a veteran investor, you may think you have enough experience to forgo the expense and manage things on your own, only to find out you’re completely in over your head. Both scenarios are common, and a property manager can help you with operations of your property.
Think about the long-term commitment required of your property- management doesn’t stop with collecting rent. In fact, that alone can prove a headache you do not have the patience to deal with. A property manager can help you deal with the routine management and maintenance issues that will surface quite frequently, especially depending on the size and number of your investment property(s). Other aspects of the job that a property manager can help you with are the back end of operations- book-keeping, documentation, filing, forms, and portfolio management.
If it’s true that time is money, a property manager can be invaluable. Most likely, you know better than anyone just how true this statement is. The majority of investors has more than one investment opportunities going at the same time or are employing at a 9-5 job during the day. How in the world will you be able to be in two places at once? If this is the case, having a dedicated property manager that will free up your time to pursue your money-making opportunities is not only a benefit, but a necessity!
You should also consider the geographic location of your investment property compared to where you spend most of your time- a property manager may be more accessible than your schedule or location allows. Even if you live in the same city, your property may be on the complete opposite side of town than your office or home, requiring a minimum of a 1-2-hour commute round trip. On the other hand, you may have invested in a property in another city or state. In both situations, it’s practically impossible to effectively manage the property(s) in a long-distance capacity. A property manager can be available to the tenant(s) 24/7 and will have quicker access to resources for emergency maintenance situations.
When it comes to setting a monthly rental rate for your house, there is a basic equation to follow- you want to make the most money with the least amount of effort. Establishing the ideal rental amount without having vacancies is crucial to making a profit in this equation.
There are factors that will influence the rental price you are able to set for your house, and the most important of these is location. If your house is close to where people want to be (such as a college or university, major shopping area, or office park), or close to a major transportation venue (such as a subway, city bus, or train) you will have the best chance of collecting a higher rent. However, if there are many rental units in this same area, you must make sure your rental price is competitive. The opposite can also be true- if your home is in a less than ideal location, you may have to lower your rate to attract tenants.
Here are some basic steps for determining the optimal rent for your house:
Look at the local and regional classifieds for houses of similar square footage, number of bedrooms and bathrooms, yard space (if applicable), and features. This should give you a good idea of what other landlords are charging for rental houses. Using the same approach, check out various web sites dedicated to rental properties such as Craigslist, Yahoo groups, and Google groups.
If you feel comfortable doing so, ask your neighbors if they are renting their property and if so, how much they pay each month in rent.
Ask friends and family for their advice or experience in renting their houses. You can also contact a local real estate agent- they are usually willing to share advice and opinions if they have the time. Chances are you probably know someone that is a real estate agent- don’t be shy. Call and ask if you could get their professional opinion about renting your house and bounce rental rates off of them for suggestions.
If your house hasn’t been appraised for a long time, consider hiring an appraiser. He/she can give you an accurate value of your house in addition to checking on the rental rate of your neighborhood.
For a basic approach, place ads at your ideal rental rate, and lower the rate until you find a tenant.
Even after you have secured a tenant for your home, make sure to re-evaluate your rental rates every so often, such as when the tenant’s lease is up for renewal. Another thing to keep in mind is that the amount of money you rent your house for can impact your property value, which is especially evident if you decide to sell your house. Investors will not want to purchase a property that has a low rate of return.
Making the decision to enlist the help of a property manager in maintaining your business or commercial property is a great first step, but the actual hiring process can be intimidating to veteran investors and first-time owners alike. It’s important to hire a property manager that you feel comfortable with- and that includes aspects such as management style, industry experience, and cost.
The first thing you should do is determine exactly what you are expecting the property manager to do. It doesn’t matter if you have the jargon exactly right but be as specific as possible in regard to what tasks need to be performed and what the duties will be. You may choose to do this step before you even approach a management company about the position, or you may feel more comfortable using the company or potential property manager as a resource in specifying these duties. Some things you will want to consider include the process for securing tenants, collecting monthly rent payments, eviction (if necessary), tenant disputes, maintenance and repairs.
Research the potential management company or property manager to find out as much information about them as you can. Start with the company’s website, as well as using internet search engines to yield any newsworthy items. Feel free to ask friends or fellow investors about their experience with property managers and for recommendations and contacts. Come up with a list of questions to use when meeting with a potential property manager, which are a combination of general industry questions and requirements as well as items specific to your property and expectations.
There are going to be many items that will be important to consider when it comes to a property manager, some of which include: How much experience does he/she have in property management? What insurance, state licenses and credentials do the property manager have? Does he/she have experience in complying with housing regulations (such as the Americans with Disabilities Act)? Does he/she have proper qualifications and knowledge to handle booking and accounting information? What expenditures will be included in the property managers fee (such as advertisements for vacant properties)?
When it comes to the cost of employing a property manager, most fees are determined by a combination of property location, number of properties involved in management, and the services that will be performed on behalf of the manager. Some property managers charge a flat monthly rate, while others operate on a percentage of the property’s rent. Be sure that you are completely clear on the property managers cost structure, and that you and the property manager agree in advance on the financial treatment of any additional services.
Talk with a qualified attorney, as well as the property manager, to discuss safeguards that will protect you from misuse of funds and embezzlement. It’s important to sign a written agreement on all terms you have settled on with the property manager before any services take place. The paperwork should include the length of time that the property manager will be employed, including a date for renewal, as well as contingencies for a breach in contract.
Many real estate developers, investors, and owners of various commercial and residential properties do not have the required time or knowledge that is needed to manage these properties. In many situations, these people hire property management firms or property managers to take on these responsibilities. Because property management involves many aspects of maintenance, the background of property managers is quite varied- everything from financial duties to maintenance and operations. In most cases, property managers work their way up from lower positions within apartment buildings, office complexes, community associations, or property management firms. A large majority end up going into business for themselves, while the remainder feels more comfortable working underneath a larger firm or company.
While there is not a college-specific designation for property management, those who do have their bachelor’s or master’s degree(s) in business administration, finance, account, real estate and public administration end up having the most opportunity within the field. People with previous experience in real estate sales can also be excellent property managers thanks to their time spent showing apartments and offices to prospective clients.
Throughout a career in property management, there is ample opportunity for higher education through brief training programs, where they learn or improve skills and knowledge in areas such as maintenance of mechanical systems, influencing property values, risk management, human resources, real estate law, tenant relations, and many more. Many related associations offer programs to receive certifications and professional designations that can improve a property manger’s opportunity for advancement. While some states require property managers to obtain licenses, it is not uniform among all states. Historically, those managers that have either a bachelor’s degree in a related field, or a professional designation, have a better chance at being hired than someone that does not.
Regardless of a person’s qualifications, anyone going into property management needs to be able to communicate effectively with people and have solid speaking and writing skills as well as basic financial capabilities. Many investors and property owners look for qualities such as good negotiation skills, in-depth data analysis skills and creative financial strategies.
Over time, a property manager usually ends up specializing a particular category of property management- residential managers for apartments, condominiums or neighborhoods, commercial managers for business parks, office space, and retail complexes, as well property managers for retirement communities, homeowner associations, and many others. Taking it one step further, he/she may choose to focus on new property management by emphasizing various marketing strategies and advertising opportunities, or on older properties that are in need of repairs and renovations.
A rental property is a residential or commercial income-producing property often utilized as an investment by its owner. Rental properties provide the opportunity for an investor to diversify his portfolio, a property owner to earn a primary or secondary income, or even a solution for owners with a home that won’t sell.
Rental properties can include apartments, houses, condominiums, vacation properties, office spaces, retail suites any available, marketable space that can be utilized according to its zoned purposes. For example, as of 2007, approximately 30% of all housing units, or 36,862,873 units, were rented by their occupants in the United States.1 However, whether residential or commercial, rental properties take time and experience to run successfully.
Rental property management involves complex administrative, financial, operational and legal responsibilities. From marketing the property and showing the available space, to qualifying potential tenants, negotiating a lease and the eventual upkeep and maintenance of the space, property management can be a lot of work. Moreover, as the first point of contact for tenants, it is necessary in many cases to be available 24 hours a day, 7 days a week.
Many property owners are now opting to hire property managers or management teams to compensate for the time commitment and experience needed to keep a rental property earning its income in today’s market. Professional property managers make it their priority to lower operating costs while maximizing the occupancy and revenue generated by the property; this streamlining often more than justifies the monthly fees they charge.
Rental properties are a great way to earn extra income, capitalize on tax breaks or expand investment opportunities. With the broad selection of properties to choose from, there is a rental market for every type of space and therefore, numerous opportunities for property owners and investors.
With over 30% of all housing units in the country rented by their occupants1, it is no wonder that apartments are a staple of the rental housing industry. Indeed, approximately 19% of renters live in structures of 2-4 units, and 44% live in structures with five or more units2. With so many of people in these multifamily residences, it is easy to see how apartments for rent a major part of the housing market are.
When considering entering into the world of investment properties, an apartment building is one of the many choices available. An apartment, which has a most basic definition of a room or set of rooms fitted especially with housekeeping facilities and usually leased as a dwelling?3 can be as little as only two units, up to apartment complexes containing hundreds of units.
Owning and operating an apartment building takes a huge time-commitment and familiarity with a wide range of complex administrative, financial, operational and even legal tasks. From reading the market to determine fair market rents, to advertising an apartment for rent, negotiating the lease and providing the services and maintenance the building needs, running an apartment building successfully is a lot of hard work.
Often, apartment property owners will turn their full-time job into a passive income investment by hiring a property manager to handle the day to day tasks of the building. This ensures the building will be run smoothly and efficiently by a trained professional and leave the owner with a sizable income and none of the work.
It’s common to see? apartment for rent? signs in neighborhoods and cities across the county. As a third of the rental housing units in the nation4, they are a cost- and space-effective way to provide affordable housing for the growing population.
Across the country, houses for rent are utilized by their owners as a primary or secondary source of income, as a vacation property, or as an investment. For renters, rental houses provide easy and affordable housing options for those who are new to a city or neighborhood, can be utilized as vacation rentals, or are cost effective solutions for long term residents who don’t have the desire or means to own their own property.
Renting a house can also be a sustainable solution for a second home that is having difficulty selling in the current market; rather than lowering the price and possibly losing value, more and more homeowners are renting their second or previous houses to cover the mortgage and retain the equity.
Houses for rent can be found through real estate agents or property management companies, in advertisements online or in the paper, or even just by trolling the neighborhood looking for signs with posted vacancies. According to the U.S. Census Bureau, in Q3 2008, median asking rent rose by 8.45% to $719 from a year earlier and vacancies for rental houses rose slightly to 9.9%1. These indicators, coupled with the economic downturn, make renting versus owning a reality for millions of people across the country. Indeed, as of 2007, approximately 36,862,873 housing units were rented in the United States and of those, over 30% were detached or attached houses (single units).2
There are thousands and thousands of houses for rent across the country; whether for a short term or long-term lease or rental, as a primary residence or for a few days away, houses for rent are an excellent option for both owners and renters.
After making the decision to hire a professional property manager, it can seem like a daunting task to try and select one from the thousands available. Professional property management companies are as diverse and specialized as their managers and as such, it is important to know what to look for before hiring one.
Before you start looking for a company, first identify your needs and goals for the property. Would you like a large management company with multiple locations and resources? Or would you prefer a more boutique business with a personalized approach? Does your property require full property management services, or only partial? Do you need a manager who can live onsite? All of these questions will help you narrow what you are looking for, even before you send out your first inquiry.
Once you have selected a company, or a small number of candidates, keep the following criteria in mind:
Find out if they have any particular focuses within their company like residential properties, commercial suites, or portfolios and whether your property fits their niche.
Check how many years has the company been in business and how they are regarded in the
community; if possible, locate other property owners who employ them to ask about their service, or request a list of references. See if they are accredited by the Better Business Bureau, have won any awards or, conversely, if they have been cited for any bad business practices.
Observe their customer service and become familiar with their policies. Make sure they are open during regular business hours and find out how they respond in case of emergencies.
Request the qualifications of the manager who will be handling your property and note if they have any professional designations or accreditation.
Review the management contract carefully. If you are not comfortable doing this on your own, hire an attorney to advise you. Look out for unnecessary fees like maintenance markups or charges for services on vacant units.
Don’t be afraid to interview multiple companies. Handing over your investment is a big step, and you want to be completely comfortable with the company you employ.
Professional property management is a valuable asset to any investment property. With the help of professional services, it is possible to reap the maximum benefits of a real estate investment with little to no strain on your time or schedule.
Managing a home, whether to rent for the long or short term, is a thriving section of the real estate market. According to the National Multi Housing Council in 2008, there were approximately 37,469,000 renter occupied housing units which held roughly 88,558,000 residents; that’s 32% of all occupied units in the United States. Moreover, of those millions of renter-occupied units, nearly 12,011,000 or 32% are single family homes. Managing a rental home, or “residential property” is a popular way to take advantage of the real estate market whether as a primary or secondary income.
Home property management is easily as much responsibility as a full-time job. It is therefore important to be organized, thorough, and seek professional services when merited. Here is a basic outline of the necessary steps to renting and managing a home.
Upon deciding to rent a residential property, first check with local and state zoning laws to ensure it is legal to rent. Next, be sure the house is in good working condition: all appliances are updated, all construction is sound, and that the house is clean and presentable. As the house is being prepared to rent, take a look at all operating costs; set up a budget of all the costs associated with the property like the mortgage, utilities, maintenance, and estimated repairs. Once all costs have been added up, research the rental market in the area in which the property sits. It is essential to know both what current market rents are (so that the property is competitive with other nearby rental properties), and that they cover the operating costs of the property. After a rental amount has been decided, it is time to put the property on the market.
In order to generate interest in the property, it is necessary to market the property to prospective tenants and give tours of the location. For interested prospective tenants, issue a written application which asks the applicants to give basic information as well as credit and employment references. A background check to research credit and employment history is a standard stipulation of most rental agreements. Upon selecting a tenant, a rental agreement is signed by all parties which outlines the terms of the agreement including tenant (s), rental amount, deposit, term of lease, and the policies and rules of using the rented space. After a property has been rented, it is the responsibility of the landlord to collect rent, ensure the property is well maintained, and promptly perform or schedule any necessary repairs. Additional home rental management duties include ensuring the property has all forms of insurance, tax documents, and paperwork needed, and the property complies with all state and federal regulations.
Often, when managing the property becomes too complicated or time consuming, it is necessary to hire a property manager or management company. These professional managers generally charge about 10% of the monthly rent but handle all administrative, financial and legal duties regarding the rental of the property. Indeed, unless renting residential properties is your primary occupation, a professional property manager is often the best solution to renting out a home.
Home management for rental properties is a lucrative part of the real estate industry. Whether as a source of additional income or a career utilizing a real estate portfolio, home management is a flourishing business in today’s market.
A critical element of successful property management is compliance with laws and regulations set forth by your individual state as well as federal oversight. However, even having the most knowledgeable and experience property manager at your disposal, or being an experienced real estate investor yourself, doesn’t make you immune to problems. In certain situations, you may benefit from a lawyer’s assistance, whether it is for representation in a lawsuit or simple advice. Usually these situations have to do with general property management and the law.
You should be realistic that property management of your rental property could potentially involve evictions. No one likes to evict a tenant, but it might become unavoidable if the tenant’s inability to make timely payments or destruction of your property becomes a risk to your cash flow and investment. The eviction process is very detailed and can become very complicated, especially if issues such as bankruptcy are involved. Because most judges will favor the tenant, it is extremely important to educate yourself on the process, follow the specific steps, and keep detailed documentation. Although many landlords successful evict tenants without a lawyer’s assistance, but it is always better to at least talk with a lawyer in advance.
Even if you diligently comply with fair housing laws you could still be accused of illegal discrimination from a tenant who has been evicted or been turned down for renting. However, being accused and being sued are very different things, and you will probably want to consult a lawyer if it is the latter. Going to court can be extremely expensive, in addition to violation fees if you are found guilty. In addition, such charges could damage your professional reputation, or that of your investment firm. It is important to educate yourself on the statutes of illegal discrimination so that you do not unknowingly put yourself at risk.
Effective property management includes the maintenance of the property, which is being rented, and it is your responsibility to keep the property up to date with all repairs. If one of your tenants claims he/she was injured because of your property, it will be an extremely sensitive and delicate issue. Especially if you do not believe you are at fault for your tenant’s injury, it is best to bring in a lawyer that is not personally invested in the case.
Similarly, to the personal injury scenario mentioned above, it is also possible to be sued for property damage. Tenants can claim ineffective property management of the rental property which resulted in unrepaired utilities that in turn damaged a personal item. An example of this could be a leak in the plumbing which caused massive flooding throughout the apartment. Part of basic property management does include acquiring liability insurance, which would probably be at your disposal. Depending on how large of compensation your tenant is seeking, you may choose to just consult with a lawyer and handle the situation yourself.
As you can see, there are always going to be situations that require some knowledge of the law, and how it pertains to property management. It’s a good idea to learn what is the right of yourself as a landlord, in addition to the rights of your tenants.
