So this is a bit of a follow-up to my previous post about steps you should take when you’re considering renting your house out. At this point you’ve done your homework. You know what amount you can charge in rent. You have added up your monthly expenses, which includes your maintenance and vacancy reserves. You have selected an insurance policy that is designed for landlords; which includes plenty of liability insurance. Oh, and your policy covers vandalism by tenants and your monthly rent if your tenants have to move because the house is uninhabitable due to a covered claim. Good job.
Now the big question; what about the management company? For me, management companies are a love-hate thing. There are good ones, and there are companies that will rip your off every chance they get. It’s unfortunate, but those nasty ones exist. This is why I stress doing your homework. If you’re still on the fence about using a management company, keep doing your research. Keep calling around to whoever is available. Call real estate companies and ask them who they recommend. Do a Google search. When you talk to them, ask for references. Drive by properties they manage and look at their condition. Are they kept up? Compare costs and fees. Don’t skip this part!
Maybe you’re on the fence about using a management company because of the costs. (Some charge 11% or more plus various fees!) Perhaps you’re alright with handling the day-to-day operations but don’t want to deal with finding new tenants or the 1 a.m. clogged toilet calls. There are management companies for that too! Certain companies offer a-la-carte management services. You can have them handle advertising and finding/leasing to new tenants and handle the late night emergency calls. Don’t be afraid to ask.
With an “essentials” only types of management plan you will be paying less as well. Most full-service management companies will charge you around 10% of the monthly gross rental income to manage your property. When the management company is only handling emergency calls, they may only charge 5%. Finding new tenants might be a fixed, onetime fee.
Make sure they are licensed. Here in Nevada, in order to manage properties for someone else, the manager must hold a real estate license and have a property managers permit. This is important. It gives you and your tenant’s added protection. Don’t use them if they’re not licensed! It’s not worth the risk and chances are its illegal.
Another important thing to consider is statements. Does the property management company offer monthly and annual statements? Do the upload them in PDF format to a website for you to manage and download? If not, I would find out if they could. Good documentation is important and you don’t want to spend all of your time running the numbers of your rental house. You’re paying the management company; make sure they do it for you!
Finally, how well do they communicate? Are they hard to get a hold of? Are they friendly on the phone? Do they answer your emails promptly? It may not be a big deal now, but if something happens to you house the last thing you want is to have your emails ignored. Trust me on this one.
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