Tips for Selecting a Good Property Management Company for Your Rental.

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.

Please post questions below and consider subscribing to my blog.  Have something you would like to see?  Send me a message and let me know!

Advertisements

Considering becoming a Landlord? Do These Things BEFORE You Start Taking Tenant Apps.

Considering becoming a Landlord?  Do These Things BEFORE You Start Take Tenant Apps.

Alright, so you’re thinking of renting out your house but you’re not sure where to start.  The idea of fixing toilets at 1 am doesn’t sound appealing no matter how much rent you’re bringing in.  Dealing with crazy applicants doesn’t seem alluring either.  I get it.  The good news is that it doesn’t need to be that difficult.  In fact, you can be as hands on or hands off as you want.

First things first, when making the decision to rent your house you need to do some preliminary things first.  First, you need to understand that being a landlord is a big deal.  You are responsible for providing a safe, livable home for someone to live in.  Tenants have rights, and they vary from state to state.  It’s YOUR responsibility to know the laws.  This is one reason why a respectable, properly licensed, property management company can be your best friend.  They deal with this stuff daily and keep up with current laws and regulations.  Either way, you need to educate yourself and be proactive.

The next important consideration is the rent amount.  How much can you get a month for that pile of sticks?  Do your homework.  Look up what other homes are renting for in your area.  Websites like Hotpads and Rent-O-Meter can be helpful.  Compare things like square footage, bedroom number, bathroom number, age, condition, special amenities, etc.   Also, don’t be afraid to call property management companies and ask them.  After all, who will better than the people who rent houses full time in your area?

Consider your expenses!  How much will you be spending every month on the house?

  • Mortgage Payment (Principal, Interest, Taxes, Insurance)
  • Utilities:  Gas/electricity – Will you pay or will your tenants?
  • Garbage/Sewer – Will you pay or will your tenants?
  • Vacancy Rate (The mount of time each year, on average, your house will sit empty while you find tenants.  5% of your annual rental income (monthly rent x 12) is a good estimate, but your local market will determine this amount.  Consider whether home are renting quickly, or sitting empty for long periods of time)
  • Maintenance – How old is your home?  Are there a lot of repairs needed?  Is that hot water heater ready to go?  Put aside 3% of your monthly rent for maintenance costs.

The next thing to consider is whether the rent going to cover all those expenses?  Will there be anything left at the end of the month after the expenses are paid? (This could perhaps be the one thing that makes or breaks your decision to rent your house.)

Next, call your insurance company.  Let them know you will be rending your home out.  Most homeowners’ policies are for owner-occupied homes.  If you are going to have tenants, you may have to change your policy to a landlord’s type of policy.  Many insurance companies offer these kinds of policies.  Also consider adding (or upping) liability and medical payment coverage amounts.  Insurance is a huge layer of protection that you absolutely cannot do without.  Call around and get quotes.  Be diligent.

If you are considering using a property management company, then do your homework with them as well.  Not all property managers are created equal.  I’ll repeat that… they’re not all equal! Call around.  Ask about their fees; all of them.  What do they charge to rent your home?  What do they charge to advertise?  What is their monthly percentage of the rental income?  Most will range between 8% and 11% of the gross monthly income.  Feel the management companies out.  If they are hard to get a hold of, difficult to get information out of and charge a fee for everything under the sun, move on.

You want to gather this information BEFORE you rent your home.  Knowledge is your friend and setting up a solid foundation is paramount to being a successful landlord.  Please comment below or post any questions you may have.  I’m happy to help in any way I can.