Basics of Property Management
Many buy and hold real estate investors decide early if managing their own rental properties is worth the time and effort. While there are pros and cons to self management, ultimately it comes down to preference, free time and personal BS capacity. Some owners have told me they really enjoy the challenges, headaches and hassles of remaining hands on and saving a few dollars per month. Increasingly, others gladly pay a small percentage of the rental income to let a professional manage the property and potential problems. This is especially true for investors that own property outside of their immediate geographic area.
Serving Ohio & Northern Kentucky from offices in Cincinnati, Columbus, Dayton and Louisville, Real Property Management is often imitated but never duplicated. For 7+ years Real Property Management has been the standard for licensed professional management and the first choice of both homeowners and investors.
For owners that opt to outsource the management to a property management company, knowing what questions to ask is a vital part of making a solid hiring decision. In almost any market, you’ll find numerous property managers of all shapes, sizes and colors. For those less familiar with how property management companies work, here is a basic checklist to help you get started.
Leasing fees and tenant placement/selection:
How much does the property management company charge (including advertising, showings, background checks, lease preparation etc.) to place a new tenant in the property? I’ve found that half to one full months rent is fairly standard. Be sure to find out how the property manager advertises for potential tenants. A property manager with low leasing fees may not spend as much on advertising or may rely on potential tenants to “show” themselves the property via a lock-box system. Saving a few dollars on leasing fees may actually cost you more in vacancy time if it takes longer to find a tenant or if damage occurs due to an unsecured property. It’s also important to understand how the property manager screens applicants. At a minimum your property manager should verify income and have a stated income approach, obtain a credit report, including a criminal background check and finally verify references to understand rental history.
Management fee: All property managers charge a certain monthly price (percentage or flat) for managing the property. This is typically between 8%-12% of the gross rent. It’s important to find out if the fee is automatic, regardless of vacancy or if the fee is charged only when rent is collected. It’s also important to understand what services are included with the management fee.
Some of the services below may actually be included as part of the management fee OR may be charged independently, make sure you ask before proceeding.
Renewal fees: Charged to handle the paperwork associated with renewing the lease for another year (or more). Renewal fees can range anywhere from half a months rent to a full month. While this may seem like an unnecessary fee, as an owner you will save thousands of dollars in vacancy and turn over expenses by keeping existing tenants for multiple years.
Eviction Fees: These are fees associated with filing and proceeding with an eviction in court. Some property managers simply pass on the actual filing costs, but manage the eviction as part of the management services charging by the hour. Others charge a flat rate on an as needed basis. Evictions can turn into a hot mess, quickly. Make sure the property manager has good legal counsel and knows the law. Real Property Management offers *FREE evictions to our clients, the only manager in the region to do so.
Maintenance reserve: Most property managers require owners to fund a reserve account for future maintenance expenses, typically ranging between $250-$1000.
Maintenance repairs: Maintenance is one of the most important aspects to property management. You may find a property manager that beats the competition in almost every other category, but if they don’t have a good, affordable solution for repair and turn over expenses, you may still end up spending more money. Most property managers simply outsource the maintenance to third party contractors that may charge higher handyman rates, while others have in house maintenance, full time employees that keep repair and turn overs very affordable, Real Property Management keeps all of our maintenance work in house with full time professional employees. It’s important to know and understand this distinction when interviewing property management companies.
While different markets are going to have different nuances associated with how property management is performed, understanding the basics (above) is important in selecting the correct property management company for your needs.
Serving Ohio & Northern Kentucky from offices in Cincinnati, Columbus, Dayton and Louisville. Real Property Management is the regions only dedicated, full service property management company. Offering management, leasing services and evictions, what can Real Property Management do for you?