Investing and Property Management

I use had lots of people over the years ask myself, in my opinion, what is the most important thing regarding investing in real estate? Everybody always assumes its price, location or time the market correctly. After over 1300 real estate transactions primarily to traders worldwide, I can say without a doubt that property management is the single most significant piece of the investing puzzle. Within real estate, you can make a mistake on cost, pick an iffy neighborhood, or even hire a bad contractor and still become profitable. Hire the wrong property supervisor and you can lose your shirt immediately! Don’t get me wrong, location, cost and rehab are huge aspects in real estate investing and are very important. With all the right property management company in position though you can make a mistake or experience a down turn in a market or neighborhood and still realize a good value for your dollar through positive cash flow. A good home manager protects your investment within the long-term.

Obviously, the next question is “how do I find a good property manager”? Listed here are several tips on picking a good administration company. This does not necessarily mean you; someone else will be managing your property.

Obtain a referral. Typically, when you invest, you can find people in your peer group or circle of influence that are investing in the same market you are or know of someone who is also investing in that marketplace. Ask them who they are using, who these people used to use, and why they will switched. Find out what they like regarding their management company but more importantly find out what they don’t like about them. The particular management company may do a great job of placing tenants but lack in the communication department; without conversation, you’re sunk! Access to your administration company is very important for the investor’s reassurance. There is nothing worse than leaving a note or sending a couple of emails and all you hear are crickets in the background. At first, you assume they are busy and will get to you soon. After a while, though, investors start wondering precisely why no one is responding and that’s whenever panic sets in. Did the renter leave? Did the management organization run off with my money? DO MY HOUSE BURN DOWN? Generally, none of the above is true but a good property manager will respond within twenty four hours of your inquiry.

Ask the administration company that you are considering doing business with intended for references. Ideally, I believe you want five to 10 references from previous clients as well as current clients which have been using the management company longer compared to 1 year. If they are not willing to give you any past clients, pass on all of them. When you get the references, CALL THEM. Ask them the same questions about what they like and don’t like.

Get a listing of policies and procedures from the administration company. You need to know how they handle marketing of the properties for tenants, late payments, evictions, maintenance calls, inspections, accounting, owner disbursements, etc . A good management company will have this information readily available.

Find out if the management company is usually licensed in the state you are purchasing. Most states require that the property manager is a licensed real estate broker and are held accountable to their condition real estate board. There are many “property managers” out there that are not, but took this opportunity to increase their income while investing is hot. Though they might be cheaper, DO NOT USE AN UNLICENSED ADMINISTRATION COMPANY! You will have no recourse in order to police them.

Find out what software program the management company uses. There are a few good property management software programs that are web-affiliated such as Buildium and PropertyWare that give the property owner a portal login so you can access your account via the web 24 hours a day. A good property management corporation will log all tenant phone calls, maintenance concerns, payments, late notices etc ., into the software program. This is beneficial to both parties as a majority of an investor’s questions or concerns can be addressed by signing into the software program and looking at the details at hand there. This eliminates lots of phone calls between the property manager and the owner. It also helps the owner to narrow down questions or concerns by handling specific information found in their portal.

The reason for investing is to get paid. You should know when the money comes in, where they have at, what your expenses are, and when you get your payments. Most management companies reconcile accounts 1 month in arrears. Rents collected in 30 days are disbursed the following month for your simple fact that not all expenses come in time to get an accurate accounting in order to disburse rent proceeds in the exact same month. Each management company is different but should be able to tell you to the day time when to expect payments on a monthly basis. Additionally you need to know when to expect the quarterly or annual accounting needed for your tax man. Again, a good software program makes this much easier for the management firm to keep track of and share with you.

To me, the fees that a management corporation charges are important but not as essential as the previous items in this listing. I have seen it over and over again exactly where somebody picks one management company over another based solely upon fees. 3-6 months later right after dealing with terrible tenants, bad data processing practices and more, the few 100 bucks they saved cost all of them literally thousands of dollars. Here’s more information regarding coxe check out the page.
Here is a brief run down on the fees you can expect to pay.

Monthly Management fee: usually 7-10% of collected rents depending on the market you are investing in. Higher rental amounts generally equate to lower monthly fee percentages and lower rents are increased percentages. A few companies will have a set monthly fee of somewhere between $50-$100 dollars per month.

Leasing Fee: generally 50-100% of the 1st month’s lease; again depending on average rent amounts. Most property management companies employ commissioned leasing agents that are generally paid a percentage of this fee as much as 50%.

Set up Fee: this is charged for the time it takes to set up the new accounts, generate bank accounts etc ., usually around $100 dollars.

Vacancy Fee: some management companies will charge a flat fee per month on a vacant unit. Their reasoning is that an empty unit still requires someone to monitor that property usually on a 1-2 week cycle to verify that this property is secure, yard is in great order, rental signs are in place and visible etc . I have found that will only about 50% of property management companies charge for this service. Regrettably, I have also found that half of those who don’t charge for this are not checking the properties periodically and occasionally a small issue turns into a bigger more expensive issue down the road.

Advertising Fees: most good property managers do not charge extra for the marketing of the vacant units to potential renters because they are paid when the properties turn out to be occupied and the advertising expense can be covered by the leasing fee. Some property managers will give you the option of additional paid advertising if you have a property that is tougher to rent than usual.

Upkeep Fees: most management companies use maintenance as a profit center; more than others! Due to the volume that some management companies do they can procure vendors at a much lower rate than what you could get on your own thereby allowing them to make a profit on certain servicing items. Yard mowings are a great sort of this. A large management company might be mowing 100 yards a season and can negotiate a volume deal at $15-$20 per yard for them. They, in return, “sell” this support to you at the market rate of $25-$30 per mowing. It is still a good deal for you as you are hands away from and would expect to pay the same price if you were only getting to have 1-2 yards mowed. On the other hand, some management companies go to extra on other maintenance issues such as repairs after a tenant has moved out. Typically, the security deposit ought to cover most items necessary to create a property re-rentable unless a bad tenant was placed and they have trashed your home. Some management companies use this as a way to increase their profits by over charging for these repairs. I recommend having a third party inspect and/or bid any repairs that seem excessive to you.