There are things you should know, as an investor,about property management companies. Property management companies that know what they are doing are an investor’s best friend.
Let’s start with the myth that property management companies cost you money and cut into your profit, this is not true by any means. A good property management company will save you a quite a bit of money put more cash flow in your pocket and will cut down on vacancy rates.
Let me explain why… let’s say you need a repair. You would most likely use the Yellow Pages to find a Contractor for the type of repair or work you need,or you might already know or have someone that will do the work for you.They are going to be more expensive than the property management company. For Example a property management company normally will use the same contractors over & over again for many years. With many years of working with them the management company builds a relationship and then The management company gets volume discounts on the repairs from there contractors. This is why the repairs can be done cheaper for you in most cases.
Unless you do the repair or work yourself, you cannot get it done cheaper than the management company. This adds up to be a tremendous savings.
Lets talk about Evictions, I am sure that at one point or another you have had to evict a tenant, and then have had to find another tenant to occupy your property. You know that these are not easy tasks. Property management companies are very experienced at doing background checks and finding quality tenants,thus saving you money in lost rent and lawyer fees. Lets say you need to do an Eviction. A reputable property management company will have very good working relationships with Lawyers, Courts and Marshalls, which means we can get the job done much faster than you thus cutting back on down time. The same goes for repairs. Property management companies get them done much faster,again saving you down time.
Have you ever had a violations List from the Township your property is located in? If you have,you know this can be a real nightmare.
Have you ever gotten a Violation from a utility company? Section8 (The State)? Mercer County Board of Social Services or any other type of municipality?
If you have, then you know that these can be nightmares as well. The property management company has the experience and knowledge of all the ins and outs that apply to those Townships and agencies. They will also have a good working relationship with those agencies,whether it be City Hall, the State, the County or the Utility Company. This will save you a lot of time and money.
Most investors are limited to their resources when finding tenants, where as property management companies have dozens of resources to find people.I could write a book on why it is so important to have a good property management company handle your investment properties,even the biggest investors in the world use them.
It is a known fact that almost all the millionaires in this country started with some type of Real Estate investment.
Without writing the book, listed below are some of the items that your property management company can save you money on:
Repairs | Evictions | Lawyers | Homeowners Insurance | Architects | Exterminators | Plumbers | Electricians | Roofers | Siding | Carpet | Clean Outs | Snow Removal | Landscaping |
Background Checks | Violation Reductions | Materials & Labor | …and much more…
Let’s talk about how a property management company should handle you, your money, your property and your tenant. Again I could go on forever so I will keep it simple.
You: You are the boss at all times and the property management company should follow your direction on all issues with the property.
Your Money: Your money is your money and you should be sent 100% of your rent in your name, your company name or however you deposit the rent into your account.Your rent money should never be made out to the property management company and the property management company should never accept cash. You should be billed for all
services the property management company provides, with your prior approval, this way there are no surprises.The management company should never take any rent money and apply it toward any bills, even if the owner of the property should ask. This is bad business.Do not let a property management company convince you that it is much easier to pay your bills from the rent, this can be ploy.You must maintain 100% control of your
money! Since I am discussing of residential property management and not Commercial, typically, investors own between one and eight properties.The reason I bring this to your attention is because one of the things you also need to do to have 100% control of your money is: pay your own mortgage, your own Homeowners Insurance,your own utilities and any legal fees or any other payments that are needed to be made on your property. You should do all this yourself. Do not let the property management company convince you to let them pay your overhead,a reputable property management company will only charge 6% of the Rent roll to manage your property.
Your Property: A good property manager will have had many years of personal experience,will know the ins and outs of construction and understand the laws in the state you own your property, as well as own several investment properties himself.Your property should be handled the way the property manager would handle his own property and there should be no conflict of interest. The property management company should not mix its real estate company and property management company. This subject can go into great depths…I will leave it at that for now.
Tenants: Your tenant should be treated with respect by your property management company, listen to their needs and try to take care of them within reason, treat them the way you want to be treated. A happy tenant will remain a tenant for years to come,making you a happy landlord.when the management company is good to the tenant,when it is time for them to move. The tenant will stick with the management company.The tenant will want the property management company to find a new location for them to live in. This means that that the property management company already knows the history of the tenant and that tenant could end up in your property.
