Property Management – Sherman Oaks

If a property owner has a growing number of properties, its inevitable that a day will come when they ask, Should I outsource the day-to-day operations of my business to a property management company?

Deciding when to outsource and which company to hire is one of the most important business decisions a property owner can make. Choose wisely, and an owner will be rewarded with the peace of mind that comes with responsible property management. Choose incorrectly, and an owner will be working harder after hiring a property management company.

Whether an owner has one or one hundred properties, its important to consider whether or not they are prepared to hire a property management company. Handing over the management of property is a major decision. Before making that choice, owners will want to make sure they understand the following:

• The implications of self-owned management;
• The pros of outsourcing management to a third party;
• The corresponding cons; and,
• The alternatives to outsourcing.

Lets take a look at each consideration in detail.

Whats Involved in Effective Owner Management?
Owning and managing property require two different skill sets. Unfortunately, many property owners purchase property not knowing the full responsibility that management entails. Before a person jumps into purchasing rental properties, they will need to understand what is going to be required of them.

• Knowledge of landlord/tenant law. Familiarity with the state laws that govern the landlord/tenant relationship is a must for any property owner. If owners arent comfortable with their level of knowledge or experience in this area, they could be leaving themselves open to lawsuits and fines. For example, the federal Lead-Based Paint Hazard Reduction Act requires the disclosure of lead-based paint and hazards before the lease of most units built before 1978. Owners can face a $10,000 fine if they fail to do so. Airtight contracts and leases are also extremely important for protecting owners from lawsuits and recouping lost costs.
• Time and expense spent visiting properties. Rental properties are going to require regular visits to check on the condition of the property, perform emergency maintenance or show vacant units. If owners properties are far away from home or each other, they will spend a lot of time in transit. If owners attempt to self-manage too many properties, they run the risk of spending all their time performing routine visits instead of managing the company.
• Responsibility for repairs and maintenance. A landlord needs to have a diverse range of skills to perform maintenance themselves. At the very least, a landlord needs to have basic plumbing, electrical, carpentry and landscaping skills to properly maintain a property. If they are not well-versed in these areas, they’ll be spending revenue on repair services. While family members and friends can be labor outlets, relying on such help comes with inherent risks.
• Effective tenant screening. An owner will quickly need to become good at weeding out problem tenants during the screening process. If an owner only has a few units and has to replace a problem tenant a few times a year, their profit is likely going to drop dramatically. Credit checks, employment verification and collecting references are key in this process.
• Ability to deal with difficult tenants. Even if landlords screen tenants thoroughly, they will inevitably interact with unhappy or unruly tenants. Whether the tenant is simply unhappy or in violation of rules and facing eviction, a landlord needs to stand firm in the face of adversity and enforce the rules of the lease. If they are not able to confront people, a property owner risks being taken advantage of by tenants. In the most extreme cases, landlords may even need to rely on lawyers or courts to settle issues and pay hefty fees.
• Good property management software. If an owner is managing a decent number of units, they will want to invest in software for managing rental properties. Investing in a robust property management system has the ability to increase efficiency by:

o Accepting rental payments online;

o Performing credit and criminal background checks;

o Decreasing advertising costs by automatically posting units to popular listing sites;

o Automatically reminding tenants to pay their rent;

o Eliminating poor record keeping by automating certain processes; and

o Creating letters and tax forms automatically from pre-existing data.

A solid property management system can be a good tool to have, especially for a novice property owner.

If a property owner decides that they are not able to properly manage their property, its important to understand what side effects they should expect. In general, a well-run property management company will yield these results for owners:

• Increased revenue. A property management company is more experienced at advertising and usually has access to larger pool of potential renters, meaning units typically stay vacant for shorter periods of time. A property management company also has a better understanding of the local rental rates, putting them in a position to maximize the amount you can charge per property.
• More free time. Naturally, once an owner hands over the responsibility of managing its properties to a company, they are going to have extra time on their hands. This is perhaps the most obvious and enjoyable benefit of hiring outside help. The property management company becomes the owners one point of contact for all things related to their property, eliminating the need to juggle a number of different vendors and services. A property owner can also use this extra time to expand their portfolio and focus on growing the business.
• Reduced direct costs. A property management company is be able to perform preventative maintenance, reducing the direct costs to the property owner. Furthermore, a management company will likely have extensive knowledge of local landlord/tenant laws, helping shield the owner from costly lawsuits. One lawsuit avoided may pay for years of property management fees. Finally, the management company likely has more experience screening tenants. This reduces vacancy cycles and damages from poorly screened tenants.