Do you own your own property, and are thinking about renting it out. Rental property is a good investment, its steady income. But do you really have what it takes to be a good property manager? Its no secret, property management is hard work! Before you step foot out the door on this issue lets discuss a few things that might aide you on the way.
1. Contracts
Without a contract you have no legal understanding or agreement with the tenant. You will need to know how to draw up a contract in a matter that covers you in all cases. Everything needs to be spelled out in black and white, with no grey area. Without the proper knowledge how to do this, you might find yourself in a tight bind later down the road.
2. Rent Collection
This can be a hassle, especially when you are dealing with the tenant directly. When you take that approach, you are on a personal level with the tenant. Rules and regulations are more difficult to establish. When you are on a personal level with the tenant, then basic rules can be bent, and probably will be. The next thing you know the tenant is behind 2 months rent, and cash flow for that property is dead.
Of coarse this does not apply to every situation. Some property mangers truly know what they are doing, and establish the relationship with the tenants as strictly business; which is the way it should be.
3. Rental Rates
Do you know the current market for rental properties in the area of your investment? How many bed rooms does it have, what is the square footage, what is the house’s design, how big is the lot, what are the accommodations? With out knowing exactly what the current market is for similar properties, you will not know what a fair price for rent is. You could either end up placing the rent to high, ensuring that your investment stays empty, and you stay without cash flow, or you could end up placing the rent to low, giving yourself a disadvantage.
4. Housing Regulations and Property Law
When actually stepping into the shoes of a property manger, it’s not as easy as just sticking out a “For Rent” sign in front. Laws and regulations need to be considered and dealt with. Lawsuits can happen when these regulations are not applied. There are local, state, and federal laws that will need to be taken into consideration. Without this information you are doomed to failure. You will need to do your research, and make sure that you are up to date with all laws.
5. Marketing and Advertising
Will you be able to advertise your property to prospective tenants with just a “For Rent” sign in front? Do you have the marketing capabilities to show the property to a wide selection of people looking to rent? This is another mishap for most new property managers. They post a sign in front and wonder why it is still unoccupied 3 months later. You will need to expand your exposure if you truly want to get tenants.
6. Inspections
Without proper and regular inspections, a small problem that would take $30 to fix could end up turning into a disaster costing $10,000. Inspections need to be done almost monthly to make sure that everything in the house is working and is undamaged. In order to do a proper inspection you will have to know everything about everything when it comes to your property. You will need to know a little plumbing, electrical work, insulation, appliances, foundation, roof repair and Air conditioning and heating. Without the proper knowledge of these problems, you will most likely have to reach deep in your pockets to fix an out of hand situation.
7. Tenant Selection
So you have somebody call in and they would like to rent your property? What do you know about them? What is their credit, criminal background, and means of income? To acquire all of this information will be time consuming and can turn out to be quite expensive. What means to you have at your disposal to get this information about the prospective tenant. Are you going to let a complete stranger that you know nothing about occupy the property just because they have come up with the 1st months rent? Most desperate property mangers that have had their property sitting there doing nothing but collecting dust, will make this jump and let anybody move into the property who comes up with the 1st months rent. (This is understandable to an extent) But without proper background checks and credit reports, you will have no idea who that person is and if they will even be able to pay next months rent.
It’s always good to be well informed who you have living in your investment.
8. Eviction Proceedings
Even though it’s something no property manger is looking forward to, there come a time when you will have to evict a tenant. This in itself is a stressful process. You cannot simply knock on the door and tell the tenant to leave. You actually have to take legal action, and prove that funds where not paid as agreed via contract.
9. Documentation
When being a property manager, you will have to make sure that you keep record of everything that you do, that the tenants do, and the transactions between the two. Careful filing is necessary to keep your head above water. You will need to document and make a copy of:
Each payment: Money orders and checks are usually the best for this because there is something to reference to. Money orders have a serial number, and checks have a number as well, so all of this information can be verified. If the tenant pays in cash, then there is no actual proof that they did pay.
The contract: If there is an eviction proceeding, then the judge will need proof of the terms that where agreed on by both parties. With out proper documentation your case will most likely be thrown out.
Work Order Requests: When something happens to the property that needs to be fixed, you will need to know rather it is your fault, or the tenants fault. Based on this determines who it is responsible financially for this repair. You will find yourself in a heap of trouble if there is a problem that places the tenants in physical danger, and you did nothing about it. Keeping proper documentation of every repair on the property while it was occupied by the tenants will help you in the long run. Always document what the problem was, who was responsible, what was done to fix it, how much it cost, and have the tenant sign it.
10. All Of Your Time
You need to understand that being a property manger is usually an all day job. Will you be willing to devote the majority of your time making sure that everything is running smoothly and according to plan? This can be quite a hassle for the inexperienced; and even for the experienced it can be overwhelming. You will need to be sure with yourself that you are ready for all of this devotion and time to this investment.
If you feel that you are not up to the task, then a property management service is most likely going to be your best bet. Let them do all the work while you watch the money roll in. For more information on this subject please see Killeen Property Management
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