How a Property Manager Can Help You
Are you an accidental landlord? here are 3 Ways Hiring a Property Manager Can help you. This is something that happens more often than you would think. Usually, when someone moves into a new home or inherits property and decides that selling the property won’t bring in enough money to satisfy the old mortgage, they will lease the property instead. However, a lot of people don’t know just how difficult it is to manage a property. There is a lot more involved than simply collecting a rent check every month.
Owning a commercial income-producing property requires much more responsibility than just buying or selling it. Landlord/tenant laws can vary greatly between states, cities and even counties. Whether you are an experienced investor who wants to focus on growing your portfolio or an accidental landlord who needs help with the day-to-day tasks, hiring a commercial property manager can save you both time and money.
1. Lowering Your Risk
Every type of business has its own challenges and risks. Property management, however, is especially risky because it is always changing. Most property owners do not have the time necessary to contemplate risk management. This is where hiring a property management company can be a huge asset. There are several ways they can help reduce your risk of a lawsuit.
Evicting tenants is a serious issue that needs to be handled carefully to avoid a lawsuit. This is one of the most difficult parts of being a landlord and one of the main reasons why people hire third-party property managers in the first place.
Lease agreements exist to protect both the landlord and the tenant. This means that both parties’ rights need to be considered during the eviction process and you’ll need to work within the legal parameters to successfully evict a tenant.
There are several different types of evictions and each one has a different procedure that needs to be followed. For example, evicting a tenant who has made unapproved modifications to the properties will follow a different procedure than evicting a tenant who is conducting illegal activity. A good property management company is well-versed in the law and will take care of lease enforcement and handle evictions in a timely and precise manner.
Get the Right Insurance
Lawsuits are common in this industry and failure to have the right insurance in place can put your business at risk. Part of a property manager’s job is to prevent the property and its owner from being exposed to risk. A good management company will review the property’s insurance policy when they come on board and at least once a year afterward. They should also have a good relationship with a reputable insurance broker who will also review your insurance policy.
While the insurance needs of a property investor are similar to that of many other businesses, there are also many distinctions. For example, when property owners often take out separate policies for each of their different properties. The problem is that multiple policies mean multiple deductibles, even if the properties are all damaged by the same event. Not only can this be overwhelming, but it can also be expensive as well. A good management company can help consolidate your different policies into one master policy while also negotiating rate concessions that will save you money.
Keep Your Property Compliant
Keeping your property in good condition is necessary to avoid lawsuits and physical damage. There is a rule known as the “implied warrant of habitability” which states that property owners must make sure their buildings are an inhabitable condition when tenants move in and maintain that condition throughout the length of tenancy. Property managers know the local health, building and safety codes that can help you stay compliant.
A good property manager will also take ongoing steps to prevent injuries or losses on your property. For example, maintenance requests need to be handled promptly before the issue becomes a liability. As a property owner, you may have other responsibilities on your plate that prevent you from handling these situations in a timely manner. An experienced property manager will have relationships with different contractors who can respond to a variety of requests at a moment’s notice.
2. Deeper Resources
An experienced property management company will have resources available that will save you money on a variety of expenses such as maintenance costs, property insurance, legal fees, etc. Working with an experienced partner will allow you to maintain control of your property while being more effective in your policies.
The bottom line is that maintenance costs are a necessary expense for property managers. Working with an experienced property management company will give you access to an in-house maintenance staff whose services are included in your monthly fees at a reduced rate. If your property manager does not have its own in-house maintenance staff, they should have a network of licensed contractors they can turn to for a variety of requests. Since the contractors are licensed and have a good relationship with the management company, you can be sure they perform quality work. Also, your property manager will be able to secure volume discounts on maintenance services which can save you hundreds of dollars each year.
Increased Buying Power
Since property management companies have multiple properties to maintain, they have an increased buying power that allows them to receive bulk volume discounts that a do-it-yourself landlord cannot get on their own. These discounts aren’t limited to maintenance fees. Your property manager should be able to get you discounts on virtually any service you require. Obvious examples include:
- Attorney fees
- Insurance rates
However, there are other discounts you might not be aware of. Your property manager may be able to get you a reduced banking rate if you open an account with a specific bank. You may also be able to save money on office equipment, supplies, and accounting software. A do-it-yourself landlord would not be able to receive these discounts.
3. Professional Processes
Property managers will have a more regimented and streamlined approach to property management that most owners will not possess. Tasks such as finding tenants, screening tenants, collecting rent and handling tenant requests can eat up huge amounts of your time. Hiring a property management company to handle these responsibilities can free up your time and allow you to focus on other things.
Leasing Your Property
Browsing the classifieds and looking to see what other landlords are charging for similar properties is a good way to come up with a general idea of what your rent should be. However, in order to attract the right tenants and get the most out of your property, you will need to spend more time doing in-depth research. A good property management company will perform a thorough investigation into the market and set the proper rental price for your property. The idea is to maximize your monthly income while maintaining a minimal amount of vacancies.
Property managers will also handle your marketing needs to ensure your listing is visible to the right audience at the right time. Through years of experience and success, a good property management company will know exactly how and where to market your property. Not only will this ensure you are attracting high-quality tenants, but it will also increase the chances of attracting long term tenants and give you an advantage in avoiding long vacancies.
Without proven tenant-screening methods, inexperienced landlords often end up renting to tenants who are not qualified. This is a costly mistake that can end up with you losing lots of time and money. Not only will you have to evict the tenant, but you will also need to spend more time searching for and screening new tenants. A common rule of thumb is that a single eviction can cost you the equivalent of four months’ worth of rent.
Experienced property management companies will be skilled at finding the right tenants for your property. They will take care of all the details, including:
- Background checks
- Running credit reports
- Contacting references
Collecting rent from tenants can be the worst part of the job for some landlords. It is also an important part of owning a property. If your tenants are not paying, or if they are consistently late, your business will not have a consistent cash flow and you may end up losing money over time.
Thankfully, property managers can take this job off your plate. They will act as a buffer between you and the tenants. An experienced company will have an efficient system in place that has been tested and proven over time. They will also be diligent in lease renewals and not allow for extended vacancies.
Correctly filing your property taxes is very rarely straightforward and almost always time-consuming. Many property owners cite this as the most difficult part of the job due to constantly changing tax laws. Furthermore, any mistakes made on your taxes can lead to costly repercussions and filing for an appeal can be complicated and time-consuming.
Hiring a property management company to handle your accounting needs and file your taxes can save you both time and money. A good company will be aware of the fact that they are responsible for incorrectly filed taxes and will do everything they can to get the necessary documents in your hands in a timely manner. They also make extra sure that all forms are filled out completely and accurately.
Furthermore, your property manager will be responsible for keeping up-to-date on all the latest tax laws and might even be able to find deductions that you may not be aware of. Did you know that you can even deduct property management fees on your taxes to receive money back?
Most landlords put too much focus on the cost of hiring a property manager without realizing that a reputable company will pay for itself with all the time and money they can save you in the long run. One avoided a lawsuit, one prevented eviction or even one less month of vacancy can cover all your property management fees. Property owners can save hundreds and even thousands of dollars each year by hiring a management company to handle the day to day activities. Without all the stress and headaches of dealing with tenants, you can enjoy a revenue stream that is essentially passive.