Robert S. Griswold - Property Management Kit For Dummies

If your assessment revealed that your skills may be better used for something other than managing your own property, see Chapter 3for some alternatives. Owning rental property can still be a great investment, even if you don’t manage it yourself.

If you’re impatient or easily manipulated, you aren’t suited to be a property manager. Conveying a professional demeanor to your tenants is important, because you want them to see you as someone who’ll take responsibility for the rental property’s condition. You must also insist that tenants live up to their part of the deal; pay their rent regularly; and refrain from causing unreasonable wear, tear, or damage to your property. If you don’t like confrontation, managing your own rental property may not be the wisest choice.

Chapter 3

IN THIS CHAPTER

Assessing the pros and cons of residential property self-management

Understanding the benefits of working with a pro

Knowing what to look for in a property management firm

The late-night cable and online real estate gurus can make real estate investing sound so simple. But a prime location at the right price isn’t all you need. The other key to success in real estate is having a well-managed property.

Initially, you may try to manage your residential rental property yourself, particularly if you have a single-family rental home or condo or even a small, multifamily rental property such as a duplex, triplex, or fourplex. That’s why I spend time in this chapter guiding you through the pros and cons of managing your own property (as opposed to hiring a pro to do it for you).

If you’re like most owners, though, at some point you’ll consider hiring a professional property management firm, which is why I also give you some tools for evaluating property management companies, from the services they offer to the fees they charge. I explain the importance of the big three traits to look for — experience, qualifications, and credentials — and reveal some of the common tricks management companies use to generate additional income that aren’t in your best interest.

Deciding how your rental property is managed is one of the most important decisions you’ll make as a residential rental property owner, so take the time to look at all your options.

With your first rental, you’ll probably do all the work yourself: painting, cleaning, making repairs, advertising, fielding all inquiries, showing the unit, screening the applicants, completing all the paperwork, collecting rent, handling any complaints or concerns, and paying bills. This scenario certainly has its advantages, but it has its disadvantages too. Use the information in the following sections to help you decide whether you want to go it alone or hire a pro. (If you decide to do the latter, check out “ Exploring Professional Management” later in this chapter for the scoop on working with a professional management company.)

If you have the right traits for managing property (see Chapter 2to help determine whether you do), if you have the time, and if you live reasonably close to your property, you should definitely manage it yourself. Here are some advantages of keeping direct control of the management of your rental property:

You save on a monthly management fee. If you purchase a single-family rental home or condo as an investment property, you most likely won’t be able to generate enough money to pay for a professional property manager and make a profit — at least not right away.

You save on maintenance costs. You decide who does the repair work and who mows the lawn. Doing your own maintenance or yard work is usually a good idea; if you hire someone else to do it for you, the cost can devour your monthly cash flow in a hurry.

No one cares as much about your investment as you do. You are always going to be the one who’s most dedicated to achieving the best results from your rental investment efforts. Property managers are professionals, but their retirement and future wealth aren’t riding on the success of your investment.

Even if you hire someone to manage your property, you may be better off choosing the maintenance contractors yourself than turning over the decision — and your money — to a professional property management firm. Some management companies have related companies or get referral fees from their select vendors; thus, you pay higher charges than you would if you’d hired the same contractors directly. A limited number of professional and ethical property managers can offer recommendations, however, and they don’t use maintenance and repairs as a hidden profit-center. Either way, develop a list of reliable and insured fix-it and landscape personnel who do good work and charge reasonable rates.

If you’re just starting in the world of property management, you may be thinking of it as a part-time venture — something you’ll do in addition to your day job. After all, rent collection is just once per month, and what else could possibly be required? If that sounds like you, be sure to check out the following list of the cons of self-managing rental property:

You can damage or interfere with your day job. If you’re a higher-income, full-time professional, rushing off on weekdays to handle some minor crisis at your rental unit is not only impractical, but can also be downright damaging to your career. Most employers or clients have little tolerance for your need to handle the responsibilities of rental-property ownership, particularly when the demands are often unpredictable and unscheduled.

You can spend far too much time. If you earn your living from something other than managing your rental property, managing that property may not be worth your valuable time. Rental management can take up more time than you anticipate, especially if you buy additional properties. Remember that residential property management often requires working in the evenings and on weekends, when most prospective tenants want to see your vacant rental units and when current tenants are home to allow access for repairs. Also, maintenance issues, such as plumbing backups or no electricity, seem to occur when you have finally left town for a long-overdue vacation. Property management is a 24-hour/7 days per week/365 days per year commitment that has zero respect for your personal schedule.

You run the risk of increased liability. If you’re a part-time property manager, you may not keep abreast of the latest laws or issues affecting the rental housing industry. Just one lawsuit over a situation that you handled improperly can quickly turn your dream of retiring early into the year’s next big horror flick. Many new residential rental unit owners underestimate how detailed and complicated property management has become, as every year, new laws protect tenants from unscrupulous landlords (who unfortunately do exist). I highly recommend that you add Landlord’s Legal Kit For Dummies (John Wiley & Sons, Inc.) to your personal property management library.