You have a rental property, now what? Do you manage the property yourself or hire a property management company? I mean really; how hard can it be to manage a rental property? You place an ad on Craig’s List, maybe put a “For Rent” sign in the yard, take a couple of calls from tenants, ask a couple of questions, and place the one your “gut” tells you is the best one, right? Simple, right? The short answer is WRONG!
The long answer is WRONG as well, but let me share with you why.
Problems with Self-Managing Rental Property
In the “good ol’ days” a man or woman’s handshake was their bond; you didn’t need a lengthy lease explaining all the do’s and don’ts of the agreement. The rent is $1200 due on the first of each month– period end of story.
Not so now.
Now you need to screen tenants thoroughly, check their current employment, check their current landlord, and previous landlord. Run a credit check–yes–run a credit check.
Now you’re thinking, well how do I do that? Guess I will “Google it.” Yes, you will find the answer on Google and use one of their suggested companies, but now that you have the report, what do you do with it? How do you make heads or tails out of the report you just ran? What does the FICO score mean, does it really matter what the FICO score is, or do you look at positive and negative accounts?
So many questions, and now your head is swirling….
But it doesn’t have to be this complicated. Professional management companies will do all this legwork for you so that you can focus on the things in life that really matter: family, friends, and yourself!
Now, let’s fast forward to getting the repairs done on the rental property. Where to start? How do I find a contractor that will give the best pricing? How long will the repairs take, a few weeks, a month?
Time is money and the longer your rental property sits vacant you are losing about a $100 day. Do the math; if you wait two weeks while you get bids, meet the contractor at the property, then wait another two weeks to a month for the repairs to be completed, you are out $3000 to $3400 in lost income. Not to mention the cost of the repairs and the cost of your time meeting with contractors, etc.
Property Management Companies are familiar with all the paperwork
Most professional management companies have contractors that work with them, know the routine and can get the repairs done in about a week. Think about that for a minute: no waiting at the rental property for a contractor for two hours only to find out they are running late, or they don’t show up at all. You don’t have to worry about scheduling the carpet company, the painting company, or the electrician, you can just send in the check, and the property management company handles the rest.
Now you are thinking, well I am handy and retired, I will just do the repairs myself. Did you know that hiring contractors to do the work on a rental property is actually a tax benefit to you? Yes, that is true and good news. When doing the work yourself, you can only write off the materials, but when you have a contractor do the work, you can write off the materials and labor. So, let the professionals handle it and enjoy retirement.
The rental property is ready for a tenant, now what? You found a tenant that looks good on paper and your “gut” thinks is a good fit for your property. You meet the happy couple and their three kids, and you hit it off so well. You pick them, and they move-in. Things are moving along swimmingly until they call you at 5 pm on a Friday evening: there is water all over the garage….
Their personal belongings are getting ruined, and they want it fixed right now. They need hot water, they need to take showers, they are threating to make a complaint with Fair Housing if you don’t fix it right now. Well, there goes your Friday night plans…You are now stuck trying to find a plumber that is willing to come out tonight and not charge you double or triple the normal service right because after all, they like their Friday nights as well.
Professional Property Management Companies Handle Tenants for You
Professional management companies have contractors take those frustrating repair calls. They work with contractors who are willing to go out after hours, and not charge double and triple the rates, thus allowing you to enjoy your Friday night. Professional management companies make sure that tenants have renter’s insurance, so if their belongings are damaged, the burden is not on you the homeowner. Professional Management companies are up on Fair Housing laws and know that hot water is a luxury and reporting to Fair Housing would get a tenant nowhere.
The first of the month rolls around and you get that dreaded text from your tenant (they don’t call anymore, that’s too old fashion) “Hi! It’s me, your tenant at 1515 John Street, I know the rent is due today but I don’t have the money. I can pay you on the 10th when my next check comes in. Is that ok?”
A little of panic and anxiety creeps up, you already sent in the mortgage payment for this month, because your gut told you they were good tenants and would pay on time. Now the check you sent is going to bounce, you weren’t prepared for the tenant not to pay.
Ok, don’t panic you’ll just transfer money from your savings to your checking account and that should be ok, right. They will pay on the 10th, right? That’s what they said, and they are good people (per your gut check).
So, you respond back, “Yes, the 10th will be fine, but no later. I have a mortgage to pay, and I don’t want any late fees from the mortgage company.”
The 10th rolls around and you are checking your bank account. Did the tenant pay you today as they promised?
Then you receive another text message, “Hi, it’s me again. The money I thought was coming didn’t show up today. I am really sorry about all of this. I know we can have the money together by the 25thof the month, is that ok?”
Your internal response is now more panic, “The 25th? No, that is not ok. I have another mortgage payment due on the 1st and I already borrowed from my savings account to cover this month, I don’t have the funds for next month, thanks to you.”
But that’s not what you say. Instead, you text back, “Okay that is fine, but please no later, and this is really putting me in a bind.”
The 25th rolls around, then the 26th, now the 30th, and guess what no money….. now what?
Well now, you must call an eviction attorney.
Property Management Companies Can Deal with Uncomfortable Evictions
Time to use our trusting friend “Google” he knows where to find everything we need, right?
Google says there are 20 eviction attorneys that service your city. But which is the best one, how much do they charge? You’ll probably have to spend your lunch break calling and interviewing attorneys.
The first questions they will ask you are: did you post a 3-day notice? Did you mail a 3-day notice? What does your lease agreement say about late payments?
Your answers will most likely be, no, no, and my lease agreement doesn’t say anything about late payments. With professional management companies, we take all the stress away of dealing with a tenant that doesn’t pay rent. Most property management companies make rent due on the 1st of the month, give a small grace period of 2-4 days, and then start charging late fees, posting 3-day notices, and will file the eviction for you, if needed. Let the professionals be the bad guys, and you get to enjoy life.
Now your property is empty, and you have to start all over again. Ask yourself this question, “do I self-manage again or hire a professional property management company to take on all the headache of managing a property myself?”
Let the professionals handle it, and you reap the benefits of owning a rental property.