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How to Decide if Professional Property Management is for You

By Brian Kline | May 30, 2014

Since you are in the real estate business, I assume you have thought about hiring a professional property management company from time to time. Or maybe you're just getting into the real estate profession and trying to decide if you want to manage rental properties yourself. Today, we'll look at some of the reasons you should consider when making this decision.

A key factor is how far you are from the property. If you have a rental house in your own neighborhood, it's going to be much easier for you to keep and eye on it and to pop in to take care of any emergency repair that comes up. However, if it's a 30-minute drive, you're going to find it annoying and time consuming to actively manage the property.


Services a Property Manager Brings

When you have a responsible tenant in the property, being a landlord is a breeze. Especially if the property is in good shape and doesn't need constant repairs. However, every landlord has an occasional "problem" tenant. This can be someone that doesn't pay the rent on time or someone that complains about every little thing or someone that is busting the place up. A professional management company can pressure this type of tenant to move on and replace them with a better tenant. Property management companies also screen tenants carefully to reduce the chances of a problem tenant in the first place.

Property management companies bring an expertise that you may not have. Two important areas they know well are complying with the strict Fair Housing laws and getting top rent for your property. A good company can cover their own fee by getting more rent than you might be able to. Another expertise is structuring leases to best protect you as the property owner.

Finally, they have systems in place to keep the paperwork and financial records in order. Whether it's refunding a security deposit or having the information at your fingertips when tax time comes around, a good property management company will have you covered.

What to Look for in a Property Manager

Besides experience and good references, you want to know how many units a manager is responsible for. Generally, a good property manager can handle between 30 and 40 units. With the automated software available today, a property manager might be able to take on a few more units but not much.

Typically, property managers charge between 7% and 10% of the rents. This motivates them to maximize the amount of rent being charged. However, some managers expect to be paid based on all potential rents rather than only collected rents. Never get into an arrangement where you are paying their fee for vacant units or units where the tenant isn't paying the rent. It's their job to make those things happen.

Regarding maintenance, you want to have a cap that they are allowed to spend without your direct permission with anything above that amount requiring your written permission. Generally, that cap should be somewhere around $250.

Finally, you should expect reports on all of your properties by the 6th of the month. That is the same date that the property manager should send your portion of the rents.

Certainly, there are other important issues to be aware of related to property managers but we'll save those for another article.

Please leave a comment if this article was helpful or if you have a question.

Brian KlineAuthor bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
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