Most beginning investors manage their rental properties themselves until the time demands become a burden. Everyone will have a different breaking point, where paying someone else 5%–10% of gross revenues is worth it because you can do other things with your time. For some people, that breaking point occurs with the very first investment. Your time is better spent finding new deals than screening potential tenants and unclogging toilets, especially if your goal is to quickly build a sizeable portfolio.
Property managers usually offer a menu of services.Your fee depends on how many you choose. They can do everything from finding tenants to collecting rents to handling complaints and routine maintenance/ repair issues to evictions. Good property management firms provide all legal forms and notices required to manage the property and make sure that all federal, state, and local laws are followed.
They can shop for the best insurance and repairs, help you fight unfair increases in property taxes, and make recommendations regarding keeping your rents at market rates. The best ones will advise you regarding additional income opportunities such as laundromats, reselling Internet access, and furniture rental. They will also tell you about additional investment opportunities, and when it is the right time to sell your investments and trade up to something better.
When interviewing property management firms, ask about the firms' years of experience, and the experience of the current operations personnel. It does you no good to hire a management company with twenty years of experience if all line employees have little experience and no in-house training. Inquire about how many units they manage and for how many different owners. A company that manages two hundred units might have one apartment complex owned by the firm itself. Ask for proof of liability insurance and for references, and actually check the references.
Inquire into the services they offer and about success stories in which they saved money for their clients or prevented problems. Stress that you do not want any names, just examples. Anyone who is good at what he or she does will have thought about these things and reflected on the good job he or she does for his or her clients. If the firm cannot share any success stories with you, you should rethink doing business with them.
Ask for a few horror stories regarding other management firms, or people who self-manage. Again, be sure to mention that you do not want any names. A management firm that is in touch with its community should know those things. You want someone who can justify the good he or she can do for you. The national trade association for property managers is the Institute of Real Estate Management (IREM).
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Note: This article was sent to us by: Martin C. Doyle at 07042010
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