Rental Property: Who's the Manager?
Renting Your Property
In light of the recent mortgage/financial crisis in this country, many people have had to take a loss on their home when transferred to another area of the country.
Some homeowners have decided to rent their homes out thinking that at some point in the future the house will regain value. Even if the prices don’t reach the previous record highs, the loss may be less by waiting out the market a few more years.
The Advantages of Having A Rental Management Company
- · The management company knows the market in a particular area and can arrive at a fair market rental price.
- · They have a legal, binding contract which is more precise and inclusive than one you may find on the Net.
- · The management company has a maintenance department or maintenance companies on call.
- · If the house is in a different city than where you are now living, the company can easily take pictures and complete inspections.
- · The management company knows the evictions guidelines in the area. They will handle all the headaches.
- Management companies can get access to the property - for a fee- and verify the level of maintenance and upkeep with picture documentation.
The Cons of Having A Rental Management Company
- · Part of the rental fee will go to the management company. This will cut into any profit you may and depending on the area, profits may be small.
- · Any late fees will go to the management company.
- · Most companies won’t send you the rent until after the 10th of the month, and most will be in your account later than that.
- · Management companies will require a maintenance fee to remain in escrow to cover immediate expenses – even if you have to add more money later due to high cost maintenance repairs.
- · Depending on the company, communications are not always what the homeowners would like. Often the landlord has to make so many calls to check on status of problems that they feel like they are doing the work themselves.
- · If a tenet remains in the house for a new lease period, the management company will require that the property owner pay a contract renewal fee of some type. The cost could be $500.00 or higher.
As long as a renter is paying rent, the management company may feel less incline to ask renters questions which might cause a disagreement. Remember not only is this your income it is also the management company's income.
The Second Year?
- · After the first year, the property owners may decide to take care of the property themselves, especially if the same renter stays in the property.
- · Managing the property may be an advantage if the property owners live close enough to drive or fly to the property quickly, if necessary.
- ·Does the property owner have access to Angie’s List for the area, and can maintenance problems be taken care of quickly.
- · Have a neighbor who will email the owners if things don’t appear normal around the property.
In any case, Home Owners Associations need to be considered. If there is some type of violation, it is imperative to understand what the HOA’s requirements are and make sure a renter is familiar with these rules also. If the HOA would have to cut someone's grass then the renter should know that the expenses the HOA incurs will be included in the lessors rent.
- Check your state laws. It may not be advisable to take less than the total rent. Some renters may ask to pay bi-weekly. Research this before you agree. It may be a costly agreement to do this.
- Also, agree on a date that will be used as a drop dead date for reporting late rent to the credit bureau. Some people believe that if they pay anytime within the month and pay the late fee that they are fine.
- If they do not pay rent by a certain date, do you know the procedures of filing a dispossessary note- called an eviction notice in some areas?
- How long do they have to respond to the eviction notice?
- Once the court day comes, what will happen to the renter and the landlord.
A Picture is Worth a Thousand Words
Often we learn by our mistakes. Some tenents are looking for a roof over their head, even in upper end property.
A good story is just that. Seeing, touching, and feeling are the best way to protect your assets. Remember everyone's idea of "OK" is not the same. Renters may tell you that things are fine simply so they won't have to be inconvenienced, or may know a repairman in the house may cause problems that will lead to a termination of the lease.
Yearly inspections are a good idea, even if the renters have a great record. Life situations change and a major change in house upkeep on the interior of the house may be a warning that circumstances may have changed.
Be alert. Hopefully a deposit will offset getting a property back in order, but sometimes repairs and contractors costs exceed the deposit.
It is important that problems are reported immediately to management. The standard lease can be changed to include what you expect. It's important that the tenents know exactly what is expected.
Normally a CPA is a good idea no matter who manages the property. A CPA will make sure the property owner get all the deductions. HOA fees are not deductible.
These are just a few of the options to consider when you decide to become a landlord.
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