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When Should You Hire a Property Manager?
Once the decision has been made to become a landlord, the next logical step is to consider hiring a property manager. This is a personal choice that each landlord will have to make based on how involved they wish to be in the actual day to day management of the property. The first step in this decision making process is to know exactly what a property manager will and will not be able to do for you.
Responsibilities of a Property Manager
- Different companies may offer differing services and it pays to shop around. A landlord can reasonably expect a property manager to perform the following list of tasks.
- ·Screen tenants
- ·Rent collection
- ·Receive all tenant calls
- ·Arrangement of maintenance repairs and payment of repairmen
- ·Follow up to ensure repairs were done correctly
- ·Periodic property inspection
- ·File notices for nonpayment of rent, rule violations and the like
- ·Process or oversee tenant evictions
- ·Get landlord approval for any maintenance over a predetermined limit
- ·Provide landlord with monthly statements of rents collected and moneys paid out
- ·Any other responsibilities agreed on by both parties
It is important to remember that landlords and property managers are contractually bound by the terms of the agreement. Property managers are regulated by state law just like real estate agents.
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Responsibilities of the Property Owner
There are still responsibilities of an owner that cannot be laid solely at the feet of a property manager. The owner of the property is still responsible for ensuring that all mortgage, insurance and property taxes are paid on the property. A contract could state that the manager would make those payments, but the ultimate responsibility resides with the owner who stands to lose the property in the event of a default.
Maintenance is another responsibility that ultimately belongs to the owner. While a property manager may have the responsibility of handling repairs, it is always in the best interest of the owner to ensure that those repairs are satisfactorily completed for a fair price. While many property managers are mindful of repair quality and cost to the owner, there are those who simply are not.
Final approval of tenants is another responsibility that owners should retain as well. While the property manager will be responsible for credit and background checks, it is a good idea to remain in the loop for final decision making. It is important to be ever mindful of Fair Housing laws and proceed accordingly.
How Much Do Property Managers Charge?
Monthly fees start at 5% of the rent and can be as high as 10%. In addition to a monthly fee, many managers will charge separate fees such as for set-up of accounts and advertising a vacant unit. Some managers will charge the monthly fee even if the unit is left vacant while others charge only during periods of occupancy. Owners should always shop around and compare fee structures as well as services offered.
Of particular concern is whether or not the manager charges a fee when the home is vacant. Property Managers who get paid regardless of the vacancy have no real incentive to find a tenant expediently. This could ultimately cause loss of rent money to the owner if the property remains vacant for an extended period. Conversely, if the manager is in a hurry to place tenant in order to collect the fees, they may be less likely to carefully screen for a reputable tenant. This could leave the owner with higher repair bills if a less than stellar tenant causes damages.
How to Hire a Property Manager
How to Choose a Property Manager
This is an incredibly important step that can have a serious impact on the rental property experience. It is wise for owners to remember that they are handing over their property to a virtual stranger to manage. Before making any hard and fast decisions owners should shop around. Not all property managers will offer the same services, and fee structures can vary greatly. Here are a few points to consider:
- Get references from both current and past clients.
- Check with the BBB and the Institute of Real Estate Management to see if complaints have been filed
It is also important to understand the laws regulating property managers in the state where the property is located. Since states all have the authority to regulate as they deem appropriate, if at all, owners should research regulatory laws for their particular area. Unlike real estate agents, property managers do not have to be certified or licensed by the state in which they do business. This also means that property managers are not bound by the same code of ethics that real estate agents must follow in regards to disclosure of certain information or loyalty to their clients.
The Institute of Realty Management does have a program through which they train and certify property managers. While managers who have completed this program are not guaranteed to be any more competent or ethical, the fact that they took the time to educate themselves and receive a certification could be a good indication that they take pride in thier work and reputation.
All expenses related to managing a rental property are tax deductible, as are any maintenance and repair expenses. This includes any fees charged by the property manager. The mortgage interest on the property remains deductible, as is the insurance and property tax. Once a property becomes a rental owners can deduct depreciation as well. There are also deductions for business expenses arising from visiting the property for inspections.
The decision to hire a property manager should not be taken lightly. This is a contractual relationship with a virtual stranger to manage a pretty sizable asset. Time should be taken to make a well informed decision.