Why Hire a Property Manager

Why Hire a Property Manager? If you are a real estate investor considering hiring a property manager, your initial thought may be that such services will unnecessarily add expenses to your property or portfolio profit and loss (P&L) for the year. While all property management services naturally involve a financial expense. The savvy investor must also consider the investment return on the service itself. There are many more considerations than merely finding tenants, managing maintenance and upkeep, and collecting rent.

Opportunity Cost
Liability Shield
Local Support
Day to Day Management – 24/7/365
Emergency Support
Minimize Repair Costs (via long-standing contractor relationships)
Organization
Build Rapport with Tenants
Tenant Screening
Rental Application
Lease Creation
Collect Rent
Eviction Process

When considering your bottom line you must factor in your time. Opportunity Cost is the economic principle stating that your time has value. As such, you can place a dollar amount on your time. You can translate the value of your time when you consider what you might be doing with your time if you were not managing your properties, i.e. – if you were not managing your properties what might you be doing? If you make $45 per hour in your primary job and spend 20 hours per year with 1 rental property. You have spent $900 in “time,” as well as actual costs, by managing the property yourself. If what you might otherwise be doing has a more nebulous value – such as relaxing, enjoying hobbies, etc., it may be more difficult to determine the value of your time. However, the main concept here is that your time has value.

As for liability: Are you protected? Are you sure?

Many people are not, or at least not as protected as they should be. Having someone represent your interests creates a liability shield between you and those would seek legal action against you. This is not to say that you are not responsible for ownership. Property ownership is a great way of generating wealth, and as a property owner you are “the boss.” However, let someone else manage operations when it comes to liability, and create distance between yourself and those who have the potential to harm you. If you are managing your own properties, consider buying professional liability insurance.

Local, Daily Support. Everyday.

Your manager should offer you 365-day support, as your home and your tenants require attention on nights and weekends, as well as during the normal 9-5 business hours, as well as during vacancies. Edgington Management is available for local support everyday. You can reach us at night, early in the morning, weekends, and holidays.

Emergency Support

If your home requires immediate attention, do you know about it and are you in a position to fix it immediately? Last winter the power went out more often then usual in the Baltimore-Washington metro area, and we heard an above average mention of pipes breaking, and more HVAC systems requiring service.

One thing you might want to consider is buying an additional filament/Ignitor for your HVAC unit to have on hand as they are the most common item that you will replace for most gas units. These are very easy to install and result in less time spent without heat, less concerns for busted pipes, and happier tenants.

– Consider taking electric heaters to your tenants/properties if the heater needs repair in the winter. This keeps the tenants happy and prevents the pipes from breaking.

– Consider owning a few backup generators that you can transport to tenants (only during the winter months) should the most severe situation occur.

Minimize your costs on repairs

Many of our clients are savvy investors that understand the bottom line, and can negotiate a fair price with labor without the help of management. That being said, a management company will have individuals that handle the service and maintenance so you do not need to negotiate or find service professionals. You are generally going to save money as your managers/agents are going to have vast contractor networks and in many cases have already worked out deals for future services.

Organization

– Receive your 1099 in January each year. This is the one-page document that will summarize your real estate bottom line. You’ll generally give this to your accountant at tax time.

– Receive checks from the management company, by mail or through the bank, the check comes from the management company and not the tenant. This eliminates the concern over bounced checks and late payments.

– Manager will keep Security Deposits in an interest bearing account.

– Manager will provide walk-through inspections, and provide you with property inspection condition reports, before, during and after tenants vacate.

Once you have your tenants, it is best to keep them, and renew their lease whenever possible. We have found that building a rapport with tenants generally results in them staying longer. Furthermore, tenants seem less likely to cause significant problems, and in some cases tenants will make improvements to our properties with permission of the owner/manager. Treating tenants fairly, and trying to work with them in the short term is almost always going to be in your long term favor.

Tenant Screening

Whether you want to procure your own tenants, have a manager find your tenants, or have your manager/licensed real estate agent list your home for rent on MRIS, the idea is the same. You need to find the right tenants, and screening them is a very important part of the process. Tenants will, at some point, move on, and new tenants will need to be procured. The important part here is that your management company helps you screen new tenants, and will find tenants for you or with you based on a variety of cost effective marketing options, including a free option.

A Property Manager will prepare a rental application for potential tenants. This is a basic tool to understand income, credit, employment history, previous residence, financial history, and other information as it may be relevant to understanding the potential tenant. You will also want a credit report with credit history. There is a processing fee that potential tenants will pay along with filling out the necessary forms. Ask your Manager/Agent what they charge to process tenant applications, and remember the goal of this fee is to filter out the less serious tenants and to pay for any credit reports. This processing fee should be kept low as the intention is not to exploit the future tenants, or to overly limit the number of applicants which could increase the time the property is vacant.

Your property manager, agent, or attorney will write your lease for you. At a minimum, use them as a liability shield and never write your own lease.

Do not write your own lease!

This bears repeating! A large function of management is collecting rent, including repairs, maintenance, late fees, and court fees as they may be considered as “Rent”. Be careful when choosing investment properties, the location needs to be preferable for tenants, and you do not want high turnover. If things go wrong and you need to evict your tenants a property manager will handle the process for you, and will find new tenants quickly to limit vacancy time.

You can contact us anytime https://www.edgingtonmanagement.com/contact-a-property-manager-now. You can also find us on Facebook https://www.facebook.com/edgingtonmanagement/