Investing in rental property can prove to be an excellent and lucrative addition to a diverse portfolio. However, being a landlord extends well beyond buying the property. As a matter of fact, managing a rental property is a full-time job that not every investor is prepared for or wants. So, what is a landlord to do? That is where professional rental property management companies come in! Join us below as we discuss the benefits of rental property management companies and help you answer the question, are they really worth it?
Self-managing Rental Properties – Is It Right for You?
Before we look into rental property management companies, it is worth saying that one can self-manage a rental investment. That said, whether this is a good idea or not depends on many factors. So, take a look below at a few questions to ask yourself before setting out alone.
Is managing rentals a job or activity for you?
The daily operations of managing a rental property is a time-consuming task. Furthermore, landlords are responsible for everything from marketing to coordinating repairs, plus everything in between. This requires a significant commitment of time, which only grows exponentially the more properties you have. So, if your daily life does not allow for this serious time dedication, consider hiring a local rental property management company.
Do you want to maximize your investment’s profitability?
Rental property management companies typically charge between 8% and 12%. That said, this can cut into a landlord’s yearly profits. As we will discover, this fee is well worth it to many successful landlords because of the value it provides. However, the cost is always a consideration investors must weigh.
Is your rental property close to where you already live?
Being far away or unfamiliar with the local area where your rental property is located presents a problem for investors. Therefore, it will take added time and effort
to handle emergency tasks, complete inspections, maintain compliance, and target potential tenants.
Are you prepared to deal with tenant issues?
Late-night calls, showings, screening, complaints, questions, maintenance needs, late rent payments – the list never ends. Even the most experienced landlords can find it exhausting to deal with tenants, not to mention it will consistently interrupt your day. Also, keep in mind that communication goes far beyond phone calls. Landlords must also respond to texts, emails and even send and receive written notices.
Self-managing works well for investors looking to make their rental property business a full-time affair. However, rental property management companies are worth the cost to landlords who value their time and peace of mind. While turning over the reins to an investment portfolio is not easy for all landlords, it is certainly worth considering.
Investors must be realistic about their experience and ability to tackle various tasks that will come their way. Local property managers offer the expertise to ensure your endeavor is both profitable and legally compliant.
What Are Rental Property Management Companies?
The most successful rental property management companies focus on a full-service approach. For a fee, these groups of professionals step in to take on a rental portfolio’s day-to-day operations. However, as with any industry, not all companies are created the same. Owners must weigh services against the cost to determine what is right for them.
Also, keep in mind that no company can completely replace the owner in all decisions. For example, if a large repair is needed or eviction is imminent, an owner must still take part in the decision making. However, what these companies excel at is providing a buffer for busy owners so that only the most pressing issues get their attention.
What Does Every Great Property Management Firm Have in Common?
Finding a property management company that suits your needs can feel like an exhaustive process. So, to help narrow your search, it is important to know what features matter most to you. In today’s competitive rental industry, landlords need every advantage they can get. These advantages are just what professional rental property management companies can provide. Check out these common features of a great property manager below.
The Latest Technology
Whether managing one property or thousands, it is essential to stay organized. Technology greatly assists property managers in streamlining daily processes and providing convenience to clients. Inquire about what software a prospective company uses and why they find it beneficial. So, choose a company that has robust software and builds it into the price as opposed to asking you to purchase it separately.
High Earning Potential
In short, what can this company do for you? Inquire about previous or current clients and see what profit margins they’ve made for them. Furthermore, how can they improve property value, will this company limit vacancies and eviction rates, and do they have a proven track record? All are important factors when evaluating rental property management companies.
Does the firm have the licensing to be a valid property management company? Choose a rental firm that is fully compliant with all state licensing requirements. Additionally, ask if their property managers are certified; while not required, it is a definite plus.
Low Delinquency and Eviction Rate
A low eviction rate is a great sign that rental property management companies are doing their job well. Landlords rely on timely payments to maintain profits. So, low delinquency signifies that the company has a highly trained staff with proper rent collection procedures in place. Additionally, inquire about retention and renewal rates. Rental property management companies with high renewal rates indicate they keep tenants happy. In turn, that helps owners avoid vacancies!
The kind of team that comes with the property management company is critical. Landlords want to look for companies that have the support staff to manage their portfolio load properly. Inquire how many properties each manager is responsible for. In turn, this will help you determine the amount of personal attention your property will receive. It is better to hire a company with a full staff of property managers, leasing agents, financial advisors, and contractors to handle maintenance.
Understanding the Benefits of Professional Rental Property Management Companies
Saving time is one thing, but there are many other benefits rental property management companies can offer. When it comes to running a business, there is no shortage of tasks. Why not rely on the trusted expertise of an experienced property manager? Check out some of the things they can do for you and your portfolio below.
- Local Market Knowledge
- Tailored Marketing
- Professional Showings
- Comprehensive Leasing Process
- Collecting and Managing Payments
- Maintenance and Repairs
- Handling Tenant Complaints and Questions
- Filing Evictions
- Hassle-free Accounting
- Addressing Legal Concerns
Local Market Knowledge
Part of the value in enlisting professional rental property management companies is to take advantage of their experience in the local market. After all, owning a rental property is only profitable if you can rent it! So, local market knowledge is critical to pricing right, marketing efficiently, and having the edge over the competition.
Getting your listing in front of individuals looking to rent is where rental property management companies come in handy. In other words, property managers know what works and where to focus the marketing efforts to limit vacancy time. So, allowing them to take quality photos, write a dynamic description, and post your property is in your best interests as an investor.
Individuals showing and responding to leads for your rental property must follow Fair Housing Laws. So, if you are unsure of what that is, using the services provided by professional rental property management companies is the way to go. Thus, a trained leasing agent can present your home to every client, in the same way, to comply with the law but also showcase your unit in the best light.
Showing a rental property is only half the battle, after which comes follow up. Therefore, professional leasing agent can use their skills to turn those showings into applications by diligently following up with leads. Ultimately, saving owners a ton of time.
Comprehensive Leasing Process
From completing the application to screening and then signing the lease, a professional manager handles it all. Any reputable company can offer property owners thorough tenant screening for creditworthiness, rental history, income verification, references, and criminal background. Additionally, once a tenant is approved, they facilitate the signing of a legally binding rental agreement.
Collecting and Managing Payments
In an ideal world, landlords could collect rent every month hassle-free and on time from every tenant. Unfortunately, that is not how it always occurs. So, answering questions, tracking payments, keeping ledgers, assessing late fees, handling tenant calls, and dealing with non-payment becomes part of a landlord’s role. However, like everything else, this is time-consuming. That said, rental property management companies have the staff and, in some cases, their own accounting department to take care of all of these matters with no added stress to the property owner.
Maintenance and Repairs
I love 2:00 am maintenance calls – said no one ever! Not only do rental property management companies handle late-night repair needs, but they also handle everything. Whether it is a work order for an emergency repair or scheduling preventative maintenance, a dedicated property manager completes this on your behalf. Additionally, these companies typically have both technicians on staff and a strong vendor network to ensure you receive the right person for the job.
Handling Tenant Complaints and Questions
Tenants can complain about a variety of issues, with some requiring immediate attention. Diffusing these situations and coming to an agreeable solution takes tact, patience, and impeccable customer service. As frustrating as it may be, a landlord must refrain from matching a tenant’s emotion when trying to resolve problems. That said, this is best left to professionals to save owners unnecessary aggravation and maintain a satisfied tenant.
No one anticipates having to go through an eviction, but it is both a costly and daunting legal process if it occurs. Since eviction is conducted through the courts, property owners must be familiar with the laws and what is required. Once again, this is where a property management company comes to the rescue! So, from filing the initial notice to appearing in court with detailed documentation, relying on a skilled professional is a landlord’s best hope for a good outcome.
Unless you are a tax professional, navigating the paperwork needed for your rental property business can prove overwhelming. So, whether it is reconciling receipts, tracking expenses, or documenting profit and loss, organization is key. Professional rental property management companies can provide comprehensive year-end summaries that make tax time a breeze. After all, why spend hours sorting through paperwork when all the answers you need can be provided to you?
Addressing Legal Concerns
Keeping up with changing federal, state, and local laws is a challenge for any property owner. Whether it deals with tenant rights or property compliance, a professional property manager will have a better working knowledge of what is needed. Below are just a few legal matters property managers can take over for a busy property owner.
- Secure a Legal Lease
- Follow Fair Housing Laws
- Marketing in a Non-discriminatory Manner
- Process Notices (Demand Letters, Lease Violations)
- Appear in Court for Eviction Proceedings
- Set Up Compliance Inspections
- Coordinate Inspections with Inspectors and Tenants
- Handle Lease Violations and Follow-up
How Much Do Rental Property Management Companies Charge?
As with services offered, the fees that rental property management companies charge may vary widely. That said, continue reading below as we review the most common fees and what they mean for landlords.
- Onboarding Fee
- Monthly Management Fees
- Leasing or Marketing Fee
- Lease Renewal Fee
The onboarding process often involves assessing the property’s condition and setting up your account with your new property manager. Therefore, the onboarding fee is a one-time occurrence, and usually the first charge you encounter. Typically, this fee averages around $100, but this depends on the company and what it includes.
Typical Cost Range: $50 to $300
Monthly Management Fees
This is the fee most owners are familiar with when researching potential rental property management companies. Hence, these charges cover the day-to-day operations of your property. This includes such tasks as processing rent, tenant communications, marketing, renewals, property inspections, coordinating repairs, and responding to emergency maintenance calls. Typically, this fee is a percentage of the gross monthly rent collected. However, some companies choose instead to charge a flat monthly fee regardless of the rent amount. So, this particular fee may vary widely depending on the company.
Typical Cost Range: 5% to 12%
Leasing or Marketing Fee
Most professional rental property management companies charge a leasing fee to market and fill a vacant unit. So, the leasing fee covers the costs of advertising the property, showing it to prospective tenants, screening applicants, preparing the lease, and performing the move-in inspection. Generally, this is either a flat fee or a percentage of the rental rate.
Typical Cost Range: One to Two Months’ Rent or a Flat Fee
Lease Renewal Fee
When a lease comes to an end, the property reaches out to offer renewal. Therefore, this fee covers the time needed to compare market rates, prepare offers, adjust the lease, and facilitate the signing of a new renewal lease. Lease renewals are critical as it is far cheaper to retain a tenant than find a new one. A professional property manager can negotiate rates and terms that balance the owner’s best interest with the tenant’s satisfaction.
Typical Cost Range: $200 to $500
Keep in mind; every company is different. While the above fees are typical, they may be far from the only charges that landlords will face. So, always ask a lot of questions when searching for the right property management company. Beware of any individual or firm who is not upfront about the fees they charge and what you can expect.
At the end of the day, the landlord’s choices for their business should serve their best interests. The benefits of partnering with a reputable rental property manager outweigh the cost for many successful investors. So, if hiring professional help is in your plan, look no further than Bay Property Management Group.
At Bay Property Management Group, we pride ourselves on transparent fees and a full-service approach to help owners maximize their return on investment. Our user-friendly owner portal allows you to access real-time property updates and financial documents from anywhere in the world. Additionally, dedicated property managers and staff are here to answer any questions owners or tenants may have. We also have 24/7 support for emergency maintenance! Give us a call today to learn how rental property management companies can make all the difference in your business’s future.