The further you live from your rental property, the harder it is to protect, care for, and manage its well-being. And if you’re like thousands of military landlords, you have a lot of personal and work-related business going on. It may be time to consider hiring a property manager.
You may be inclined to hire a property manager if you’re moving across the country and don’t want to be responsible for finding tenants and handling the day-to-day property upkeep, like scheduling maintenance and repairs. These are all great reasons to hire a property manager. But before hiring one, you need to know exactly how their business operates and how you’ll work with them in the future.
Here are a few things to consider when hiring a property management company.
Fill vacancies. One of a property manager's primary responsibilities is to advertise your vacant rental property and find suitable tenants.
Screen tenants. Part of finding a tenant is to investigate their personal information. After the applicants fill out a lease, property managers run credit and background checks and call employers and personal references. They’re trying to determine if the tenant has a background that will lead them to treat your property respectfully and pay the rent on time.
Handle the lease agreement. Property managers sit down with the tenants to review the rental agreement, answer all questions, and sign the lease.
Act as the point of contact. Any time the tenants have any questions or concerns, they’ll contact the property manager.
Conduct the move-out process. Returning to your property to prepare for the next tenant is time-consuming and expensive. A hired property manager conducts the move-out inspection and determines how much security deposit should be returned to the tenant.
Collect rent. Your property manager should ensure that the tenants pay the correct rent amount each month and pay it on time. The manager would also be responsible for enforcing late fees or other agreed-upon penalties if they don't.
Maintenance and repairs. The property manager is responsible for responding to tenant calls for maintenance and repairs. As the homeowner, the property manager would only contact you to authorize a purchase or simply to be informed, depending on your agreement.
Keep records. Every month, the manager should provide you with any notes, receipts, and records they have on the property. Property manager services vary, so discuss the exact details of their offerings before signing a contract.
If you’re new to the rental property business, read 7 Common Issues Landlords Face and How to Tackle Them.
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Pay the property manager. Property managers don’t work for free. Plan to budget part of your monthly income to pay for their services. It’s possible to negotiate their monthly fee, but many homeowners and property managers usually settle somewhere between 4% to 10% of the monthly rental income, depending on the property and how much it’s worth. Property managers typically draw from the rent collected.
Create a fund for repairs. They’ll handle the necessary repairs around the property and then bill you or draw from your reserve fund (more on that in a minute). You should also have an emergency fund for your rental property available.
Give up control (mostly). If handing over the reins to someone else isn’t your thing, you may not want to hire a property manager. Micro-managing a professional you’ve hired doesn’t usually bode well for the relationship’s longevity.
Assume liability. In The Legal Issues of Being a Long Distance Landlord, Anna Blanch Rabe shares that,
“Renting your property can mean you have increased liability risk, because injury that occurs to tenants or contractors due to inadequate maintenance can mean the owner is liable. You also risk false allegations from tenants or prospective tenants and fraudulent or illegal behavior on the part of tenants or property managers. You should consult with your insurance broker about needed liability insurance for the property to protect you in the event of personal injury claims or allegations against you as landlord.”
Follow up. Establishing clear expectations with your property manager from the beginning is important. For instance, if your property manager takes care of a repair, you should require a copy of the receipt and a before and after photo of the repair.
Don’t ignore the law: What Homeowners and Landlords Should Understand About the Fair Housing Act.
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What services do they cover? While the above covers a handful of tasks most property managers cover, your experience may vary. Find out exactly what you’ll pay for each month.
What fees do they charge? Ask about initial set-up fees, finding tenant fees, vacancy fees, lease renewal fees, lease renewal charges, marketing fees, eviction fees, unpaid invoice fees, and the percentage of monthly income they charge. These fees may sound excessive, but most are there to cover the expenses associated with running background checks, advertisements, and the property manager's time.
How many properties are they managing? Coupled with references, knowing how many properties the property manager manages will clue you into how many people trust them with their rentals and also indicate how much time they have to focus on your property.
How do they handle vacancies? When the property becomes vacant, where does the property manager market the property, and what does the advertisement look like? Insist upon good quality photos, various advertisements, and a listing on MilitaryByOwner if it’s near a military installation.
What is their communication style? Discuss an appropriate response time, how they would reach you in normal circumstances and an emergency, and how often they plan to check in with you.
How do they handle repairs and maintenance? Some property managers request a reserve fund that they can use to make necessary property repairs or maintenance without consulting you first. The fund is usually somewhere between $250-$500. Once they’ve depleted the set amount, the property manager must contact you for additional expenses. Setting a maximum for one purchase is a policy you should have in writing in your contract.
How often do they plan to check on the property? Find out how often the property manager plans to drive by to do a simple outside check or knock on the door, and ensure the tenants respect your home. A casual check every so often can help prevent disasters that can occur without accountability.
Do they listen? Ensuring they’re good listeners gives you confidence that they know your expectations. If you find a manager who constantly talks over you or cuts you off in conversation, you’re probably dealing with someone who doesn’t respect you, and you certainly don’t want to go into business with them.
Before hiring a property manager, shop around and compare companies. Rely on personal referrals and internet research and reviews. Review pricing, services, and personalities to find the best fit. Remember, you’re searching for a professional you trust to handle one of your largest financial investments and protect an emotional attachment to a property you may one day call your forever home.
Whether you hire a property manager or manage it on your own, there's a lot more to know about the rental business! Our free resource below is designed to walk you through every aspect of owning a rental home.