Why do landlords, real estate partnerships and associations turn to professional third party property management options?
Some real estate investors continue to debate the value of bringing on professional, third party property managers. Others wouldn’t dream of investing without it, or can’t. So what are some of the top drivers that property owners and associations reach out to management companies for help with?
A recent survey from AllPropertyManagement reveals what most landlords need help with:
1. Nonperforming Tenants: Dealing with delinquent, difficult, and defaulting tenants is never fun. More than just being a pain and a time drain, this process can be wrought with financial and personal risk. It is a delicate process which can either elevate property performance and returns or bankrupt investors. This alone can be good reason to bring on a professional, third party company, and can more than pay for their services.
2. Maintenance Emergencies: Maintenance emergencies can steal your time and profits. Property owners need someone on 24-hour stand-by to deal with emergency maintenance requests, and the team to deal with them. They don’t just need to be ‘dealt with’ either. They need to be handle well, quickly, efficiently, and cost effectively. This alone can be a full time job for a DIY landlord.
3. Tenant Screening: Tenant screening is becoming increasing important. Note that this doesn’t necessarily mean being tougher and more stringent. May Property Management in Massachusetts points out that mastering tenant screening means securing the most profitable tenants based upon willingness to pay (track record), ability to pay, and how they’ll treat your property. Longevity can also be a significant factor. Do you want long term tenants that will stay for many years and reduce turnover costs, or short term tenants that may pay a premium, but will allow for larger leaps in rental rates? Note that this may change over time depending on market trends. Today, tenant screening is heavily data driven. Yet, accurate interpretation of that data relies on looking at the right metrics, and knowing how to read between the digits. Good tenant screening can minimize nonperforming tenants and evictions, and maintenance emergencies. However, balance must be maintained in order to maximize occupancy (as vacancy can be a larger threat), and to avoid crossing lines which could see landlords or managers sued for discrimination.
4. Major Repairs: Major repair concerns also drive many to use professional property managers. Owners want to be sure they have an expert opinion on how much work should be done. Is maintenance and a patch job sufficient, or is replacement really warranted and the smart move? If a roof, plumbing, AC, or electric wiring and panels need to be replaced; how do you select the best people for the task, and manage them well?
5. Rental Policies: This goes hand in hand with tenant screening. Both individual landlords and condo and home owner associations have to be very delicate in setting rental policies. Which restrictions or allowances will help optimize the value of the property, while minimizing risk? Go too tough and you can wind up on the wrong side of the law, and destroy property values. Be too lenient and a hotel like environment or bad tenants could destroy the community and ability of owners and buyers to finance.
6. Staying on Top of Laws: There are volumes of real estate laws. There are real estate laws, lending laws, association laws, landlord-tenant laws, and more. And they are constantly being updated. Property owners and boards must ensure compliance when making rules, in delivering notices, and certainly need help fending off lawsuits.
7. Finding & Working with Contractors: Finding a trustworthy and good contractor can seem like a new installment of Mission Impossible. Where do you find contractors to trust? How about contractors that will do a great job at a decent rate, and will finish on time without leaving you open to liability? Forget the Yellow Pages. Then how do you deal with contractors when they don’t perform according to the contract? A property management firm already has proven and tested contractors, often with sizable discounts on their services.
8. Conflict Resolution: There are plenty of areas for conflict to arise when investing in real estate. There are neighbors, tenants, partners, lenders, vendors, the city and county, and more. Sometimes you’ll need a great real estate attorney, and one that isn’t afraid to go to court. In other cases a lot of these issues can be prevented or muted more efficiently and affordably by using a third property manager.
9. Management Tools and Technologies: Serious investors can’t survive and thrive without good tools and technology. Of course, this doesn’t necessarily come cheap for the individual investor with just a few properties. A professional firm with many properties and clients can invest in the very best tools for the benefit of their clients.
10. Bookkeeping and Record Keeping: Keeping good and accurate records, and maintaining them in compliance with the law is critical. It can also make a big difference in net income and returns.