Every landlord must decide whether to manage their property or hire a professional management company to do it for them. Your first consideration is always how much does property management cost. And secondly, is it worth it?
Both Tenant Placement and Property Management
Tenant placement and property management are just as they sound. It includes finding suitable tenants and then managing the day-to-day operations of the property.
In a tenant placement agreement, the property management firm is engaged only in finding suitable tenants for the property. After placing a tenant, the firm’s work is complete until the owner needs another tenant.
Some agreements are only for property management and do not include tenant placement. These are often used in situations where the owner already has a tenant.
Tenant Placement: What Does The Property Manager Do to Find A New Tenant?
Finding a tenant includes photographing the property, writing up a cogent description of the space, determining a competitive market value of the space, advertising the property in multiple on and offline listing sites, showing the property to several potential tenants, screening the potential tenants in person, conducting background checks of prospective tenants, and then when the right tenant is found, handling all the contract paperwork. The property management firm makes sure the client has signed a lease agreement that protects the property owner from a myriad of litigious risks. If the company also has a property management agreement with the owner, they will then enforce the terms of the lease throughout the tenant’s occupancy.
Tenant Placement: How Much Will It Cost Me To Hire a Firm to Find Me A Tenant?
Some finder’s fees are a flat rate. Others range from 50% of one month’s rent up to two month’s rent. Finder’s fees can vary widely between firms. And the difference in price can largely be attributed to the level of service you receive. Check online reviews, the Better Business Bureau, and social media for insight into the quality of service the property management firm provides. Beware of companies that boast low fees, but then charge extra for everything from maintenance to evictions to late tenant payments and more. (See article on Hidden Property Management Fees.)
Property Management: What Does The Property Management Firm Do For You?
In a property management agreement, the property management firm is responsible for enforcing the terms of the lease, managing the day-to-day operations of the property, and protecting the owner’s investment. This entails many tasks which we have broken down by category:
Tenant Move In
Executing lease agreement, scheduling the move in date, reviewing the lease terms with the tenant, performing pre-move in inspection to verify property condition at move in date, collect first month’s rent and security deposit.
Collecting rent, chasing down late payments, and billing late fees, performing bookkeeping, and providing monthly and year-end reporting.
Sending out eviction notices, instigating paperwork to initiate evictions, representing the owner in court, and working with law enforcement to remove tenants and their possessions when needed.
Maintaining outdoor areas and landscaping, removing leaves, snow, and trash, providing maintenance and repair personnel, providing vetted contractors for repairs and remodeling, coordinating repairs and scheduled work between in- house staff, vendors, and tenants, monitoring a 24-hour emergency repair hotline.
Providing renovation recommendations for maximizing rental income, garnering multiple vendor bids, preparing cost estimates, overseeing all renovations.
Understanding and abiding by all local, state and federal legislation that applies to renting and maintaining properties, advising owner in the event of dispute or litigation or referring them to a qualified attorney.
Performing property inspections, reporting on safety hazards, code violations, and all repairs needed on the property.
Providing accounting of property management services, making payments mortgage company, insurance, home owners associations (HOAs), advising owner on relevant tax laws and deductions, providing cash flow statements with itemized income and expenses, providing annual reporting and tax documents, maintaining all records of invoices, leases, inspections, warranties, etc.
Tenant Move Out
Inspecting the unit and assessing the condition at the time of the tenant evacuationvacates, returning any security deposit balance to the tenant after inspection, cleaning unit and performing repairs or upgrades, re-keying the locks, putting the property back on the market.
How Much Do Property Management Companies Cost?
There are various fee structures involved in property management. Some firms charge a flat fee, other’s charge anywhere from 8% – 12% of each month’s rent. Consider whether or not the pricing model aligns the company with your financial interests or not. A percentage-based model rewards the management company for getting higher rents and keeping the property occupied. A flat-rate model – where the manager gets paid every month whether it’s vacant or not – may result in lower rents and/or higher vacancy.
Again, be mindful of extra charges not included in the initial fee. When comparison shopping between management firms, be sure you are incorporating all of the additional fees into the overall cost of service.
Is Tenant Placement and/or Property Management Worth The Cost?
The answer is it depends. Look at the list of tasks involved in tenant placement and managing the property. Are these things you have the time, patience, desire, and skills to perform? If the answer is yes, then professional property management may not be worth the cost to you. If any of these things are tooseem daunting to you, then you may want to start interviewing management firms. If you need help figuring out which one to hire, see our resource on How Do I Select a Good Property Management Company?