Sunday, February 23, 2014

Why Home Owners Should Consider A Property Management Company

Choosing the wrong tenant can cause you extreme stress, not to mention legal issues. Not paying attention to your budget might leave you owing money instead of making it, and forgetting to keep copies of important documents or failing to pay attention to the legalities of renting out properties can lead to legal trouble. If you are looking to rent out your home or if you are already an established landlord, you can help stay away from serious problems by using a managment company.

Using a Property Management Company will assist with keeping you compliant with the ever changing laws and regulations.  They have the experience to help find approved tenants, from knowing what questions to ask in the initial meeting, to full national background and credit checks, to calling references and verifying incomes.  They will take care of the tax forms that need to be sent to the tenants each year and should also handle all of your accounting, providing monthly and annual statements, making it easy for you to file your taxes.  They also help coordinate maintenance items that may arise, many times allowing you to save money by using their preferred vendors.

Here are 6 issues management companies help you avoid :

1. Not paying attention to legal requirements

Your city may require a renter’s permit or license.  Call or check out their website to check on their requirements.  You may need to notify the city that the property has now become a rental property. Most cities will require a rental / safety inspection.  You will need to prove that the rental unit is safe and meets fire codes. You also may need to prove that your rental has structural stability, safe wiring, proper lighting, appropriate ventilation, adequate heating and cooling, and a sanitary living area.

A good management company will assist you with the application process and the inspections to help make sure your property is licensed correctly.

2. Choosing a tenant in desperation

You definitely need to screen your tenants.  If you find yourself in the situation of only having one interested tenant, but you don’t feel comfortable with him or her. Understandably, if you rely on rental income to pay your own bills, then the idea of waiting around for the right tenant can be scary.  But if you bring in a tenant who lacks the financial means to afford the rent you are asking,  or one who doesn’t pay on time, or who doesn’t respect the space, this may end up costing you a lot more money than you would have by waiting for an approved tenant.

You can find out a lot about a potential tenant through credit and reference checks, but some potential issues won’t show up on a credit report. You may want to go as far as checking out their Facebook profile page.

Management companies will help market the property to as many available sources as possible to avoid the situation of only having a small pool of potential tenants.

3. Staying on top of lease renewal

While it is every landlord’s dream to have the perfect long-term tenant who pays his or her rent on time every month, requests maintenance respectfully and patiently, and maintains the property well, many rentals see high turnover rates. The ideal long-term renter isn’t always available. In some cases you may not necessarily want a renter to renew a lease.  Many lease are written to automatically extend into a month to month lease after the expiration date.  You want to start the conversation prior to the lease notification period to give you the chance to make any changes you see fit, rent increases, a different lease period or the opportunity to move in a different direction with the home.  

A management company will have systems in place to send out reminders to keep on top of any of these upcoming dates / notification periods.  

4. Forgetting to maintain a paper trail

In addition to always creating a contract, you should keep a paper trail of any issues that come up with a renter or rental space. If a tenant denies that you provided an updated lease, notice of rate increase, or another important document, you can protect yourself by keeping copies of all notices that you send to tenants. It is also important to keep a copy of payments as well as all important correspondence, including when you respond to a complaint or fix an issue.

Eviction notices can’t be served unless the tenant has been notified prior to the eviction being served, so be sure that you provide notification. If you ever face a lawsuit, keeping paper copies of all important material will help your case, and you can protect yourself further by providing written notices and updates rather than speaking to a tenant over the phone or in person.

A good management company will also have systems in place to track communications and keep records of notices that have been given to the tenants.  Management companies are good at avoiding evictions by first finding qualified tenants and keeping good communication with the tenants throughout their stay, but in the event an eviction is necessary, they will also make sure that you are compliant with the laws to make sure that the process is as smooth as it can be.  

5. Not budgeting properly

While the idea of extra monthly income is exciting, being a landlord doesn’t always pay off, and you may face good and bad months. You should not expect that all of your rental income will go straight to the bank. In addition to paying for the space you own (if you have a mortgage), you will have to pay whenever anything needs to be fixed. In addition, you may not always have renters in place.
It is a good idea create small buffer to help cover any loss of income or when you have an issue to fix. All of these issues should go into your budgeting, as should taxes on rental income. Be sure to charge enough for your properties and to raise rent regularly (but fairly) so that you are covered during hard times.

A management company will do a good job keeping your property rented at all times.  Making sure they are on top of lease expiration dates and starting the marketing at the right times, keeping in communication with current tenants to allow for any showings that are needed to find the next tenants to give you a smooth transition with no loss of rental income.  They will also provide monthly and annual statements to help keep on top of your rental.  

6. Choosing the wrong support team

If you hire a property management company, make sure that they have the experience to succeed. You can look for a company that has a specific rental specialty that matches your needs, on that shows properties in a manner that you like, properly screens all potential tenants, and appropriately deals with all issues, including problems after-hours.

Management companies will usually meet with you for a free rental consultation, giving you the chance to learn about their services, coverages and their company.  

A management company can allow for peace of mind knowing that someone is on top of things.  Many tenants find working with a company can be preferable over working directly with a home owner who may not be as responsive as a management company.  

http://www.realtyconnectmn.com/blog/2014/02/23/why-home-owners-should-consider-a-property-management-company/   

+Erik Laine +chrissy fallon +Jesse Halverson +RealtyConnect +David Timmons

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