What is property management?
What is property management
“To hire, or not to hire, that is the question!” Yes, you’ve guessed correctly , this post is about property management. Hiring a property management company is a choice that many real estate investors contemplate a lot. Some investors understand the advantages a property management company gives them and hire one before they even close the deal for buying their property. Others prefer to stick to the do-it-yourself way and to try and manage their property themselves. While this is, of course, possible, we should think about whether it’s the best way for real estate investors to make use of their time. Time is money, after all. It’s wise to spend it efficiently and profit from it as much as possible.
In this article, we are going to talk about what is property management and what does a property management company do. This is a good way for real estate investors to understand why the price they pay for a property management company is not a negative, but an investment that bears fruit.
What does a property management company do?
Many real estate investors, especially the ones that don’t have much experience in this industry, worry that they might be paying to a property management company for something they might as well do on their own. With time, investors often realize that spending money for something is not necessarily a charge, it can be an investment that actually ends up making more profit for you. After all, that’s exactly how investing in property works, right? You spend money to buy properties, then you see it return to you and also gain profit.
So what does a property management company do that helps you make more money? Here are some services any average property management company will do for you so you can optimize your profit and save your time:
• Finding and screening tenants.
• Opening and enforcing leases.
• Collecting payments every month.
• Address all maintenance requests and repairs.
• Deal with late monthly payments, trouble with the tenants and evictions.
• Keep detailed financial records of everything connected to the property.
• Know the law.
Finding and screening tenants
Sounds easy, right? There are always people out there looking for a place to live in. You should be able to find one for your property very fast. However, it doesn’t work quite like this. Many tenants are looking for property to rent, but there are also many properties for rent. Everyone needs toothpaste but it doesn’t mean every toothpaste company sells equally fast, right? You go to the store and there is such a variety of toothpaste, you just don’t know which one to choose. You will most certainly end up buying one but which one? So you choose the toothpaste with the best exposure and the advertisement that caters to your needs the most.
That’s the thing with finding high-quality tenants for your property too. Property management companies have been in the industry for some time and know just how to advertise your property effectively so it can reach the right people as fast as possible. The goal of every property management company is to provide the owners with long-term tenants that keep the property safe and pay in time and to give the tenants the property that would satisfy their needs and keep them happy. That’s why property management companies make sure they are equipped with the tools and expertise to do this. Creating listings, advertising with signs and ads, both online and offline, using connections with other property managers. There are many things one needs to know how to do in order to fill in the vacancies fast. Property management companies take on the cost of marketing, showing the units in their best light, and screening the applications thoroughly in order to save unnecessary turmoil that may arise in the future if an unsuitable tenant signs the lease. This service usually also includes move-in and move-out supervision, during which the owner’s best interest is being looked after.
Many people agree that finding and screening tenants is the most valuable function of a property management company.
Opening and enforcing leases
Administering a lease isn’t as simple as just putting a signature on a piece of paper. You need to decide on the best terms for both parties, phrase them as clear and plain as possible and make sure the terms are being followed strictly. You must also be careful about any loopholes you might be leaving. This is why it’s best to have the leasing agreement being drawn up by someone who has expertise in the field. Property management companies will include things such as scheduling move-ins and rent payment methods and dates, setting up rental insurance, and a detailed move-in condition report. They also make sure everything is in accordance with the current laws of the state, regarding rental property.
Collecting payments every month
Depending on the tenant, this can be one of the easiest tasks to perform or one of the most difficult. Online payment methods certainly make collecting rent a lot easier. However, sometimes there can be complications. We’re going to talk about overdue payments later in this article but even if the tenants are on time, collecting the monthly payments can be quite time-consuming if the owner gives for rent multiple units and if not all tenants agree on a single method or time of payment. The more tenants you have, the more the methods and the time of payment vary.
Address all maintenance requests and repairs
Regular property maintenance is something every owner must provide. It’s one of the services that most often drives owners towards hiring a property management company. If you find yourself thinking about what does a property management company do and if you really need one, consider this: the company deals with all maintenance and repair requests for you. Property management companies have a list of trusted contractors that will deal with the maintenance and fixing of all systems that need it and will do so for a better price and with extra effort because they work often with the property management company. The property management company acts as a middle-man that connects the tenants with all the necessary services.
Usually, property investors with more experience sign an agreement with the property management company which authorizes it to deal with repairs under a certain amount of money without needing immediate permission before they do it. This speeds up the process and saves time and money in case the issue grows while the company is waiting for permission to fix it.
Even if repair requests may arise less frequently, maintenance is always needed. Air conditioners, furnaces, water heaters, pipes – many of the systems which help the property function properly need regular maintenance. The property management company will schedule maintenance for all systems that need it and may call for routine maintenance like lawn care, plumbing issues, and drywall patching. Preventative maintenance can save a lot of money for property investors.
Another thing connected to maintenance that property management companies take care of is dealing with the tenants. This can be a big challenge sometimes. Often their needs aren’t very big or won’t cost you much money, but they might be urgent. A tenant may get locked out at 3 a.m. or the pipes may get blocked on a weekend. When many of these problems arise in a row, the landlord gets irritated and if the problems are not solved urgently, bigger issues with the renters may arise. A 24/7 customer service proves to be very efficient in such cases.
Deal with late monthly payments, trouble with the tenants and evictions
Late payments can be a big issue if they happen frequently. Dealing with them requires enforcement of rules and a lot of confrontational skills. Quite often, sending a notice just doesn’t do the job. Property management companies have a lot of experience in dealing with tenants and know how to make sure the owners are getting their money on time. Late rent payments are not the only problem that may arise with tenants. Tenants may risk the condition of your asset or the police may be involved in some criminal problem. Often these situations can be handled just between the company and the tenants but at times, lawyers must get involved, going to court might be necessary. The property management company handles this for you, saving you a lot of time and stress.
Handling evictions can be a bit tricky too – it’s much more work than just kicking out a tenant that doesn’t pay regularly. It’s a legal process that has certain steps that must be followed so legal problems don’t arise later. There is a ton of paperwork involved. If the matter is taken to court, the company can represent the owner if the owner can’t attend. Sometimes even law enforcement can be involved if the tenant refuses to leave the property.
And then there are the professional tenants that often target do-it-yourself landlords who didn’t hire a property management company with experience in spotting such individuals. Professional tenants have been renting properties for a long time and know many loopholes and technicalities that allow them to take advantage of the legal system. They have learned to legally withhold rent due to repairs and, they know how to drag out the eviction process and they know how to remove this from their record. Professional tenants often jump from property to property in a way that lets them avoid paying full rent. Their goal is to live at the landlord’s expense – and they’re usually quite good at this. Dealing with such individuals can be quite stressful, and hiring a property management company can save you the time and effort you need to put in removing them from your property.
Keep detailed financial records of everything connected to the property
This might be the most boring part of being a real estate investor. All that bookkeeping can prove to be quite time-consuming and it needs someone with great organizational skills to manage it diligently. Proper bookkeeping and invoice processing is absolutely critical for minimizing taxes and keeping the cash flow. It’s part of what property management companies do for you, but even if you choose not to hire one, it’s best to use the services of a professional when it comes to bookkeeping.
Know the law
Real estate investors often underestimate how much knowledge of the laws that relate to owning and renting property is needed if you want to make the best out of your investment and not lose money. Property management companies combine many services in one, which makes it more affordable and easy to access: instead of hiring lawyers, bookkeepers, vendors for maintenance, detectives, and god knows what else, just trust a property management company to do it all for you! It will certainly come at a better price and the services will be tailored specifically to your needs.
Property management companies have strong expertise and a lot of experience with all kinds of laws, regulations, and ordinances, connected to renting property. They know how to address them correctly, and how to help you avoid issues and to profit the most from the current legislation.
One of the biggest perks for investors about hiring a property management company is that it allows them to use their time for something different. This can mean more time with their family, more time to travel the world and be free, or more time to find more investments and add more units to their portfolio. In any case, in the business world time is money. It’s always a good idea to have more of it.
Time is not the only benefit you gain from hiring a property management company. By having a third-party manager, you can mitigate liability, by hiring a company with experience in marketing, you will have shorter vacancies, by hiring a professional in property management, you’re going to have lower maintenance costs. The advantages are plentiful!
If you’re interested in property management in Orange County and want to know more details about the services offered by property management companies and their pricing, contact Caris Property Management now! Learn more about the world of property management and how you can benefit from it directly from the experienced team of a successful property management company with a lot of experience in the business and deep understanding of the local market.