Purchasing properties and leasing them out has long been an excellent method for investment-minded individuals to build an impressive portfolio of assets. Leasing properties allows individuals to pay down their mortgages and possibly have an additional income source if the market is strong.
The question for these individuals has always been whether to manage the property themselves or turn the process over to a property management company. Both options have advantages and disadvantages that the home owner needs to be aware of in order to make the best decision depending on their unique situation.
Deciding which property management path to choose depends upon the type of person the homeowner is and what their commitment level is realistically going to be. The basic question is whether they think they can manage all aspects of the property and maintain a high level of involvement with the process, or whether it is more prudent to turn the entire process over to a property management firm. Being a do-it-yourself landlord can be a rewarding and cost-effective way to manage a property if the individual has the right mentality and skill level.
The first thing a do-it-yourself landlord must be is handy. There are many things that occur to a rental property through simple wear and tear that require anything from simple maintenance to heavy-duty repair, and the landlord that has the skills to complete these tasks themselves can save a sizeable amount of money. The do-it-yourself landlord must also have good business sense and the capability to effectively screen potential tenants.
The most costly aspect of leasing property is finding the wrong tenant. Bad tenants not only damage the property causing increased costs, but they can frequently be late with the rent and ultimately might need to be evicted, which can cost a great deal of money and time.
A successful do-it-yourself landlord must have access to tenant screening services so they can make an informed decision. It also is very helpful if a landlord has access to the Multiple Listing Service or market data that can help them determine the current rental rates of the market so they can price their property appropriately, helping to attract more desirable tenants.
A landlord who is capable of consistent maintenance, tenant screening, and market interpretation can be effective at maintaining their own rentals as long as they have the time and ability to commit to it. If there is any doubt, it might be a more effective, although costly solution to choose a property management company. Property management firms have unique advantages that most do-it-yourself landlord’s lack, and even though a property management firm will be an additional expense to the property owner, their value to the process can sometimes seriously minimize those costs.
Property management firms can maximize the rental income from a property because they have an intricate knowledge of the rates the current market will support as well as trends up and down. This means the property will always be rented for just the right amount.
Property managers also have very effective tenant screening processes that ensure only qualified tenants are considered, which minimizes evictions and late rent.
Property management firms usually maintain relationships with contractors and maintenance professionals on a constant basis, so they have access to lower rates and more dedicated service which ensures prompt attention when needed. The management firms also deal with any tenant issues or complaints as well as keep up with mandatory state and federal housing regulations, ensuring legal compliance.
The cost for property management firms is usually the first month’s rent and then 8–10% of the monthly rent (which can be a sizeable amount), but the prospective landlord must determine the overall value of the service they provide as opposed to doing all the work themselves. While there are software programs and online subscription services that can assist in accounting and tenant selection, unless the landlord is completely committed, choosing to go with a professional property management firm might be the most cost-effective and best overall route to take.
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