A lot of landlords manage their rental properties themselves. Usually, it’s to save money. Hey, we get it! A lot of property managers (not RES) are expensive, and many aren’t terribly competent.
Many of our current property management clients used to self-manage, before hiring Real Estate Solutions.
Today, we’re going to give you the top 5 reasons they should have hired Real Estate Solutions for their property management needs from day 1 – and why every landlord should strongly consider hiring the professionals at RES.
In no particular order…
- Owning a rental property is a legal minefield. It’s not as simple as “Find a tenant, collect the rent.” If it were, property management wouldn’t exist. Here are just some of the legal issues that arise with owning a rental property.
1a: Discrimination lawsuits. Landlords can tend to be picky about who they put in their properties – and it certainly is wise to have criteria – but if you’re not consistent, and if you discriminate against tenants because they have kids, because they have a service animal or because of any other reasons, you could easily be sued for violations of the Fair Housing Act and the ADA (Americans with Disabilities Act.) Having a clear, consistent, and written policy outlining the criteria used to accept tenants, and a policy for handling tenants who were declined, is absolutely necessary.
1b: Maintenance, repair, and process-related legal issues. Loose railings, spongy steps on a deck, bedbugs, domestic issues, delivering proper 30 day notices, etc., etc. Many counties require smoke detectors to have newer lithium-ion 10-year batteries, and they need to be placed in specific areas. Carbon monoxide detectors are required and must be checked. Locks need to be changed between tenants, and when a tenant is taken off a lease, and the pros install digital door locks (DDL’s) to facilitate this process and save money. Private landlords rarely know what the Warranty of Habitability is, why it matters, and how it affects issues ranging from ants to hot water. Without the right lease in place, lease disputes can quickly land in court. In-depth knowledge of Fair Housing Laws, ADA, Emotional Service Animals, current and often-changing laws related to notices, evictions, eviction moratoriums, etc. are all part of why landlords should not self-manage.
1c: Security deposit disputes. Private landlords never have the fully systemized approach needed to make a “slam dunk” security deposit claim. Going into the property just prior to possession and documenting every square inch, documenting equipment, documenting the apparent age of wear items such as carpet and paint… these are par for the course with professionals. At move out, we seek out dirt or damage and document the move out condition. Anything we claim is 100% verifiable and provable in a court of law. We’ve been there and we know what the judges will be looking for. The traditional “walk through checklist” most landlords use, results in them being sued in small claims court for treble (read: triple) damages. That’s right, for every $1 claimed, landlords have to pay back $3 when they lose in court. These are just a small picture of the legal issues involved with managing rental property!
2. You don’t actually save money by doing it yourself. In our experience, DIY landlords measure turnover time in weeks, not days. Whether it’s because they are taking the time to paint themselves (another false savings proposition), or whether they can’t find the right contractors, those days just tick away – each one adding up to a more and more expensive vacancy. Professional property managers have new tenants lined up before the last ones leave, and turnover happens with a professional team of cleaners, carpet cleaners, handymen, etc. and the property is ready and safe for new tenants.
DIY landlord marketing is usually not very effective, for many reasons. From marketing photos (the pros take great ones), to video virtual tours, to knowing what websites are the most effective, the professional property manager has this dialed in. Not having this marketing reach only adds to the pain of a prolonged vacancy. The DIY landlord also can’t respond to text messages, calls, and emails from prospective tenants at all hours of the work day, set up showings, and screen tenants.
All of this is not even taking into account the hours spent by a DIY landlord. Even if you’re retired, your time is worth something. If you’re always at your rental, acting as the contractor and property manager, you can’t be anywhere else. Golfing? Watching the game? Forget about it, you’re dealing with your rental. If you have another full-time job, there is no real ROI for you when it comes to spending time at your rental.
The smart play is to treat professional property management as a cost of owning investment properties. Just like insurance, HOA dues and maintenance.
3. It takes a village. With a professional property management team – like the one at Real Estate Solutions – you are not hiring 1 person to replace you as the DIY landlord. You’re hiring an entire Team of professionals, all highly trained in all aspects of property management. If you want to go on vacation, and you’re a DIY landlord… you’re taking your rental property with you on vacation. When you outsource the management, you are free to live your life and let the money roll in. We handle the headaches, we handle the legal issues, we handle the evictions (extremely rare when we place the tenants), the lease renewals, the maintenance, the neighbor complaints, on and on. When you have a Team of professionals in your corner, your tenants are happier. Happier tenants stay longer and take better care of the property – making you even more money on the reduced turnover and vacancy.
4. Systems, technology, and one-stop shopping. Professional property managers make all the documentation associated with owning a rental property conveniently accessible and easy to find and understand. Monthly statements of income and expenses, notifications of any maintenance underway, notification of lease renewals, constant feedback on the status of showings and marketing efforts, and year-end statements and 1099’s. It’s all part of the service, and it allows the landlord to relax and check on their property as often or as infrequently as they would like. Take a vacation and enjoy the direct deposit of your rental funds into your bank account without any action needed from you.
5. Growing your portfolio. Everyone knows why rental properties can be great investments. If done right, they can be truly enjoyable to own as well. After all, it’s a large, expensive asset that appreciates, while your tenants are simultaneously paying down your mortgage.
For most clients, rental proceeds cover the mortgage, HOA dues, taxes, and management fees. If that ends up looking like a “break-even” proposition, it’s not. Not even close. Remember, every year you have an occupied rental is a year you made significant money in terms of appreciation and mortgage paydown. Focusing on cashflow is often missing the forest for the trees.
With a professional property manager as part of your Team, the next opportunity to buy a great rental property could be right around the corner. Property managers know when other landlords are selling their rental properties before they are even listed, and they can present that opportunity to buy another rental before it hits the market. The property manager will know a LOT about the property, too! The property manager will have detailed maintenance history, will know what the property rents for, and even what the neighbors and HOA are like. There is simply no substitute for having a professional property manager feeding you data on the best rentals to buy, the ones to avoid, and helping you grow your portfolio of investment properties.
by Greg Weik
Filed under: Property Management