Almost anyone can be a landlord and the extra income can be great…but owning even one rental property can be a huge headache! Do you have the time and skills to handle it properly?
A landlord is responsible for providing a safe, smoothly functioning home for their tenants. That means making sure plumbing, wiring, and appliances are working, outdoor areas and stairways are safe, and having the ability to quickly respond to all problems. It also entails advertising the rental, screening potential tenants, and evicting them if necessary…all while staying within the strict guidelines of the law!
Before you even begin to tackle these tenant issues, you should determine whether or not your property is a good, potential money-making candidate.
Things to consider:
- How much will it cost to keep it going…including mortgage payments, utilities, maintenance, repairs, etc.? Is it in good repair, in a safe part of town?
- Estimate your rent price. Adding up the costs involved is not enough. Check around your area for competitive rates on other similar rentals.
- Compare the rent to your costs. Create two Profit and Loss statements, one best-case and one worst-case scenario. Will it make a profit? Are there other reasons you want/need to hold onto the property?
Once you have determined your property is a good rental, you need to decide if you can handle those tenant issues we mentioned earlier; maintenance, tenant screening, and the law. Yikes! It might be time to consider calling in the cavalry…or in this case, a property management company.
What can the right property management company do for you?? The right company will act on your behalf in all matters concerning the upkeep and management of your rental. Some of their most common duties:
- Repairs and maintenance problems
- Collecting rent
- Performing credit checks and background checks on prospective tenants
- Keeping current with local tax codes, as well as building and neighborhood requirements
The major benefit is the amount of time saved and hassle that is avoided by you, the owner. Typically the property management company will charge a fee based on a percent of the rent collected and amount of work involved to maintain the property.
Tenants will benefit by having a central contact for reporting issues, asking questions, and response times can be much faster!
How to pick the right one? Ask about the following items when you are interviewing…
- Communication – Is there fast and easy communication? 24 hours/7 days week??
- Evictions – Do they handle them? Is there an extra fee?
- Additional fees – Discuss any and all of them up front!
- Agreement Terms – What if you decide to end the relationship? Is there a penalty?
- Advertising – Where do they advertise? Newspaper, online? Will they put up a rental sign?
- Rent Checks and Deposits – Will they mail them to you or direct deposit?
- Landscaping / Yard Work – Do they handle these services? Cost?
- Section 8 Tenants – Do they handle them? Are they familiar with the rules and procedures? This requires a lot of extra time and paperwork each month!
Rental properties can be a real challenge for investors. Find the plan that works best for you…reduces your stress, AND maximizes your profits!