It’s tempting to think of passive income as money earned while taking in the scenery over at the botanical gardens. But the term is misleading, especially when it comes to managing rental properties. Being a landlord is hard work. It’s a hands-on job that requires a steady local presence and in-depth knowledge of the law. Depending on how limited your time is, managing even a few rental properties can be a hassle. Successfully managing rental properties — and the tenants that come with them — involves minimizing vacancies by finding and screening tenants quickly, responding to maintenance requests in a timely manner, collecting rent, enforcing lease terms, handling tenant turnover, and more. Here are a few reasons why you might want to let a property management group take care of your day-to-day operations.
1. Establish a local presence
For owners and investors who don’t live near their properties, hiring a property management group to handle daily operations makes a lot of sense. It gives you the flexibility and confidence to invest in properties in areas outside of your immediate realm of expertise. In a hot, humid climate like Florida, all manner of insects flourish. A seasoned local property manager will know that leaking faucets and A/C units, loose mortar around windows, and rotted roof shingles all invite termites to take root — and will take preventive measures against it. Up north, weatherizing in winter is crucial to ensure pipes don’t freeze. (It also helps control heating costs.) A local property manager will know to add insulation in overlooked, underheated areas like attics, garages, and under kitchen and bathroom sinks.
2. Find and screen tenants
A property management group knows the local rental market inside out, and will place tailored ads on all the major apartment listing sites, offering incentives and discounts when necessary to attract new tenants. The property manager also screens tenants using credit checks, background checks, rental history, and the wisdom experience brings. But finding quality tenants is not the end of it. Tenant turnover can take a big bite out of your operating budget. Good property managers will minimize vacancies by checking in with tenants regularly to get leases renewed and market soon-to-be-vacant units as soon as tenants give notice to move out.
3. Handle maintenance requests, keep tenants happy
Aside from finding a cheaper place, relocating for a job, or buying a house, renters in a Zillow Rentals study on tenant retention cited maintenance issues as one of the top reasons they moved out. To drill down a bit, slow response times, poor communication, and unfinished work were the main factors driving tenant dissatisfaction with management, and these lapses in customer service made them three times less likely to renew their lease. Fortunately, these are factors you can control. By hiring a property management group you can rest assured that maintenance requests will be handled promptly and efficiently, and your tenants will want to stick around.
This is a good place to point out the difference between a resident manager and a property management group. While a resident manager may be quick to respond to maintenance issues, they may lack the expertise to get the job done right the first time. A property management company is more likely to have relationships with proven vendors, which can help control costs in the long term.
4. Collect rent, manage the books
Collecting rent is easier than ever, thanks to digital property management solutions. You can now receive rent payments directly into your bank account. More comprehensive software packages like Buildium help property managers handle accounting and some business transactional business operations. But there’s no substitute for a dedicated property manager whose job it is to track expenses, provide important tax filing documents, handle leasing, and more.
5. Avoid costly legal mistakes
Federal, state, and local laws regulate many aspects of the rental business. The Fair Housing Act protects tenants from discrimination during the screening process. Security deposits must be held in escrow and returned according to strict laws that vary from state to state. If you’re receiving federal or state grants for providing affordable units it gets even more complicated. An experienced property management group brings in-depth knowledge of the applicable laws in the areas they service. That coupled with detailed record-keeping can help you avoid costly legal mistakes.
Bottom line: If you don’t live near your rental property, you’re not keen on hands-on management, your time is limited, or you just want the peace of mind that comes with not having to deal with maintenance headaches and potential lawsuits, hiring a property management group is your best bet. Your tenants will love you, and pay their rent on time.