Property Management Blog

If you have a property that generates income, you probably want to maximize your profits without too much wear and tear on the property itself. Finding the right tenants and keeping the property occupied and well-maintained can help you produce more income over a longer period of time.
However, if you have a full-time day job, you may not want to spend the time or effort to do the legwork yourself. That is just one of the many reasons that you need to hire an experienced property manager to look out for your interest.
Still not convinced you want to give a slice of your income to a third party? Keep reading to find out what a property manager can do for you.

6 Reasons You Should Hire a Property Manager Today
Property managers act as a buffer between disgruntled tenants and busy owners. They can prevent you from getting too personally involved and pulling up stakes on a good investment. As an investor, you must decide where you can best spend your time. Chances are, looking for other properties, concentrating on your career, or spending time with your family takes priority over managing rental properties. At least, that is the way it can be when you work with a property manager you trust.
Here are just some of the ways an experienced property manager can make you glad you hired them:

Finding the Right Tenants
Property managers have expertise when it comes to advertising properties and matching them up with the right tenants. By screening tenants for their background and ability to pay, property managers can help you avoid late rental payments and evictions. In fact, many property managers have a list of tenants looking for properties like yours.

Setting the Right Rental Rates
You may have researched rents in the area prior to buying your investment property. However, property managers have their pulse on what tenants are willing to pay. Property managers walk a fine line between maximizing the monthly rent and setting a competitive price so that you can minimize vacancy rates.

Collecting Rents
As a bonus, property managers also show the property, collect rents and deposit them into your account. This concierge service allows you to enjoy an additional revenue stream without the hassle of dealing with tenants and maintenance. Typically, property managers have access to advanced systems that make it easy for renters to pay online. They could even have payments go directly into your bank account.

Marketing and Advertising
Property managers have a knack for finding the right websites to market your property. They craft compelling property descriptions and take photos that show your property in the best light. This puts your apartment, townhome or single-family home in front of the right renter at the right time.
Managing Vendors
This doesn't apply to every property owner. However, if you own a large commercial apartment building, property managers can serve as the point of contact for vendors, maintenance workers and construction teams. By trusting this task to your property manager, you can save money in the long run. Property managers will work hard to find the best price for each job. As an owner, you may not have time to do that.

Property Managers Know the Law
Perhaps you have done extensive research into all the laws that apply to renting out property. However, property managers have practical experience dealing with hundreds of properties and a diverse set of owners with unique needs. Property managers know the state and federal laws that apply to being a landlord inside and out. They also understand the responsibilities of tenants, such as paying the rent on time and respecting the rules laid out in their lease or other agreement.

This makes your property manager an invaluable resource when it comes to any legal matters associated with your income property.

Home warranties are frequently misunderstood because they are often confused with insurance policies. Warranties are a service contract designed to cover certain types of repairs but usually reserved for items such as major kitchen appliances, along with electric, plumbing, and HVAC systems. These policies do not cover most problems that insurance policies cover.
Home warranty companies promote their products to cover unexpected breakages. Many rental property owners often question whether a home warranty is worth the expense. While, in some cases, these might be worth the investment, if you own a rental home, they might not be the best option. Here is why.

Extra Costs
Warranties have basic items the company will cover, but certain types of properties will incur extra costs. For instance, brand new homes space more than 5,000 square feet, and separate structures on the property are not usually covered in a basic home warranty policy. Additionally, even if your property aligns with the criteria to be eligible for a basic policy, if you call for service, you will be charged anywhere from $75 to $125 for an assessment from a technician.

Not Guaranteed Coverage
If a problem is discovered, resolution may involve multiple contractors, which can incur additional assessment costs. Furthermore, exclusions are common – there is no guarantee a warranty will cover certain problems and you will pay for the repairs. Before investing in a home warranty, it is important to read every line of the contract in detail to know what will – and will not – be covered. Also, check to see if there are any limitations. Many warranty companies will cap how much they will pay out per year for repairs.

Responsiveness Is Not Always Timely
One of the most significant drawbacks of home warranties is companies do not always respond to calls in a timely fashion. As a result, your tenants may suffer if the HVAC system breaks, or they have no water. If they experience too many problems, it’s possible to lose tenants. Not to mention, you’ll have to restart the advertising and vetting process to find new ones, which is also more costly than retaining great long-term tenants.

Poor Maintenance Leads to Denials
Home warranties will not generally cover any poorly maintained components. In other words, if your tenant is responsible for cleaning/maintaining certain components (e.g. appliances or having the HVAC system serviced every year) of the home or apartment and they don’t fulfill their end of the bargain and breakages occur, the home warranty company may deny the claim. Or, if your property is older, some warranty companies will try to use the “poorly maintained” reasoning as a basis to deny the claim. If you do buy a warranty, keep careful track of all maintenance records.

No Say in Replacements
If a home warranty company deems an appliance or other home component needs replacing, they make the decision. You most likely will not have a say about what brand or model is purchased as a replacement. It is an important consideration if you want to take the chance of replacing quality installations with lower-grade ones.
An investment owner must carefully weigh out whether home warranties are worth it. While they could save money, they also carry risks.
Always check a company’s reputation with the Better Business Bureau (BBB).
Carefully read all components of a policy.
Ask relevant questions.
Double-check the dollar amounts covered.
You may find one repair that might wipe out your allotment for the year and make the purchase of a home warranty cost-prohibitive. In that respect, you are better off creating a repair fund and putting aside money to cover repairs and breakages. You will also have control over the repairs and what contractors are used.

Embarking on a relationship with a new tenant is like starting a new friendship. Communication that is transparent, honest, and respectful is key to developing professionalism and trust. Communication is a two-way street and starting off by laying the ground rules and expectations can make a big difference in the landlord/tenant relationship. When landlords build positive relationships with tenants, they are more likely to renew their rental agreements or leases.

Get to Know Your Tenant

Knowing how a tenant likes to communicate is instrumental. Different generations and age groups prefer different methods. According to Statista.com, 49 percent of renters are under the age of 30, and according to propertymanagement.com, 34.4 percent of renters are under the age of 35. Getting to know how this younger generation communicates and gets their information is key. Unlike older adults who prefer telephone and USPS mail, for example, younger renters prefer to use their mobile devices. They constantly use their smartphones and other mobile devices via email, texts, and social media messages. Getting familiar with how individual tenants are comfortable communicating is key.

Tips for Effective Landlord-Tenant Communication and Outstanding Customer Service:

• Set Consistent Hours: Setting specific times/office hours that you are available provides consistency. This includes reading and responding to emails, texts, private messages, etc. This portrays professionalism and allows you time to research and resolve any issues the tenant has.
  Provide After-Hours Contact Information: 
• Provide tenants with after-hours contact information so in the event of an emergency they know who to contact and how.
• Listen to Tenant Input: Communication is a two-way street. Before jumping to conclusions, listen closely to the tenant's concerns and issues. As a landlord, this input can help you improve policies and procedures. It also shows the tenant that you are genuinely interested and concerned about them.
• Keep Your Promises:  It is imperative that when you promise a tenant something or schedule a meeting with them, you fulfill that promise. It is also equally important that you respond to emergency requests. You may not consider it an emergency, but they do, and not responding could portray apathy on your part. If you know you are going to be late or not make a scheduled meeting, inform the tenant as soon as you know. Plus, if you forget and miss a meeting, apologize, and proceed to take care of the problem. This will gain their trust and respect.
• Maintain A Professional Relationship: There is a fine line between being friendly and becoming friends. Landlords should maintain a professional relationship with their tenants and steer clear of forming close friendships. This could blur the lines and create an awkward situation if something happens to the friendship, and they continue living on your property.
• Nurture Long-Term Relationships: Landlords that nurture professional relationships with their tenants show they care about them. Consider sending birthday and holiday cards via the mail, like their social media posts, and recognizing other important events in their lives.

Create A Welcome Packet

Start your landlord/tenant relationship off on the right foot. Make a positive first impression by presenting new tenants with a Welcome Packet. Fill it with information that will help them navigate the neighborhood and community. It can be as simple as a bag filled with a handwritten welcome note from you, and coupons to local establishments and restaurants. Go one step further and include snacks, fruit, and bottled water. They are sure to appreciate your thoughtfulness and look forward to a positive long-term relationship.

Real estate investors often struggle with whether buying a fixer-upper to rent out is worth the effort. The truth of it is, there is no clear-cut answer to this question. 

Location
As the old saying goes, “Location, location, location.” Whether a rental property is a lucrative investment boils down to its location. A fixer-upper might be found at a fantastic price point, but if it is not in a desirable location, will all the money invested to bring it up to standards yield a good ROI?
In cities that are highly desirable and in-demand, chances are the answer is yes because you could move tenants in quickly and charge a premium rent. However, if the property is in a distant suburb with poor commuting, the answer would likely be no because you might find it difficult to recoup what you have spent as opposed to purchasing a turnkey property in a less desirable location.

State of Repair
A fixer-upper property might only need some solid TLC to bring it back to life. Others might have significant damage that would be expensive to fix to make it safe and livable. Even if purchased at a rock bottom price, would the length of time and expense needed to get it to the condition where it is rentable be worth the effort?

In some cases, if the work needed is mostly cosmetic or consists of basic repairs, the answer would likely be yes. Especially if you have DIY skills or work with a network of contractors who you trust to do good and timely work. In this case, you increase your chances an ROI can be achieved in a timely fashion. In other situations, if structural problems are why the home is priced low, you might want to steer clear. For instance, if the foundation is damaged, property needs asbestos removal, contains significant amounts of mold, meth damage has occurred, or has septic/sewer problems, chances are this is not the best investment.

The time and expense might be too much to even get you to the breakeven point, especially once factoring in any additional unexpected and hidden renovation costs that are always a risk when purchasing any property. Instead, seek to invest in a property that needs little to no major repairs to make it rentable.

Asking Price
A low asking price is one of the primary benefits of buying a fixer upper. These properties tend to sell at much lower purchase prices than houses that do not require remodeling or repairs. If a seller is motivated enough, they may even be willing to accept a lower asking price. Another benefit is a fixer-upper often comes with lower property taxes when compared with other homes in the area because taxes are charged on a property’s assessed value. Houses that need substantial work will typically have a lower assessed value.

Always have your own home inspector examine a fixer-upper so you can gain an honest assessment of the level of repairs and/or remodeling needed. If, after looking at the results and doing a cost analysis, it strongly appears your after repair value (ARV) will yield a good ROI, chances are the property would be a smart investment over the long term. Especially if you can quickly list it and fetch a good rent. However, if it appears it will be a while before you can start to break even or see any kind of ROI, you might be better off identifying a turnkey property to invest in.

Tenants may not consider renters insurance a top priority in this current economy when every penny counts. Landlords may think that this insurance is only for the benefit of the renters, so if the renter balks at carrying this coverage, the rental property owner may not require it.

There are many reasons landlords or property managers should require renters to carry renters insurance. This insurance benefits both renters and landlords.

The lease agreement should have as one of its terms the requirement that renters provide proof of insurance at the time the lease is signed. If the renter does not have proof at that time, the landlord should not allow the renters to move in until proof is presented.

1. Reduces the possibility of lawsuits by the renter against the landlord.
If there is a break-in and a tenant’s property is stolen, the tenant may try and sue their landlord for the lost belongings. If the tenant’s personal property is stolen, damaged by fire, water damage, natural disaster, water overflow, and more, their losses are covered by their own insurance policy and there is no need for a lawsuit.

2. Protects landlords and tenants when renter’s negligence is responsible for property damage.
If the renter accidentally starts a fire or lets the water overflow in the bathtub damaging the carpet and the floor, for example, renters insurance will pay for this type of property damage. The landlord will be responsible for repairing the structural damage.

3. Loss of use.
If the property is damaged by a natural disaster to the extent the tenant must vacate, if tenants have renters insurance, the policy will pay for a hotel for a time while the property is repaired. This makes it more likely that tenants will wait for the damage to be fixed and move back in instead of vacating the property and finding a new place to live. Additionally, depending on the state where the property is located, the landlord may be required to pay the loss of use expenses if the renter does not have renters insurance.

4. Tenants have money available to pay for lost and damaged items.
If tenants had to replace their stolen or damaged property themselves without insurance coverage, they would have less money to pay their rent.

5. Helps you find responsible tenants.
Renters insurance is relatively inexpensive. It is generally around $20 a month. If a renter claims renters insurance is too expensive, you likely do not want to take a risk on that renter being able to pay the monthly rent.

6. Protects you and the renter from third-party liability.
If a tenant’s visitor trips on the renter's area rug, or gets bitten by the tenant’s dog, the renter's insurance will pay for medical bills and other damages suffered by the visitor.

7. Allows landlords to be pet-friendly.
Approximately 67 percent of all Americans own pets. If the tenant is required to have renters insurance that will cover liability and damages if the pet bites someone or if the pet causes property damage, relieving the landlord of liability, it may expand the pool of potential renters available for the property.

8. May prevent raises in landlord’s policy premiums.
For every claim submitted by a landlord, the premiums are generally raised. If tenants have renters insurance and submit claims to their own insurer, the number of claims submitted by the landlord will not increase which should also prevent the premiums from increasing.

9. Appeasing landlord’s insurer.
A landlord’s insurance company may offer lower premiums when a landlord requires tenants to have renter’s insurance.

10. Peace of Mind.
A landlord can have peace of mind about possible financial losses when tenants have renters insurance.

Landlords should discuss the requirement for renters insurance and the benefits to the tenants of having a policy in place prior to signing the lease agreement. Tenants should understand if they cancel the policy or let it lapse, they are in breach of contract which is grounds for eviction.

Purchasing a rental property can be a terrific investment. Especially one that already has a demonstrated history of maintaining steady occupancy. Before taking the plunge into this investment area, it is important to not assume the property is vacant. Acquiring an investment property with already established tenants has its pros and cons, here is what you should consider.

Pros of Buying an Occupied Rental Property

Inherit a Turnkey Property

Since the property is already housing tenants, there is an extremely high chance it’s in good condition and should already meet local regulations, health and safety standards, and zoning codes. This means little work for you to do. However, it is a smart strategy to hire a home inspector just in case the previous landlord or owner skirted rules. You do not want to inherit any legal headaches.

Gain an Instant Cash Flow

Owning an already occupied property means instant cash flow. Most new property owners will be faced with immediate mortgage payments, and steady passive income rolling in can help offset this expense. You will not need to scramble to find tenants to gain your revenue stream.

Needed Repairs Done by Seller

During the purchase negotiation, like any other property, buyers have the right to ask for certain repairs to be completed before signing an agreement. This means any necessary repairs are done at the seller’s expense, not yours.

Can Save Money for Future Renovations

Living space should theoretically be in good shape since there are established tenants. However, like any other property, wear and tear will occur. You are likely not going to want to do any major renovations while the space is occupied, but since you do not have to invest in finding tenants, you can focus on planning and saving for upgrades that yield a good ROI. This way, in the future you can market and rent the property at a higher price after you have made improvements.

Cons of Buying an Occupied Rental Property

Must Keep Existing Lease Terms

As a new landlord, you cannot just come in and raise rents, nor can you modify the existing agreement regarding pets or other policies. You must wait until the existing tenants' leases are up before you can set renewal rental terms. Additionally, if you inherit undesirable tenants, you’re stuck with them until their lease is up (unless you have legal grounds to evict them).

Cannot Conduct Tenant Screenings

Established tenants have already been screened by the previous owner or property manager, and you will have to rely upon their screening. Before you can begin to conduct your own screenings, you will have to wait until leases expire. In the meantime, what you can do is obtain as many details as possible to determine how the previous screenings were conducted. Which leads to…

Might Gain ‘Problem’ Tenants

Most tenants are good ones who will pay rent on time and treat your property like their own. Unfortunately, with already established tenants, you do run the risk of having a problem tenant. They might not pay rent, destroy the property, or disturb other tenants and neighbors.

Risk of Inheriting Major Flaws

Every new owner runs the risk of the previous owner not maintaining the property up to code. If it turns out this is the case, you might be in for expensive improvements or must face legal battles.

Do Your Due Diligence

If you plan to buy home with tenants as an investment property, be sure to do your due diligence by:

• Reviewing current lease agreements and ensure they meet all local tenant laws.
• Ask the seller questions about their tenants and for proof of payment history.
• Inspect the property to see how the tenants treat it.
• Verify security deposits and make sure they appear on the settlement statement.

Committing to a pre-existing lease agreement comes with its pros and cons. However, if you go over details carefully, consulting with an attorney, and learn everything you can before you buy a rental with tenants in place, this will help you decide if the investment is a good one.