A recent national survey conducted by Opinion Research Corporation—the same firm that does polls for CNN—found that more than half of investors said they would definitely be interested in investing in a rental property if they didn’t have to be a hands-on landlord, and had the assistance of a reputable company to handle the selection, purchase, rehabilitation and management of rental homes.
Finding and overseeing a professional management company is a critical service that HomeUnion® performs for its customers. The boom in single family rentals has created a fast-growing business for property management firms in dozens of markets across the nation. These management companies make it possible for investors to move beyond their own local markets and invest where conditions are best for cash flow and appreciation. It can be easy to get overwhelmed by the sheer number of potential management companies out there – this is where HomeUnion®’s service comes in. The companies that we work with have gone through an extensive vetting process so you can rest easy that your property is in good hands. If you want to look for property management on your own however, below are 5 things you should look for when choosing a property manager.
Good Management Opens Up Distant Markets
A great management company maximizes the return on your investment by holding down repair and maintenance costs, keeping rents in line with local market increases, and above all, keeping your property rented to responsible tenants who will pay their rent on time and respect your property.
On the other hand, bad management can cost you dearly. Poor maintenance reduces the value of your property, making it difficult to collect rents on time or raise rents. A property that goes vacant for months at a time wreaks havoc with your bottom line.
5 Traits to Look for in a Property Manager
The 80/20 rule of the landlord-tenant relationship dictates that 20 percent of your tenants will be responsible for 80 percent of your grievances and headache. The added value a good property manager brings to the relationship starts at the very beginning, with a very thorough tenant screening. Managers have access to the range of services that conduct credit checks, employment verification and criminal checks. A credit report covers the past seven to ten years and reveals late or delinquent in paying rent or bills, including student or car loans, criminal convictions, lawsuits such as a personal injury claim, and more. Are there discrepancies between an application and a background check? What does their current landlord say about them? Do problems surface when references are checked? Are there red flags, like tenants who have sued landlords or been evicted?
A good management company has procedures in place that quickly vet prospective tenants and weeds out problems before problem tenants move in. Ask how tenants are screened and the quality of their tenant population. What percentage of rents is paid on time? For more answers on tenant screening and management check out this guide on tenant selection.
Just as a good management company has a variety of online tools today to check out tenants, the Internet offers a variety of handy tools to find out whether a company has legal or financial problems.
However, take tenant complaints on sites like Yelp with a grain of salt. A few gripers may not represent the majority of a management company’s tenant population. Moreover, complaints about rent increases, higher deposits and a no-tolerance policy with regards to late payments may be signs of managers who are taking good care of their owners’ interests.
Craigslist can be an effective way to find tenants. However, you’ll sleep more soundly if your management company is sophisticated at tenant marketing, with a variety of proven tools at their disposal. Good property managers work with large local employers—such as company headquarters, universities, hospitals, and local governments—to provide housing for new hires. In addition to having a good web site, they know how to use local and national rental sites. They’re good at social marketing. They also know that there’s nothing wrong with a good old fashioned yard sign, either. Be sure you know what tactics your manager may use, because you will pay for them when the time comes.
How long single family rental tenants stay varies greatly by market and property type. A national survey of tenants in 2013 found that single family home tenants are 25 percent more likely than apartment tenants to stay in their current homes five years or longer. One out of four (26%) single-family tenant plans to stay in place five years or more, compared to one out of five apartment dwellers (22%).
Retention clearly will have a major impact on your bottom line. Even if you should be so lucky as to avoid a vacant month when a tenant leaves, you are going to incur some marketing costs to find a new one.
Review your management company’s retention record carefully. Are they aggressively marketing to families and older tenants who are more likely to stay longer? Or are they filling their properties with tenants who last only one or two years?
Another option to consider is guaranteed rent insurance that protects property owners against loss of rent for a relatively small annual fee. Guaranteed rent policies generally don’t cover the first month that the property is vacant. These policies are often sold with property owner’s insurance, which insures rental building and contents owned by the property owner.
Property management is a term that covers a wide range of specialties ranging from shopping centers and office buildings, to apartment buildings and single family rentals. The difference between managing apartments and single family homes is significant. Apartments have hundreds of tenants under a single room with common mechanical systems, centralized security and only a few yards of grass to cut and sidewalks to clear of ice or snow. The same number of single family tenants are scattered all over town, each in unique structures with differing maintenance requirements and each with their own lawns and sidewalks. Apartments have one owner. The same number of tenants in single family rentals may have hundreds of owners.
,You definitely want a management company with extensive experience in single family rentals–someone who has systems in place to manage and maintain separate properties, and who knows how to communicate with a large number of owners simultaneously.
The single family rental boom is only six or seven years old, and in its early years it was centered in a dozen or so markets. Outside of those markets, in places like Las Vegas, California, Phoenix, Atlanta, Orlando, South and Gulf Coast Florida, the number of management companies that have experience in single family rentals are fewer, and most have less experience. However, there are good companies out there who are ready to serve you. As the owner of a single family rental property, it is extremely important that you do your own due diligence, and make sure the company you choose is capable of managing your property and handling your needs.