The average property manager will charge ten percent of the rents collected once a vacancy is filled, plus an initial retainer to get an account established for each property the manager is hired to get rented. Up front out-of-pocket fees can run a new investor several hundred just to get the property rented in the first place. For a basic $700 rental, you can expect to pony up a grand for the initial retainer plus another $840 in annual management fees. And let's not forget the maintenance costs. If you are a beginning investor, it pays to know how to do what a qualified property manager can do for you. A full-time property manager is a luxury most new investors can only look forward to. Most states require some kind of licensure for property managers, but the typical exceptions to that statutory requirement includes owners and their employees. What that means for you is that if you already employ a small staff or even just a personal assistant, you have all you need to get started managing your new investment.
A good property manager will screen tenant applications checking for credit histories, rental histories and criminal background checks. The reason for the criminal background check is because property managers, not owners, can be held liable for negligently leasing to convicted sex-offenders in neighborhoods with children. An individual homeowner doesn't have that elevated responsibility to the community-at-large. Nevertheless, you may choose to complete a criminal background check on anyone you want by simply logging on to the internet. Local and national criminal histories are available to the public nowadays for a nominal fee, usually anywhere from $15 to $100. Credit checks however serve a different purpose. The reason credit histories are obtained by property managers and by property owners is to gauge the applicant's ability to pay the rent. Obtaining the ability to pull someone's credit history is only slightly more difficult than obtaining the criminal history. There are several third-party credit reporting companies online from whom you can choose to buy a membership. These memberships can be annual memberships or monthly memberships and the fees are quite nominal, usually anywhere from $15 to $25. If you prefer to go directly to Equifax or a similar first-party credit reporting agency, you will have to apply, pay their annual or monthly fee and prove that you have a genuine need to use their service. Once you have the ability to screen the applications of potential tenants, you can take your choice of prospective tenants to fill your vacancy.
Property managers are required to comply with many laws that do not apply to the individual property owner. For example, a property manager must establish objective criteria to select tenants. And although this is certainly a good idea for the property manager, you, as a new investor, can choose to rent to someone based on gut instinct. This ability can allow you to rent to someone who otherwise might not qualify to rent from a management company. The better management companies, for example, generally do not rent to applicants who have filed a bankruptcy petition within 24 months. But filing for bankruptcy relief doesn't necessarily mean the tenant won't pay rent. If that applicant has a good job and no more debts competing for his or her paycheck, he or she will have to rent for about two years before qualifying to purchase another home of his or her own. This is where the individual property owner managing his or her own properties comes in. You can choose to rent to these applicants and usually collect a higher security deposit, an extra month's rent plus perhaps even a higher rental rate (depending on your local laws). Because of the legal limitations placed on professional property managers, often a rental will stay vacant longer than it would have if the property owner was managing his or her own rental.
What's important to the beginning real estate investor is not managing the lives of the tenants or memorizing the laws applicable to third-party property managers, but managing the new investment. The new investor wants to make money. Doesn't it make more sense to start your real estate investment business by collecting $8,400 in your first year? Or would you rather pay $1,840 to your manager and lose a month or two in rents netting about $5,160? It's your choice, but do the math and put a value on knowing how to do what you will someday be able to hire someone else to do for you. As you likely already know, running a successful business means knowing how to run it from the ground up. Real estate investing is no different in that respect. Know what you are doing. Then, when your investment business can afford it, hire an experienced, trustworthy property manager, then sit back and relax like you always knew you would.
Wolfgang_O
0 comments:
Post a Comment