I may be moving from a house that I purchased 1 year ago and am very much interested in keeping it as an investment property. Since I will be relocating to another state I know I would need a property manager to oversee the property. What kind of resources are available to help me choose a property manager? The following is a list of some of the questions that I have:
- What are my responsibilities as the property owner?
- What are the responsibilities as the property manager?
- Approximately how much would it cost to have the property managed and maintained by a property manager?
- What kinds of questions do I need to ask when trying to choose a property manager?
- What expenses would be tax deductible? Is the interest paid on the mortgage (or any part there of) still deductible?
- If you can provide me with a list of available resources that can help me answer these questions and the many others that I have, I would greatly appreciate it.
Thank you in advance for your assistance.
Thanks for writing. Here are the answers to your questions.
What are my responsibilities as the property owner?
About the only responsibilities you’d have as a property owner once you hire a property manager are to make the mortgage, property tax and insurance payments. Even so, some property management companies would do that for you (for a price). But, of course, those payments would remain your responsibility. If the property manager didn’t make them, the excuse that “he was supposed to pay you but didn’t” wouldn’t work very well.
Of course, you always have the ultimate responsibility for the maintenance and repair of the property, even with a property manager. You certainly wouldn’t want to leave the responsibility totally in his or her hands. Two things could happen, neither good. One, he or she might not take as good care of the property as you would prefer, thus driving down your rents and creating deferred maintenance, both costing you more money in the future than they would if they had been taken care of in a timely manner. Two, your property manager might spend too much on repairs and maintenance, thus eating into your profits.
You could also undertake some responsibilities, depending on how much you wanted or were able to do. For example, you could approve tenants. And that is something you might definitely want to consider. I hear horror stories occasionally about property managers not being as careful as they should in selecting tenants, partly because of their fee structure (more about that later). One way to combat that is to create for the property manager a list of rental criteria (possibly even with his or her help and consultation on what is reasonable for the property and the area). Then you could make the final selection from those who met the criteria.
That involves a much longer and more complicated procedure than I am explaining here, and has many considerations regarding the Fair Housing Law. However, your property manager should be well versed in Fair Housing compliance. If he or she is not, find another property manager in a hurry: it could be a lawsuit waiting to happen
Your responsibilities would also include approving any repairs or capital improvements over an agreed-upon amount. Obviously the property manager should not have to call you to approve having someone fix a running toilet or broken window, but should get your approval for an exterior paint job, a new roof, new carpeting and such.
What are the responsibilities as the property manager?
- Collect the rent.
- Take the calls from the tenant.
- Arrange for repairs.
- See that the repairs are done properly.
- Send appropriate notices to the tenant for late or nonpayment of rent, violations of the rules, etc.
- Do or oversee evictions.
- Get your approval for major expenses.
- Inspect the property occasionally
- Provide you with an accounting of all money received and disbursed monthly or quarterly, as well as keep a client trust account for owner money. State law regulates property managers much as it does real estate agents. And every state is different.
- And whatever else you agree upon between you. In fact every responsibility of the property manager is agreed upon contractually.
Approximately how much would it cost to have the property managed and maintained by a property manager?
Starting point is about 5% of the gross rents and it goes up to a maximum of 10%. But that is just part of it. Some property managers will charge you a set-up fee, for advertising a vacant unit, for trips to the property. Find out what their fee schedule is before you use them. Call several property management companies to ask about their fees. Don’t suggest anything to them, let them try to sell you. They will tell you what is important to them, what they believe their best service is. Then compare that with the others you call.
One thing to be particularly concerned with is if the property manger gets paid when the house is vacant. If he or she does not, they could be in too much of a hurry to get the place rented to be as careful as they should about tenant selection. They just want somebody living there so they can get their 5%. You see, if they rent to a tenant who tears up the property, you get to pay for repairs, not them. Another good reason for you to approve all tenants.
The apparently cheapest may not be the best. A “teaser” rate of five percent could be hiding some much higher back end charges. For example, the five percent might only apply if they only have to collect the rent and send you an accounting. If they have to do anything else, such as arrange for repairs or check references, they might charge you by the hour, thus quickly eclipsing any higher rate another management company might charge. Another company might charge eight percent, but includes all other services in that eight percent.
What kinds of questions do I need to ask when trying to choose a property manager?
I think I covered that above. But ask for references, and check them. The most important point to remember is that you are turning your property over to someone you don’t know to manage for you, and you will be many miles away. You won’t be able to just drive by and see how it looks.
At least as important as asking the property manager questions would be asking the property manager’s clients questions. Get a list of references, and call them, just as you would landlord references.
What expenses would be tax deductible? Is the interest paid on the mortgage (or any part there of) still deductible?
All management expenses are deductible, as well as repairs and maintenance. Your mortgage interest is still deductible, as are your property taxes and insurance. In fact, all your expenses, including sales tax and going to inspect the property a few times a year, are business expenses. Plus, of course, you have depreciation to deduct, once it becomes rental property. Ask your accountant about any things to watch out for.
If you can provide me with a list of available resources that can help me answer these questions and the many others that I have, I would greatly appreciate it.
The National Association of Residential Property Managers (NARPM) – is an association of real estate professionals who know first-hand the unique problems and challenges of managing single-family and small residential properties. NARPM offers training and designations for the manager specializing in residential property management. These certified managers are designated RMP and MPM. In addition companies can be certified as CRMC. Only property management firms that are headed by an MPM® and that demonstrate the highest level of professionalism are eligible for the Certified Residential Management Company (CRMC®) designation.
The Institute of Real Estate Management (IREM) – is an organization of professional property managers. It is a subgroup of the Realtors and issues professional designations such as Certified Property Manager (CPM). So if you see a property manager with a “CPM,” you can figure that he or she has taken the time and spent considerable money to learn a good deal about the business. When you look in the yellow pages for property managers, you will see some of them advertise themselves as CPMs. Other designations to look for are ARM and AMO. These professionals have also spent considerable money and time to acquire the skills necessary to become an expert in their field.
All Property Management – is a national directory of property managers and resource designed to help landlords find and select the best property manager for their needs. Property owners can search by property type and zip code to find property managers that service their location. Then owners can compare and select managers to get more information about the company and even a free quote on the cost of managing the owners property.
19 Comment on “How to Choose a Property Manager”
June 25, 2013 at 11:59 am
There are many things to consider when looking for a property management company in Minnesota. Like what fee they normally charge for the entire process, what docunments we will receive from thir side? Find out more information of the company you are going to select and check their work experience and their customers services they are offering.
June 30, 2013 at 6:46 pm
Property management is a tough job. It could be easier if landlords and professional property managers get trained and stay up to date on current topics. Unfortunately most do not and they find themselves in unwanted, costly situations. Either a landlord gets educated and stays educated or they hire the best property managers to do it for them. It’s a mistake to think anyone can do property management without learning the secrets from a seasoned professional like Bob Cain.
July 31, 2013 at 11:48 pm
Thanks Bob, I am a new 3 year home owner and have no idea about leasing. Im highly considering Leasing my townhome. Your info is very helpful.
August 18, 2013 at 2:21 am
We own property in Florida but live in the north. We’ve had six property managers in 12 years. They are arrogant, don’t want to answer questions or explain where & why your money is going. If you need a hot water tank all they want to do is say to you, you have to replace a hot water tank & that will be $700.00, thank you. We had one property agent steal from us $600.00 when we were leaving their company. Don’t count on the NARPM to do much either. Because it looks better for them if they don’t lose a tenant they will cowtow to the tenant, not to the owner. Most of the agents in FL. charge 10% plus even if you want to take over managing the property yourself they get paid that 10% a month until the tenant they put in there moves.
Boise Property Management
October 17, 2013 at 2:13 am
Extremely valuable information. Especially the part on pricing. Get it in the contract! If you have any questions get it in the contract. Many people get sucked into paying unnecessary or unknown fees. Thanks again for the post.
December 23, 2013 at 9:47 am
Hi, all the time i used to check web site posts here
in the early hours in the dawn, as i love to gain knowledge of more and more.
December 30, 2013 at 8:30 am
Some investors think that managing a rental property is like a walk in the park. However when they finally acquire that building, it turns out that managing it can produce more headaches than the whole acquisition process ever did. Below are some factors to consider when thinking about hiring a rental property manager. First time investors can rack up costs because of inexperience. The more units you have for rent, the more responsibility you need to take on as a landlord. Hiring a rental property manager can ensure the timely collection of rent, decreased response time to complaints, and general upkeep of the property. Get more tips at : http://www.us4real.com/why-to-hire-a-property-management-company
green coffee bean extract
January 15, 2014 at 4:10 pm
That iss a very good tip particularly to those fresh
to the blogosphere. Short but very precise information… Appreciate your sharing this
one. A must read post!
questions and answers
January 17, 2014 at 3:54 am
I constantly emailed this website post page
to all my associates, because if like to read it after that my contacts will too.
Check out my blog questions and answers
February 25, 2014 at 8:39 am
Excellent post. I was checking constantly this weblog and I’m
inspired! Extremely useful information particularly the closing section 🙂 I care for such info much.
I was looking for this certain information for a long time.
Thank you and best of luck.
March 3, 2014 at 10:56 am
It’s a mistake to think anyone can do property management without learning the secrets from a seasoned professional like Bob Cain.
March 4, 2014 at 6:02 pm
Thanks for the compliment, but I stand on the shoulders of the experts and scions of the industry. That’s where I get my ideas and inspiration.
April 5, 2014 at 8:21 am
If you are going for most excellent contents like me, simply
pay a visit this web page daily for the reason that it offers quality contents, thanks
barbie princess games and videos
August 9, 2014 at 7:05 am
whoah this weblog is fantastic i love reading your articles.
Stay up the good work! You recognize, lots of persons are hunting round for this information, you could help
barbie princess games and videos
August 21, 2014 at 3:10 pm
This really should learn how to effectively learn his place puppy training in your
dog for service dog training. When used correctly
to guarantee our pet, the dog will quickly learn to like the
old PetSafe 400 remote trainers.
My page: bing.com – Meridith –
Madera county sheriff candidate
October 3, 2014 at 4:25 pm
I pay a quick visit every day a few web pages and websites to read articles or reviews, however
this webpage provides feature based articles.
SEO Services Philly
October 5, 2014 at 10:27 am
I’ve read a few just right stuff here. Definitely worth bookmarking for revisiting.
I surprise how much effort you set to create one of these magnificent
One Agency Sorell
January 17, 2015 at 9:44 am
Choosing a property manager is not a tough task as it sounds. By asking some important questions from the manager while hiring, one can hire the right property manager.
Steps to Selecting the Right Property Manager | MRS Management
February 2, 2015 at 7:48 pm
[…] so it’s important not to just hire anyone to manage them. You want to make sure that the property management company that you hire is responsible, and has a good reputation with both tenants and property […]