The property management business is a really good idea for someone who wants to make a decent income without taking too many risks.

My foray into property management was purely by chance. I had about 15 flats in Dundee and employed a full time handy man to collect rents and sort out any minor repairs.

My friend Chris knew that my properties were well managed and he asked if I would look after his mother’s flats. I knew that she was not well and because of her health, in the last year half her flats had lain empty. I reluctantly agreed and started renting out her properties.

I managed to get her occupancy up to over 90%. My charging structure was very simple as I kept 10% of her rent and she also paid all costs. She was delighted with my service and told her friends who approached me to do the same for them. Being busy but not wanting to say no straight away I offered to provide the same service but at 15% of the monthly rent. To my surprise they agreed.

Word of mouth got around and soon I had to start turning people away as I was far too busy managing my packaging company to do property management full time! Had this business not been doing well I could easily have started managing properties full time.

I even managed to buy a couple of apartments at knock down prices when one of my clients wanted a quick sale after his tenants left. They offered me the properties for the same price they had bought them for a couple of years ago.

I knew the market had risen substantially since then and bought them straight away. I spent a couple of weeks doing them up and had them rented out in no time. When property prices started rising strongly I sold both of them, making decent money only to miss out on the real boom in prices!

If you have time on your hands why not consider managing other people’s properties? Be warned though that you are on call 24/7 if an emergency happens at any of the properties.

Naz Daud is the founder of CityLocal. This Business Franchise Opportunity is for people who would like to work from home and be their own boss.

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In addition, somebody has got to be there to manage the property from a financial perspective, collecting and following up on invoices and paying bills, among other things. Who should the check be made out to, and who should the tenant contact if they should have an issue to discuss? Just because you purchased the property does not make you a counselor or consultant, and it definitely does not imply that you have any customer service skills.

This is what a property manager for. They can cover just about all of these things and more, but just like the saying goes ‘nothing in life is free.’ Property managers do charge for their services and you don’t always get what you pay for (or thought you were paying for) in any case. To give you the best tool possible to avoid getting into an issue with a property manager that you are unable to handle, here are some of the most common mistakes that people in your position make, spelled out in plain English so that you know to avoid them.

• Over Paying
Paying too much is the top mistake that first time property manager hirers are guilty of making. Property managers do a lot for your company, and it is important to pay them but nobody said you had to make them rich. Ten percent of the monthly rent paid is a great place to start as far as recurring payments, as well as a set percentage of the first month’s rent of a new lease or a small percentage of the amount of the total leasing amount over the entire span of their time is also okay.

• Hiring a Bozo
Okay, of course nobody is going to necessarily hire Bozo the clown, but if you are going to spend the money to hire a property manager make sure you hire someone who is qualified and knows what they are doing. Of course not every property manager is going to be degreed, but having the right experience in lieu of a degree is an essential qualifier. It may in some cases be okay to give a newbie a chance, but make sure that you are able to spend the time or hire somebody to spend the time to properly train them.

• Hiring One-Sided Property Managers
Many owners find it easier to hire companies or individuals who will do the leasing side of things but not the managing side of things as far as tenancy goes. It is easy to hire someone to do this because it is usually for a substantially less fee than those who do both but don’t be tempted. Those managers who do not have to deal with tenants will be a lot less scrupulous when it comes to selecting them. After al, who cares what somebody is like as long as you don’t have to live around them?

• Hiring a Manager You Would Detest
If you meet your potential new property manager and you feel like you wouldn’t care to deal with them, consider the fact that you might not want to hire them. If you have ever lived near or rented from a property manager that you hated you will understand why, but treat your potential renters as you would yourself. This is also bad for business, so if you want good clientele make sure that you only arm yourself with the best people to deal with them.

• Using Standard Contracts
Make sure that when you hire your property manager, your contract reflects the times. This also goes for your leases. If you buy the pack of contracts or leases from Staples where you simply fill in the blanks, you are leaving yourself open for a lot of holes. Have your contracts done specifically for your situation.

• Signing a Long Lease/Contract
The worst thing you can do is sign a super-long contract with a property manager or managing company; that is, unless you have worked with them for years. If a company provides good service and is consistent and worth the money that will keep you in the game, not some silly contract that can be forfeited or fought in the case of poor management. This is why it is important to have better than a standard contract.

Hiring a property manager can be a real headache and if you are a first timer, that is more than an understatement. That is why it is important to make sure that you do well when you are hiring you property manager, so that you don’t have to deal with it again any time soon.

You want to make sure that you get the best deal that you possibly can, but you want to make sure that your property manager will do a good job for you as well, and you do not have to spend a fortune on them to do so no matter what type of property you need managed. Property managers are supposed to help increase your revenue, not draining it by charging outlandish costs and fees.

Tony Seruga, Yolanda Seruga and Yolanda Bishop of Maverick Real Estate Investments, Inc. work with builders, developers and other players in the commercial real estate industry to acquire and develop properties. They use progressive investment strategies that have proved extremely profitable. In addition to their own deals, they teach both seasoned and inexperienced investors how to be big players in the game. Visit the website for more info.

The manager will be taking on significant responsibilities with the owner’s real estate. It is important to look at the contract and at a minimum it must
1. Name all parties to the contract
2. The legal property address
3. Define the responsibilities of the manager and the owner
4. Enumerate all fees and commissions for leasing or real estate sales.
5. Define the term of the contract
6. Both parties must sign and date the contract

What is Agency?

“It may be referred to as the relationship between a principal and an agent whereby the principal, expressly or impliedly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship.”

Wikipedia

Basically you are signing off and binding the manager to act in your behalf and in your best interest regarding the management of the property.

The Take-away:
1. You should require a current license and go to search your state dept. of Real Estate to see if it is current and that there have not been any complaints or suspensions or revocations of the real estate license.
2. You should also check with your local Better Business Bureau and ask for referrals. 3. Finally, ask to see the general liability insurance policy and if the principals have errors and omissions insurance.

The length of the Contract: Often this is one or two years. Property Managers don’t like a month to month contract because they need to get the tenants into the rent roll and into their system. They also need a little time to learn the property. One year should be a minimum. The Take-away: Be sure that the contract can be voided, without having to provide reason and without penalty with a written 30 day notice to terminate the arrangement. Be sure that your written termination date matches the hire date or you may have a deduction for early termination. If the hire date was on the first, terminate on the first.

Duties and Responsibilities of Managers

1. Maintenance and Inspections: In a general sense they should perform all the duties necessary to maintain and manage the property. You may specify that certain tasks or procedures remain the owners to do. Many owners like to do their own maintenance.

The Take-away: Property management companies often have their own handyman and you should be very clear about how this works. If a light bulb is out and the handyman has to travel back and forth and change the bulbs, there is likely a minimum one hour charge. It could cost you $45.00 to change a light bulb.

2. Major Repairs: you should expect that all major repairs be completed with three independent bids and receipts to back up the billing.

Take-away: To protect yourself, you should establish limits on how much can be spent without having to get your approval. If the bids all seem high, we think you should have the right to bid it out yourself. If you do, you would then be responsible for the outcome and if it was not up to code, the management firm may not want to represent you. So, for those who know what they are doing, this might be a money saving option on big jobs.

3. Inspections: The manager should be there for all city inspections and without any charge. This is part of the management of the property. Take away: you should have in writing that the company will also provide annual inspections and a written report.

4. 24 Hour emergency Service: This is part of basic management. There must be a 24 by 7 response team and there should be no extra charge for this. Its part of the basic manangement of a property.

Tenant Screening and leasing

1. Marketing and advertising the rental: The company should be familiar with the local market and be able to price the unit so that it rents reasonably fast and at the right rent. A poor rental process can cause you time on the market while all the bills still have to be paid. We have seen many companies try to hit home runs with getting the highest price only to be over zealous and cost the owner months of income.

The take-away: Ask the company how much leasing experience they have, how long a property is on the market. How to they come to their pricing strategies and how they intend to advertise, and are there any costs involved. We think that craigslist and a company website should do the job. With the exception of luxury properties, newspaper classifieds are a costly expense.

2. Tenant Screening: What are the tenant screening criteria. he company should be able to clearly offer you a set of rules. This should never be an off hand “we pick em if we like em” approach. Thats a law suit waiting to happen. We will write on fair housing, the federal government’s body of law governing housing and discrimination. meanwhile there are a series of articles at our website you can read if you need to know.

Financials:

All management companies should have accounts online and always available. The bigger companies will have an accountant in the company. Thats a plus.

The company responsibilities are:

1. Track income and expenses to determine profitability
2. Rents and other fees from the property shall be deposited into a special bank account or trust as required by law and cannot become mingled with the company funds.
Issue monthly income statements
3. Negotiate rental agreements
4. Respond to tenant requests and deal with problem tenants
5. The Agent should collect the rents and other income from the property promptly
6. From the rents received the Agent should pay all operating expenses and such other expenses as requested by the Owner. This may include the payment of mortgages or taxes.

Howard Bell for yourpropertypath.com

www.yourpropertypath.com

At Your Property Path we believe that knowledge should be free and freely shared.

Investor Associations

Most cities have a real estate investors association. You should visit the associations in your area and join one that you are comfortable with. Through these organizations you will find educational opportunities as well as networking opportunities. Attend as many of the educational programs as you can. This will help you to become more comfortable with each area of investing. The more areas you have knowledge in the better equipped you are to be able to meet the needs of sellers that contact you. Through networking at the association meetings you will be able to find many of your team members. You will also find other investors who will be interested in deals that you do not want. You can always pass these deals along for a bird dog fee or an assignment fee.

Wholesalers

You will find many wholesalers at association meetings. If you decide to rehab or rent property, a wholesaler will be a valuable source of property for you. They will spend the time and money to find the deal and negotiate with the seller. This allows you to spend your time managing your rehab or rental property. Make sure you verify their ARV (After Repair Value) on the property as well as their repair estimate. As long as the numbers work, you should not mind paying them their “wholesale fee”.

Real Estate Agents

Most real estate agents are not interested in working with investors. This is because they are trained to make “full price offers” on listed property. In every area there are a few agents that do work with investors. These are usually the most successful agents in the area. They understand that a good investor client means easy repeat business for them. You will find these agents by looking at who has the most listings in your target area as well as word of mouth at investor association meetings. These agents are very busy so it may be difficult to establish a relationship with them. However, it is well worth the effort in the long run. They are especially needed if you decide to be a wholesaler. They will have access to most of the bank owned properties.

Real Estate Lawyers

You will need a strong real estate attorney on your team as soon as possible. This person will handle closings for you as well as title searches. They can also give you legal advice as you run across unfamiliar situations (such as a seller in bankruptcy). You should make sure that your attorney specializes in real estate.

Lenders

There are three main type of lenders that you will be dealing with:

Hard Money Lenders – Based on ARV of property, your credit history and close quickly

Conventional Lenders – Based on your credit, current property value, slow closing

Private Money Lenders – Based on your relationship with the individual

You will find all three types at most association meetings. When you are beginning your investment career you will most likely be working with a hard money lender. They are called hard money lenders because they charge pretty hefty fees to make the loan. They will usually loan up to 70% of ARV for a period of 6-12 months. They typically charge 3-6 points up front to make the loan (each point is 1% of the loan amount), interest rates of 12-18% and will hold repair money in escrow to be paid out as repairs are completed. Although these fees sound expensive they really aren’t. It is much cheaper to borrow from a hard money lender than it is to take on a money partner and give up 50% of any profit made. See the following simple example for a comparison using a 6-month holding period, 3 points upfront and 12% interest and a final sales price of $145,000:

Loan From Hard Money Lender

 Sale Amount 145,000Loan Amount 100,000

Points to Lender 3,000

Payments to Lender 6,000

Partner Split 0

Net Profit 36,000

50% Money Partner

 Sale Amount 145,000Loan Amount 100,000

Points to Lender 0

Payments to Lender 0

Partner Split 22,500

Net Profit 22,500

As you can see, hard money lenders are not as expensive as you thought!

You will probably only use a conventional lender when buying long term rental property. Conventional lenders will be necessary when you sell property to homebuyers. A good mortgage broker will be able to find financing for buyers with a variety of credit issues. An average broker will only be able to finance buyers with perfect credit. Make sure you look for brokers who can find financing for people with “A”, “B” and “C” credit. Once you have established a track record as a successful investor you will be able to attract private investors. These are people who have money that they will loan to you in order to get a better return than a bank or the stock market will give them. You can replace hard money lenders with private lenders and stop paying the upfront fees. You may also be able to negotiate a lower interest rate than the hard money lenders charge.

Insurance Agents

There will be two main types of property insurance that you will need. These are “Builders Risk” and “landlord” insurance. When you are dealing with a vacant house that is under repair you will need “Builders Risk” insurance. Builders risk insurance will cover the property and usually the materials being used during the rehab (in case of theft). It is more expensive than a landlord’s policy because of the increased risk. A landlord policy will cover the property only, not the contents. Your renter will need to have a renter’s policy to cover their belongings. Landlord policies usually will not cover vacant property or property under repair. Most agents do not sell both types of policies. Make sure to acquire the correct type of policy so that you are always covered.

Chris Wright is a licensed real estate agent in the State of Georgia and has been an active real estate investor in metro Atlanta for 11 years. He also invests in property in North Carolina and Florida. You may find more real estate investing articles and tips at http://www.landlordspecials.com

It is one of the major assets of most of the organizations. Besides, it also includes all the disciplines that are implemented on property rules and rental policies.

In other words, ‘Property Management’ is yet another career profession, which is a part of the growing business industry.

A property manager’s employment can be in either of the following ways:

1 Directly under the supervision of a real estate property owner.

2 For a property management company.

3 Hired by a legal entity to look after the real estate for a certain period of time.

Following are certain roles played by a property management company and the property managers. These roles are more or less similar to the roles played by management in any business.

4 It takes the responsibility of managing the multiple aspects involved in the ownership of real estate.

5 It acts as a liaison between the landlord and tenant. In this case, they perform duties like posing appropriate gross rent, responding to and addressing maintenance issues, accepting rent, advertising vacancies for landlords, doing credit and background checks on tenant, etc.

6 Apart from managing income and expense related activities, property managers are also required to manage construction, development, repair and maintenance.

7 It is quite essential for the property managers to maintain good relation with the management company, property owner and tenants.

8 Initiating a ‘litigation’ with tenants, contractors and insurance agencies is an important aspect of this profession. However, it is an entirely independent function meant only for the trained attorneys.

9 They also look into legal aspects like evictions, non-payment, harassment, reduction of pre-arranged services, public nuisance, etc.

Following are some characteristics of an ideal property manager:

10 He should have an updated knowledge about new laws and practices in the given localities, cities and states.

11 He should also stay updated on local ordinances.

12 He should be very honest while enforcing property rules and rental policies.

13 He is expected to be well oriented and organized with paper works.

14 He ought to have good communication and computer skills.

15 He should not refrain from working with the public.

16 He should have a strong sense of duty and commitment.

Leasing and Renting versus Buying – Answers From a Las Vegas Buyer Agent – leasing and renting

The same applies to a condominium or homeowners association. The association must maintain the common areas of the property. Of course, these associations have to maintain the integrity of the buildings, grounds, common areas, and amenities.

The process of foreseeing into the future is the very essence of the reserve and replacement process. The Board of Directors is responsible for the financial well-being of the association and for the process of funding of the future repairs and replacements. This responsibility should not be taken lightly by the Board of Directors, who typically are volunteers and often times not knowledgeable regarding repair and replacement reserves.

The Board of Directors should investigate the services of a professional management company. Professional management will make the appropriate recommendations regarding reserves, however the Board and membership have the ultimate decision on the reserves. A sign of a well managed association will have a healthy reserve program to fund future repairs and replacements.

When one hears the word maintenance, you might think of something needing an immediate fix. However, maintenance includes planning for the replacement of all of the items that will wear out during the life of the structure. A property that is poorly maintained may not retain value for the property owners.

The lack of reserves or replacement funds in a community may be taken into consideration by potential buyers. Potential buyers are interested in possible special assessments that may replace or supplement poorly funded reserve accounts. Lenders such as mortgage companies and banks may refuse to grant loans on properties that demonstrate a shortage of reserves or replacement funds. Many lenders will ask for the financials records of the association for up to two years, including the budget, to assist in their evaluation of the property.

A lack of reserves in an association also exposes the residents to high and frequent special assessments in older communities, poorly maintained communities, and weather disasters. In addition, not all residents in a community may be able to absorb the financial responsibility of a large assessment, whereas reserve amounts, taken out of the monthly maintenance assessment are easier to swallow.

Michael Mattiace is a licensed Community Association Manager in Florida for the past 16 years. He has managed an assortment of small to large associations, created budgets, supervised maintenance projects from the very small (ant piles) to the very large (concrete restoration). Visit his blog for lots more advice at http://www.AskThePropertyManager.com

• Your property manager will be receiving rent and fees on your behalf. A crooked manager could steal you blind.

• Your manager will be in charge of finding new tenants. A naïve or slipshod manager could bring in bad tenants who trash your building.

• Your manager will handle maintenance. A greedy manager could charge a fortune for simple repair jobs.

Here’s a thirty-question checklist for interviewing prospective property managers. The answers you get will provide a very solid understanding of each manager’s qualifications. You can also get an impression of a prospective manager from other cues – I’ll explain those at the end.

Finally, remember that you have to compare managers to others within an area. It’s possible that none of the prospective managers in one city will match the high standard of your terrific manager in another. On the other hand, if you can’t find a good manager in a city where you plan to invest in real estate, maybe you shouldn’t invest there.

The first questions have to do with finding good tenants, which I think is the key to a happy building. A building with good tenants tends to have fewer maintenance and other issues.

• How many vacancies do you have right now? Out of how many total units that you manage?

• What is the average length of time it takes to fill a vacancy?

• Is that average time getting longer or shorter?

• How do you market your rental units?

• Do you require an exclusive arrangement for marketing to new tenants?

• How does your web site look?

• What factors would make you reject a prospect?

• Would you accept a tenant who met your qualifications in some areas, but not others?

• Which qualifications are most important to you?

• What screening methods do you use?

You want a manager who finds good tenants reasonably quickly. He should use a variety of methods to find prospective tenants, such as a web site, Craigslist postings, newspaper ads, signs, flyers and more. Your manager should follow an extensive screening process, but be willing to accept a “maybe” tenant if the situation is right. You want a look at the web site to make sure that is inviting to prospective tenants, and constantly updated.

As for the exclusive arrangement, property managers never mind when you or somebody else finds prospects for them. However, in almost all cases, they will still want a rental fee for moving the prospect into your rental unit. Make sure you have a clause that if the unit hasn’t been rented for some time, and you or someone else you find brings in a new tenant, the rental fee is cut in half. You don’t want it cut to $0 because the manager will still have to screen prospects.

The next questions relate to tenant management. It’s just as important to keep good tenants as it is to find them.

• What does your lease look like?

• What is your late rent policy?

• What other rules do you set for tenants?

• What percentage of tenants do you have to evict?

• How does the eviction process work here?

• How do your tenants contact you?

I recommend sticking with the manager’s preferred lease, late rent policy, and rules unless you have a really major objection. If the manager is really experienced, chances are they’ve developed smart rules and policies over time. Tenants should be able to contact the manager through a variety of ways during the day, and have an emergency number for off hours. If the manager is always evicting tenants, he’s bringing in bad tenants.

The next questions relate to maintenance.

• Which kinds of maintenance jobs are handled in-house?

• Which ones do you use an outside handyman for?

• Which ones do you use professional contractors for?

• How many quotes do you get for jobs?

• How expensive does a job have to be for you to contact me before doing it?

• What are your rules for contractors being inside occupied rental units?

• Who are your preferred contractors?

Managers should have a well-thought-out system for assigning jobs to different parties – in-house employees, handyman and professional contractors. Almost any plumbing, heating, or electrical job should be handled by a professional. Other jobs, such as paving a parking lot, require special equipment that usually only professionals have. But most small jobs can be done by handymen who will cost you less.

You want multiple quotes for major jobs – say, anything over $500. You should also have a rule that contractors can never enter an occupied unit -even if the tenant is not home at the time – without a manager’s representative being there. Finally, you want the names of preferred contractors so you can run a quick check on them.

The last group of questions relates to experience. You want managers to know the local real estate world inside and out.

• How long have you been a property manager?

• How long have you been a manager in this area?

• Can I see some of the other properties you manage?

• Do you personally invest in real estate in this area?

Finally, you need to understand your arrangement with the property manager.

• What is your fee structure?

• How will I get reports?

• Do you require an exclusive arrangement to broker the property?

• How much notice will you give before terminating a contract?

The manager’s fees aren’t really important unless they are much higher than everybody else’s, or are so high that you really can’t afford them. Reports are very important because they are your only window into how your investments are performing. The best way is to get them on your own computer, on your time – as may be the case if they use on-line property management software.

You should not accept any exclusive arrangement to broker properties unless they have a limited term. In other words, if the properties don’t sell after a certain time, you can re-list with a different broker for no penalty.

Also, you should require good notice for the contract to be terminated – at least 30 days. That gives you time to find another manager.

Here are some other things to watch out for:

• A manager with a messy office or personal appearance. Chances are he doesn’t much care about the condition of the properties either.

• A manager you have a hard time reaching by phone or email. If he won’t return your messages now when he’s trying to get your business, what are the chances that he’ll do better later?

• A manager whom you sense is trying to intimidate you with knowledge. The “don’t ask stupid questions, I know all about this” approach is often a cover for not really knowing much at all.

Brendan O’Brien is the developer of Property Master rental property management software. Our landlord software runs on any Web-connected computer with full accounting, alerts, nearly 50 reports, and many other great features. Check out our e-book for more great tips at pcpropertymaster.com.