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! read more…
Buying a piece of income property, whether it is for residential or commercial use is a great investment. What better of a way to gain a valuable source of residual income than investing in income producing real estate? No matter what type of property you purchase, if you intend for it to be used for real estate purposes or for commercial purposes somebody has got to manage things, both in regards to establishing contact with tenants and serving as a midpoint between the tenants and the owner.
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. read more…
The Property Management Contract – Taking it Apart
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: read more…
To be successful as a real estate investor you will need a “team” of professionals that you can rely on. You do not need to build this team before you start investing. As you progress in your investing career you will meet many people in these fields that you will want to establish a working relationship with. Some team members will not work out and will have to be replaced. Don’t worry about this, as it is a normal part of the business. A great way to find your team members is through referral from other investors. Once you join a local real estate investors association you will meet active investors who will be able to guide you toward competent individuals in the business. One word of caution though – contractors have earned bad reputations. Therefore, most investors will not share their “best” contractor for fear that he will get to busy to do their work. Expect to have to sort through many contractors if you decide to do any rehab work. This team will be needed to successfully close your purchase and sale transactions. Not all members will be needed for every transaction but knowing they are in place will increase your confidence level.
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”. read more…
The processes that are applied in order to maximise the returns by effective administration of property are together referred to as ‘Property management’.
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. read more…
To the homeowner, the idea of reserves or replacement funds involves recognizing that the house will need painting, the roof will need replacing, and the driveway may need to be redone. Most homeowners learn quickly to put money away for “a rainy day”.
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. read more…
Finding a good property manager is like any other vendor search – it’s worth your time up front to make the best possible choice. That’s because a bad manager can cost you a lot of money, up to the entire value of your rental property investment. Consider:
• 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. read more…
