If you’ve recently purchased an investment rental property – or if you’re just starting to think about becoming a landlord – you’re probably thinking about your bottom line. You’re looking at how much you can charge in rent, how much you’ll have to pay on your mortgage and property taxes, and how much you’ll need to set aside for repairs and maintenance. When you look at all that, it’s easy to think, “Well, maybe I should be my own property manager to save some cash…”
Before you commit to managing your own property, though, there are a few factors you should know about. Understanding these could make a property management firm’s fees look much more attractive.
How Will You Get and Retain Tenants?
First, you’re going to need to attract good tenants to your property if you want to start collecting regular cash flow. Are you familiar with all of the appropriate listings where you can advertise your property? Do you know how much it will cost you to advertise and how much ROI you’ll get from that cost? If you don’t have a good advertising plan and the tools to gather appropriate data analytics, you could very easily spend a lot of money on advertising that isn’t actually doing much to find you quality tenants.
Then, once you’ve found great tenants, how are you going to keep them? Lack of maintenance, delayed responses, and other factors on your part could make good tenants less likely to renew their lease, and tenant turnover can be a real problem for your investment, especially if you have trouble finding new tenants to take your old ones’ place.
You’re Going to Be on Call 24/7
You already know from personal experience that home emergencies don’t always happen during business hours. When something happens at your home in the middle of the night or early in the morning, you call the appropriate specialist and have it taken care of ASAP. When something happens at your rental property, your tenants are going to call you. And you’ll need to be available to answer their calls at all times of the day or night. Are you prepared to deal with a plumbing emergency at 4:00 AM?
How Will You Deal With Security Deposits?
When your tenants sign the lease and hand you a check for the first month’s rent, they’ll also hand you a separate check for the security deposit. You must have a separate account set up to hold tenants’ deposits. In fact, it’s not just a bad idea to put the deposit in your personal or business account with the rent check – it’s actually illegal. So, are you ready to deal with security deposits and how you’ll collect them, disburse them back to tenants, and/or use them to make repairs when tenants move out?
How Will You Handle Late Rent Payments?
In addition to having separate accounts for rent and deposits, you’ll also need to have a system and policy in place to handle late rent payments. How much will you charge in late fees? How will you collect late payments? Do you know the legal proceedings if you have to evict a tenant?
Dealing With Insurance Companies
When disaster strikes, you will need to deal with your homeowners’ insurance company to get repairs and damages paid for. You’ll need to do this in a timely manner so that your tenants have a safe and secure place to live. If you don’t, you could be dealing with a lot more issues. At the least, your tenants might choose to move out, leaving you with no cash flow from the property, or in a more severe case, they might even decide to sue you for damages.
All of the scenarios and factors we’ve mentioned here may sound like a nightmare, but they don’t have to be. Some people have the background, talent, and skills to take on these tasks and duties, but if you don’t want to deal with them, your property management company can help you out and make your job as a real estate investor much easier.