Using a 1031 Exchange on Investment Properties
Property Management 101
Rental Property Owners may want to hire a reputable, local property management firm to oversee the logistics of an investment property. When the owner has little knowledge of the financial or legal ramifications of owning a business or residential property, then it is best to hire a professional to handle the investment. Landlords that live in a different area than the property may find problems commuting in emergency situations. A property manager understands the local market and has experience that can help the owner grow his or her real estate portfolio and make money without doing the daily work of managing properties. This professional is responsible for earning money through upkeep and upgrades. He or she is the one who strives to make the investment turn a profit for the owner.
What is a property manager?
A property manager is a person that the property owner hires to take care of his or her lease properties. These people market and lease the property, collect rent, coordinate maintenance and handle any concerns and/or questions the tenant may have. The units might be single-family homes or multifamily units. At On Q Property Management we manage both multi and single-family homes. Our property managers can handle everything from leasing to managing the property.
Collecting rent
Meeting up with numerous tenants on rent day is not always easy. With the various work schedules, appointments, grocery shopping, work, and school, it is difficult to catch every person at home when it is time to pick up the money. Property managers provide an invaluable resource when it comes to collecting the funds for leasing a unit or home because they keep track of who is behind and those that are on time with the payment. They track payment type like whether the person pays with a credit card, check, money order, or cash. Managers can set up payment schedules, change rates, manage online payment systems, print rent reports for property owners, and much more. The property manager even sends monthly statements to the owner updating them on rent collection and activity on the property.
Property maintenance management
As a landlord that owns many properties or works another full-time job, it can be difficult to take care of emergency problems and routine maintenance at rental properties. A property management agency handles the day-to-day logistics of owning property. He or she can call someone to handle a pest problem, fix a leaking faucet, repair a broken air conditioner, and paint a wall. The owner is free to see to other important matters, and the buildings are kept in shape and regulation with local code. The manager is a liaison between the landlord and the tenant. When the owner is not in town, there are no delays with repair issues because the management firm takes care of the problem immediately. Our property managers can send over estimates for your approval and handle everything completely.
Dealing with tenant concerns
Nothing is as disconcerting as having a tenant move out with no notice or a major maintenance issue develop when the home or business owner is not free to help. These situations pose enormous problems for the landlord. The owner loses money when he or she cannot resolve issues quickly. These are the times when a property manager is a huge blessing because he or she has the authority to deal with police, fire, maintenance, social, and legal matters concerning the investment. With unfortunate circumstances, the property owner can get updates and make decisions as if he or she were at the site because the property manager can reach the land fast. The lease manager can call to get approval to do any work on behalf of the owner when tenants or potential buyers have questions or concerns.
Enforcing lease agreements
Renters that do not follow the lease have consequences that protect the owner should the lease payment be late or someone damages the rental. Management consultants follow legal recourse when a tenant does not follow the rules. These firms protect the owner should monetary issues or problems with evicting a tenant surface. The benefits of using a property consulting firm give owners the freedom to work, retire, or attend other obligations while protecting the financial investment.
Providing rent price updates
As a local real estate firm, the owner can expect the agency to identify market changes where a price increase is necessary. He or she has the networking reach and the hands-on experience with real estate in the community, so this is a top priority for any Phoenix property management firm. When market conditions drastically dip, the manager can assess the situation and provide the owner with the most recent figures so that he or she can make an informed decision about the best way to handle the situation. The property manager can offer ideas that the owner might use to fill vacancies in a tough market. An exceptional firm will foresee these situations and have contingency plans in place to minimize any loss for the investor.
Preparing a property for marketing
When a tenant moves out of a building, the owner or management representative must perform some key duties to turn over the rental. Sometimes, this job is an easy cleaning and patching a few nail holes. Many times, owners have maintenance issues like leaky faucets, clogs in drains, dull paint, normal wear and tear on consumable items like carpet, and fixing broken items before the building or unit can be rented again. The owner has to pay for the repairs costing double since the property is empty. At On Q, we do market our homes before the tenant moves out to limit the vacancy rate and hopefully have a tenant lined up right when repairs are completed. To keep the income flowing the right way, the property manager works to turnover properties as fast as they can within reason. Some of these responsibilities include:
- Inspecting the unit for damage, routine repairs, and areas that need freshening up
- Writing up a work list for the maintenance team
- Getting approval for replacement carpet, appliances, or drywall
- Fixing any damage inside or out
- Re-inspecting the property after repairs or upgrades
- Having a cleaning team thoroughly wash down the property for new tenants
- Changing locks between tenants
- Taking care of any outstanding utilities so that the new owner or renter can get electric, water, and sewer in his or her name
- Fixing up the lawn and remove overgrowth, weeds, and time consuming decor
- Marketing photos
- Listing the unit on local property sites
- Adding the property to the management website
Finding new tenants quickly
When a home or business becomes vacant, it is the job of the real estate management firm to find another tenant fast. Part of this process is advertising and marketing the unit or building. Another phase is to select candidates according to background credentials and credit reporting. Finally, showing the property and narrowing the selection down to the lucky candidate helps fill empty rentals fast. Using a property manager with local expertise means that the person has insider knowledge about rental pools, research tools, vetting requirements, and the landlord's preferences on new tenants. He or she can fill out the necessary paperwork, sign the lease, and give the new tenant keys to the structure.
Routine inspections
Property owners that are not in town may want to ask a local firm to handle regular checks on the property. These inspections might include cleanliness requirements for government subsidies or agency payments. Each property will have inspection requirements such as maintenance checks that the firm will oversee in place of the owner.
Handling legal notices
In the unfortunate event that the city or a tenant sues the property owner or summons the person to court, the property manager can legally represent the landlord. The manager can sign for deliveries, perform business transactions, and represent the owner unless the person must show up in person. Should the owner need to send out a legal document, the manager can draw it up and sign it in place of the landlord to give the paper to the designated party. These notices include rental agreements and evictions.
Taking care of evictions in unfortunate cases
When a tenant breaks the lease or stays beyond the agreement, then someone has to make sure to go through the legal process to evict the party. When a landlord has other duties, then a property management firm can step in and take care of the situation. Whether the tenant needs a 30-day notice, or the representative goes to court for the owner, the real estate representative is a helpful individual in these situations because of the training it takes to get real estate certifications.
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Meeting renter needs
A property manager does more than just take care of landlord needs. He or she also works with renters to ensure that they have all the resources they need to make rent payments, turn on utilities, fill out maintenance forms, request upgrades, and answer questions. The representative sees to it that the tenants are happy to increase loyalty and reduce turnover rates.
Benefits of hiring a property manager
Forbes says that there are numerous benefits to managing properties as an owner and outsourcing the task to a local firm. An owner may have the passion and dedication where a property firm has resources and contacts. Sometimes, the property management firm is an obvious choice such as times when dozens of units need managing. Other situations arise where the owner wants to handle the work and end up taking on more than they can adequately oversee. Over time, the landlord might find problems stacking up, rental disagreements taxing, and problems in his or her personal life. These issues often create a need for the owner to step back and let someone else take the reins. Many landlords have the best of intentions, but for one reason or another, things evolve into a costly problem. A property management firm can help landowners get rid of the stress and get back on track. These agencies have vast resources because they do the work of managing real estate investments daily. A local firm knows the area, understands the price changes in the market, and has the skills to find responsible tenants.
How many properties should an owner have before outsourcing management duties?
Forbes tells readers that investors with more than five properties or tenants should definitely look for a real estate consultant to manage the daily operations. Individuals that plan to work another career while owning properties may want to hire a local specialist. Managing real estate comes with time and money expectations. Tenants that become a problem may end up being a hassle for the entire lease if they do not break any part of the contract. Annoying phone and emails can become bothersome and interfere with other work or personal responsibilities, so the less time an investor has to with tenants or on the property should signify the need for a manager. Each decision is a case by case situation where the owner commitment, time, money, and resources are all important parts of the decision to hire a property management agency.
Proactive budgeting
When the investor plans to buy more properties, then it is a good idea to count management fees into the budget when using a real estate consultant. Planning ahead allows the landlord to see where the profit margin lays beyond management fees and purchase price. By forecasting the total fees, a property investor knows whether or not the land is worth the cost to acquire and still outsource the work of daily care. This budgeting helps property owners weed out the worst investments and find a rich pool of potential acquisitions.
Records maintenance
Every firm is responsible for tracking, logging, and keeping information on file for the owner for tax and legal purposes. These documents include leases, rental applications, receipts for contract services, maintenance fees, and budget sheets. Any transaction dealing with the property is the responsibility of the management firm. The property overseer ensures that work forms are complete and on file for future reference. Any income for services that the owner pays out for the property must have a receipt and a log entry in the owner’s account on file. The same goes for accepting rental payments or sale prices. The manager is the person that makes sure that all of the paperwork is complete and accessible at any given time. They also ensure that the documentation takes place in a reasonable time frame.
Why choose a local agency to manage real estate?
When a landlord employs a business manager from the community, then he or she knows that the person has inside knowledge about the area, local market standings, home prices, rental laws, and other important community information. These people can show units and talk about the nearby parks, grocery stores, schools, shopping, dining, and entertainment. Filling vacancies take someone that has the skills to play up the best features of the property like crown molding, walk-in closets, or a new roof. This person can also direct the potential tenant to local resources like bus transportation, bike rentals, banks, and doctors offices.
Landlord-tenant law and changes
While the laws are different in each state and municipality, there are some general expectations concerning the rights and responsibilities of tenants and landlords. Each state has a rule book with the duties for each party outlining who pays for what, how many people can live in a residence, or when the tenant has to move in case of the sale of a rental. Knowing when these laws change is a big part of the role of a land consultant. He or she tracks local changes and state revisions to ensure that the management agency and all clients remain in compliance. Understanding how modifications to real estate law affect each party is just the beginning of the job for the manager. Documenting compliance and ensuring that tenants know the changes and expectations are two more parts to the equation. An investor that does not live or work near the investment property may or may not know about these adaptations unless he or she has contacts in the government offices for the community. This reason is why experts suggest using a local firm.
Supervising maintenance crews
When an owner hires a real estate consultant to oversee the property, the manager has a responsibility to keep track of maintenance staff, pest control workers, inspectors, and other visitors to the site. Making sure that repairs are correct and happen in a good time frame protects the owner's investment and control the budget. The manager tracks employee hours and job duties to make sure they line up with the budget. Hiring and firing maintenance crews is the job of the property management firm giving the landlord a reprise from the unsavory duty of letting someone go.
Tax filing
Every business and property has tax documents and payments each year. The management firm takes care of this paperwork for the owner. The agency files rental sales tax on time to keep the owner in compliance. The firm also keeps track of documents, tax law updates, and any reporting guidelines that affect the investor or property. He or she fills in the landlord and makes the switch to the new regulations on behalf of the owner to keep the process moving smoothly.
Retaining or boosting property value
Many home or business owners do not realize that the primary duty of the manager or real estate firm is to make money for the landlord. Lease units are an investment that should hold or grow in value. The most important job of a management agency is to protect the investment and make the owner as much money as the firm can. Upkeep and strict background checks help ensure rent comes in on time. Oversight and careful budgeting keep the business on track. Fast responses to emergencies and complaints can reduce negativity keeping the property reputation intact. All of these duties help keep or boost real estate value.
Certification requirements for property consulting firms
In America, several states require nothing for a property management firm to operate. Most locations do ask for a real estate license, a management license, or a property management certification. For example, Maine and Maryland do not have specific requirements, but Illinois expects managers to hold a state brokers license and certification from the National Board of Community Association Managers to operate in cities like Chicago. In Arizona, a property management firm has to have a state broker license to operate. An investor should always know what the state law requires from a management firm so that he or she can choose the best agency for the job. It is always good practice to check out the management agency like one might do a background check on a tenant to ensure that the firm is reputable and current. This way there are no surprises down the road, and the investor stands to profit from his or her investment.
How to choose the right property management firm
When the decision to hire a property manager is right, then one of the first things an owner wants to look for is the certification and licensing of the agency. Once all the legal proof is there, then the next step is to look at property associations, listings with the Better Business Bureau, community organizations and memberships, and any awards. Finding out how long the agent or firm has been operating in Phoenix will allow the owner to gauge local experience. Looking at reviews and testimonials on sites like Yelp, Google, and social media pages will give investors an idea of the performance capabilities of the Property Management firm. Reading the responses from previous clients on the company website can help owners prepare a list of potential interview questions for management firms. Looking at photos of current properties under supervision can help an owner assess how much experience the agency has in comparison to others in the area. After scheduling interviews with each management firm in consideration, the landlord should compare notes from each until the winner is clear. Any contract for hiring this representative should have the oversight of a real estate lawyer to make sure that the owner's best interests are met. An attorney can read contracts and help write up legal forms for the business.
Being the Landlord and Property Manager?
When someone decides he or she want to get into buying and selling properties, it is an excellent idea to consider whether or not a property manager is necessary. Small or short-term investors may not feel that the cost is worth the time savings. Some people are passionate about real estate. These owners are often the ones that go above and beyond what is right to improve the quality of living for tenants. This action helps forge a long-lasting relationship. These people want to get into the paperwork, maintenance, or renovating to improve the community and entice exceptional people to live in the neighborhoods and his or her homes. Some business owners take this route, but it is easy to lose track of how much time one spends working on the property and possibly investing more than it is worth. The decision about whether to manage or outsource investment property is not one that an owner should take lightly. The best way to make this decision is with a cost-analysis report and simple pros and cons chart.
A property manager does not have one role. This person handles everything from finances to leaky faucets to angry tenants. He or she has to know how to market and advertise new openings to fill them quickly so that the owner does not lose money on investments. This person must also track money that comes in from rent or selling along with costs for services from outside agencies. He or she has to know how to talk to people, showcase a property, and get the word out to the best potential audience of renters or buyers to make the owner as much money as possible. The property manager increases wealth by maintaining the property, searching for responsible and timely tenants, and fixing problems before they become emergencies that cost the landlord more money than preventative maintenance.
