Lesson
1
Using
An
Outside Property Manager
Some people want to reap
the benefits of real estate investment, but don't want to personally manage
their properties. If you are in this category, there are a couple of
issues that you need to keep in mind.
First, you need to take this factor into account
when purchasing the property because you need to include the cost of outside
property management in your analysis of the property. This cost must
include not only the management and/or leasing fees charged by a property
manager, but must take into account a few other factors. Costs vary
substantially from management company to management company, depending upon (1)
competition in a particular marketplace, (2) the degree of services desired, and
(3) the type and size of the property. The range of fees is typically
around 10 percent of gross income for a single-family home to 5 percent of gross
income for a large apartment complex, with extra charges for special services
(e.g., collecting judgments, major rehab supervision)
Second, when you do your
own management, you are on top of maintenance requirements and, if you are
handy, can even do some of the work yourself. You also have control over
work that you can't handle or don't want to do in that you can pick your own
vendors. Management Companies either have their own in-house maintenance
division or utilize certain independent contractors. While the costs of
either is often competitive with what you can hire, that is not always true.
Third, a management company will never have the
degree of concern about problems (e.g., vacancies) as the owner. On the
other side of the coin a good management company, for which management is their
full-time business, can make up for many of these possible deficiencies by being
more competent and efficient.
One advantage to utilizing
a property manager is that it puts a third party
between the property owner and their tenants. We all tend to develop
relationships that become personal, and those between landlords and tenants must
be kept on a business basis.
If you prefer to be an arm-chair investor,
it is imperative
that you use care in picking a property manager. You should first read our
Selecting A Property Manager page.
And, even if you do hire a property manager, you should also be knowledgeable
about the aspects of management so that you can recognize when your hired
manager is doing his job properly and react quickly if he is not. The
remainder of this course will help you gain the knowledge that you need.
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