Did that get your attention? I knew that if I titled this article “How and why you should be a landlord,” no one would read it. So I decided to make my point in the title, that if you want to be a millionaire (and can’t wait to win a game show or the lottery) then maybe you should consider being a landlord. Here are some tips that may ease your fears of buy and hold real estate investments.
The easiest way of owning rental property is to hire a management company. We know that not all management companies are created equal, so how do you find a good one and avoid the bad ones? As important as it is to screen tenants, it’s more important to screen management companies.
First you need to choose whether you are going to be totally hands-off or partly involved. An example of being partly involved would be directing the advertising and screening of tenants, but not handling the day to day operations. Another example would be rehabbing the unit and then turning everything over to a management company regarding the leasing and day to day operations. In contrast, if you don’t do any of the above and allow the management company to do it all, then you would be totally hands-off management.
The location of the property can help make your decision. For example, I’m more involved with the management of my properties that are within driving distance than my out of state properties. Ones that I can get to within an hour, I’ll handle all management, whereas ones that are a couple of hours away I’ll handle rehab and then hand them over for the management company to lease and handle the day to day operations.
I feel strongly that all the services that are provided for you by the management company should be in writing. Below, find a list of the most common services provided by a management company:
- Advertise for New Tenants
- Field calls from prospective tenants
- Screen tenants – run credit and background checks
- Choose tenants
- Draw up lease and inform the tenant of rules and expectations
- Perform the move-in inspection with new tenants
- Be sole contact for tenant
- Collect rent
- Take calls from tenants
- Arrange for repairs
- Coordinate ongoing upkeep of the property
- Oversee and coordinate evictions
- Provide accounting of all money received and distributed monthly
- Administer trust account for owner
- Pay all expenses
- Send owner a CHECK (that’s my favorite part)
Where can you find a good management company? A recommendation is always the best but it’s up to you to do your due diligence. Here is a resource you can use to help verify the professionalism of the management company, www.irem.org. This is the website for The Institute of Real Estate Management which is an organization of professional property managers that is affiliated with the National Association of Realtors. A few of the questions you might ask when interviewing a management company are: How long have you been in business? What is your fee schedule? Will I have a dedicated staff person? May I have a sample of your reports? Are you a member of IREM and/or the BBB? May I speak to a reference?
Just a few ideas to get you started. Next week we will touch on being a more HANDS ON Millionaire.