Historically, renting your home has been considered a relatively simple and low risk undertaking. However, in recent years, this apparently simple task has become progressively more complex and the risks associated with becoming a landlord far greater. While managing your rental is certainly within the abilities of most property owners, the time and effort involved in management may be greater than the cost of hiring a professional property manager.
The professional property manager is conversant with the applicable statutes and regulations relevant to the management of rental property. In addition, the manager will typically perform the following tasks as part of the management service:
Until recent years, advertisement of an available rental meant placing a “For Rent” sign in the front yard and possibly placing an ad in the local newspaper. Times have changed. Today, while the old stand-bys are still used, effective advertising also includes extensive use of the internet, making availability of the property known to real estate professionals, and targeted advertising to large employers.
Once an application for rental is received, it must be determined if the applicant is qualified to rent the property. Has the applicant been evicted from a prior rental? Does the applicant earn sufficient income to pay the rent? These questions, as well as others should be answered prior to approving the applicant.
A professional property manager will typically check four areas when screening an applicant. These are the applicant’s credit report, income, employment, and rental history. It has become almost universal that the applicant’s credit report be checked for late pays, judgments, liens, or bankruptcies. The applicant’s employer is typically contacted to verify income, and the applicant’s prior landlord is contacted to verify rental history. While there are few perfect applicants, the information gleaned through the application review process can greatly reduce the likelihood of renting to an unqualified resident.
After the applicant is qualified, the necessary rental documents must be prepared and executed. Gone are the days of going to the local stationery store and buying a preprinted, two-page rental agreement. Today, rental agreements are custom drafted to reflect specific state statutes, and sometimes, applicable local ordinances. In addition to the rental agreement, any required addendums are prepared and may include an addendum relating to pets, a no smoking addendum, an addendum relating to pool use, and if the property was built prior to 1978, a lead paint addendum. Further, a move-in inspection is completed and documented for review by the resident at execution of the rental agreement. Ancillary forms relating to transfer of utilities and trash pick-up may also be needed depending on the location of the rental property.
Every property owner would agree that timely payment of rent is critical. If the applicant was properly screened prior to acceptance, most poor rental risks will be eliminated. However, circumstance beyond the possibility of screening can adversely affect the resident’s ability to timely pay rent. These circumstances include loss of employment, injury, illness, and changes in marital status. When the resident is unable or unwilling to pay rent, the property manager has the ability to effective move forward with the collection process, or if that fails, terminate the rental agreement and locate a new resident in the minimum amount of time.
Typically, the property manager will receive rent on the first day of the month, with disbursal of funds to the property owner between the fifteenth and twenty-fifth of the month. Because the property manager is required to hold all funds in trust, funds must be held until checks clear, which may take as many as ten working days. In addition, time is required for the accounting and statement preparation process.
The property manager will provide you with a monthly statement showing all income and expenses associated with your rental property. In addition, you will receive a year-end statement showing all income, and expenses broken out by category.
If you have ever had a resident at your rental property call you at 2:00 a.m. to tell you that the water heater is leaking and your rental is three inches deep in water, you will appreciate having a professional property manager. Most property managers maintain a twenty-four hour system for receiving emergency repair calls and relationships with a variety of skilled tradesmen capable of handling any emergency. For non-emergency repairs or preventive maintenance, you are contacted in advance to discuss the work and its potential cost to your.
Does the resident have an unauthorized pet? How about six roommates not listed on the rental agreement? These, and other similar problems, can only be found through a physical inspection of the property. Typically, your property manager should have a representative inspect the property one to two times during the term of the rental agreement. Inspections may be conducted either as a scheduled appointment with the resident, or while repairs or scheduled maintenance is performed.
After the resident moves out of the property, the condition of the property must be assessed and any damages charged to the resident’s security deposit. However, the property owner is not permitted to charge for “normal wear and tear.” What can be charged for that red wine stain on the white carpet? How much for the numerous nail holes in the living room wall? These, and similar questions are addressed by the professional property manager every day.
Further, did you know that if the resident is not provided an itemized statement of deductions from the deposit within thirty days of termination of the rental agreement, the property owner is precluded from making any deduction for damage to the property?
Probably the most difficult part of owning rental property is evicting the resident who has failed to meet their obligations as stated in the rental agreement. Typically, this means that the resident has failed to timely pay rent. The professional property manager can handle the eviction process efficiently, while making the process far less difficult for the property owner.
The professional property manager provides a cost-effective service in the rental and management of investment property. While the above discusses the functions performed by the property manager, it should also be noted that efficiently and competently performing these functions minimizes potential risk to the property owner and in the long term, maximizes returns from the investment property.
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