Thinking about Property Management? Do Your Research First

Are you considering trying your hand at the business of property management? There’s a lot that goes into property management besides coordinating tenant screening reports  and collecting rent. You have to know what property owners in your area expect from a property manager, you have to know what your strengths are, and you have to know how much to charge to stay competitive.

First, decide what kinds of services you’ll offer, and what you’ll need in terms of staff, equipment and other resources in order to effectively offer those services. Then decide which types of properties you want to manage. Commercial properties or residential? Single-family homes or multi-family housing units? Then do some research to figure out what services are most important to those property owners and those types of properties.

Then you have to study the marketplace and figure out what is being offered and at what rates. When you find the clients you want, sell them on your ability to give them better service or more for their money than they were previously getting. Help them to understand the benefit of unloading the more stressful aspects of property ownership to a professional property manager.

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Taking on Rental Property Isn’t an Easy Paycheck

On TV it seems simple, right? Buy a house, make a few improvements, find a tenant and start reaping in the cash. In reality, though, the business of property management is not quite so easy. Sure, there are rewards, but there are risks too, and the wise investor considers both before making an investment.

The first step is, of course, to buy the right property in the right location at the right price. This is no small feat, though with the plethora of properties on the market these days it’s easier than it has been in quite some time. The second step is to really think about whether you want to be a landlord. Becoming a landlord is not a magical way to get a check in the mail every month. Landlords work for that money, even when there’s a good tenant in place and no maintenance concerns lurking.

Ask yourself if you enjoy working with people, meeting new people and getting to know and trust them (to some extent, anyway) with your investment. Are you a good judge of character who is also astute enough to not go on emotions but to use an impartial service to screen tenants? Are you comfortable with fielding maintenance requests and hiring professionals when necessary? Do you have enough in savings or other investments to cover the considerable financial risks associated with property management? Are you a shrewd businessperson who can keep accurate and thorough records of all transactions and correspondences with tenants and service professionals?

Be honest with yourself about what kinds of skills are needed to be a good landlord; that honesty will either save you tons of money and hassle, or feed your dreams of becoming a property manager. 

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Many Americans Don’t Understand Credit Scores

According to a recent survey by the Consumer Federation of America and VantageScore Solutions, many Americans don’t really understand what goes into creating their credit score or how it may be used.

Among the findings, the majority of those surveyed didn’t know that a landlord or property manager could use a rental applicant’s credit score as a factor in deciding whether or not to approve them for a lease. About 67 percent of respondents incorrectly assumed age is a determining factor in the credit score, though nearly half knew the basic purpose of a credit score is to assess the risk for lenders of whether a borrower will or won’t repay a loan.

More than 1,000 Americans were surveyed by phone, averaging a D in total knowledge about credit scores, according to the survey results. VantageScore is a joint venture of three credit bureaus -- Equifax, Experian and TransUnion -- and calculates credit scores on a scale from 501 to 990.

Many may be ignorant about a credit score’s purpose or use, but that doesn’t mean a landlord shouldn’t use it. On the contrary, a thorough tenant screening and credit check are tops on the list of ways a landlord will know whether a tenant is lease-worthy.

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Being Nice Doesn’t Mean Compromising Principles

It’s OK to negotiate with potential tenants, especially if they’ve made a good impression on you and their application is in order. But too often landlords find themselves compromising their goals or going outside their comfort zones to appease people who haven’t even technically signed a lease yet.

That’s why it’s crucial that the landlord or property manager stays in control of the situation, from the initial walk-throughs to the lease signing and beyond.

1. Don’t accept someone’s copy of their credit report. Run your own. In fact, do an instant tenant report to see right away whether someone is worthy of being your tenant.
2. Don’t trust the fact that the person “seems nice.” Do a background check to rule out any criminals or sex offenders.
3. Don’t blindly accept someone’s request for a favor regarding when to give you the security deposit or first month’s rent. If they’re already having trouble coming up with money owed to you, it’s a good sign they’ll have trouble every month.
4. Don’t allow a prospective tenant to dicker with you over the rent price. Do your market research before deciding on what to charge for rent. That way when they complain that nobody in the area is asking that much, you’ll know whether they’re lying.
5. Don’t overlook a red flag, such as a pet being moved into the rental unit when the tenant said there were no pets. A tenant who lies is a problem tenant, and you’re probably in for a lot of headaches.

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Before Buying Investment Property, Consider This

Are you thinking about buying investment property and hoping to make a second income from leasing that property? There are a few critical things you should consider when deciding what property to buy.

1. How many tenants could you get from the property? If it’s a single-family home, chances are you’ll only have one source of income for rent. If that tenant falls behind on payments there won’t be any money coming to you to help pay the mortgage. In a duplex or other multi-family housing situation, you’ll have multiple income streams. Then again, more tenants means more maintenance and, perhaps, more hassles.

2. Make sure the building is inspected by a qualified, reputable home inspector. You don’t want any surprises when it comes to necessary repairs or upgrades before you can even begin leasing the space.

3. Check the comparables. Find out how much similar properties in the neighborhood are charging for rent, and what that includes (sewer, trash, parking, other utilities). If your rental income expectations are too high for the area, it’s best to keep looking.

4. Come up with a plan for how the property will be managed. Will you serve as the landlord, or hire a property manager? Will you inspect the property regularly? Do you have a relationship with a nearby repairman to do routine maintenance and repairs when necessary?

5. Consider the location. If you’ve never owned an investment property, you’re probably going to want one that is close to where you live. Buying and leasing a building in a different town can be more of a hassle than you bargained for.

Credit reports can tell a lot about a potential tenant, but they do not show whether someone has a previous eviction notice. Fill in the blanks on a prospective tenant’s background by using a tenant screening service to see important details about their rental history.

Why Landlord Insurance Is a Good Idea

If you’re thinking about becoming a property manager, you should definitely look into landlord insurance policies. Landlord insurance is an important way to protect your investments and gives you peace of mind when taking on such an endeavor.

The two biggest benefits such a policy offers are:

• Coverage in the event that the property is damaged or otherwise uninhabitable, thereby mitigating your losses in rental income.

• Coverage of legal fees in the event a tenant sues you for injuries sustained or other problems related to the property you own.

A few things to you’ll need to consider when deciding on the right policy:

1. What kind of property is it? There are different insurance requirements for different types of property.

2. Where can you get the best rates? Research, research, research to find the best rates on the type of insurance you need. Check with any financial institutions and insurance companies with which you’re already affiliated, to see what they offer. Also check with other landlords in your area as well as any local property management associations. Compare premiums and services, and don’t be afraid to bargain to get the best bang for your buck.

3. What types of things do you want coverage on? The amount of insurance you need will depend at least in part on the kind of property it is, where it’s located, and how well maintained it is. Most landlord policies will protect you against theft, fire, vandalism and damage from weather events.

Did you know previous eviction notices don’t show up on credit reports? Don’t be duped into thinking a credit check is all you need to be assured you don’t have a problem tenant. Get a professional tenant screening!