We don't need no stinkin' managers!

Most noobs think that just because they read all those GURU books and hear about "Don't make Real Estate a JOB", that you need to out-source everything.  This is not always true - especially for the new investor.  I would rather say that until you can't handle the duties, don't pay for property management on your investment homes.  There are too many ways to minimize your management time; with a little preparation. 

I still manage most of my investments and put in very little time having to deal with tenants and toilets.  I also know hundreds of other investors that do the same thing.  The key is to put a plan in place.  If you take the time to prepare your business before you start buying many homes, you can easily create a method for taking this pain away; at least for the most part.  There will always be things you have to approve, such as authorizing big money purchases or major repairs.  

For example, instead of having your tenants call a phone number to put in work orders for repairs, take some time to create a website that is set up to receive all the tenant repair requests and have them forwarded to you.  This not only gives you a way to access and keep track of tenant issues but you can also easily forward them to your contractors so they can get started on repairs.

Another way you can use the a website is with creating an application form.  Lets say that you have a a house that's ready for rent and your accepting applications.  You could feasibly have your applicants fill out online applications that forward to your email or a tenant screening service.  By doing this, you may have a tenant ready for processing and not even have to lift a finger aside from maybe meeting with them to give the keys or do a walk-through.

Try to make your tenants accountable.  Like charging 200 dollars for any repairs that are caused by them or happen to be appliance related.  This could save you a lot of money and may keep the tenant from being so hard on the home. 

Allowing someone else to control when and if rents get to you is not the most comfortable feeling.  Even with larger property management companies, there are instances that your rent may not be processed or fail to get to you altogether.  A property management company is not on the hook if your rent is late, you are.  Even if your rent does get to you eventually, you are in less control and have less ability to initiate measures to collect.

There comes a time when an investor may need to give up control of their management, but as a new investor, you should take the time to learn how to manage your properties.  Not only are you saving yourself some money by not having to pay a management company - you are also learning to maintain your investments with hands on experience.

If you do find yourself in the situation that you must get a manger for your property, keep these things in mind:

How much do you charge for management?  It is pretty common to charge around 10% of the gross rent per month.  If you have multiple properties, some will offer discounts on each subsequent property.

How do you handle evictions?  Make sure your management company has a clear cut process for how they handle evictions.  Some managers are less inclined to evict if they eventually get the rent.  remember, this is your property, not theirs.  They do not have 'skin in the game' if you will.  Always make sure they follow strict rules for eviction.  I call if the rent is late by 1 day and file eviction papers with the court house after 3 days; you should too.

Repairs and Maintenance.  Property managers are notorious for trying to nickle and dime their clients in this area.  Most charge about 10% of the repair cost for managing the repairs and coordination.  Also, they may charge for even visiting the tenant property to evaluate the damage.  Be careful when they bring this up in the contract - its a real hole in your pocket.

Do you send monthly reports for auditing and tax purposes?  Most larger property management firms are good about sending monthly statements and end of year reporting.  Make sure this is done!

What do you charge for re-leasing and advertising?  Here's another area where managers really rake you over the coals.  When a property manager rents out your investment home, they will often charge you a finders fee and on some occasions will charge you half or even all of the first months rent as their leasing fee.  Know what your being charged and why.

Do you do inspections?  You should be inspecting your properties at least every quarter.  Do not let the property manager get away with collecting rent and forgetting about monitoring the condition of the property.  You may find a tenant that has torn up your property but was great about paying rent.  Won't know the extent of the damage until they move out - then its too late!

As you can see - there are pros and cons for both having and not having a property manager, but if you plan ahead and stay strict in your management techniques, you will find that it is easier than many people make it out to be!