The Real Property Management Issue Is Education

The Conundrum of Investment Properties

Investors seeking diversification have frequently turned to a rental property or a collection of rental properties to even out and spread risk across their investment portfolios. As with any investment people should consider all of the issues, problems, and pitfalls along with the potential returns. Unfortunately, a lot of investors aren’t aware of the potential problems and do not take the time to investigate these issues before they close escrow. A property management course and a course in basic real estate investment would be great investments of time for someone considering rental properties as a source of investment income and long-term investment. Some of the problems and concerns are discussed below.

Inexperienced Agents and Uneducated Investors Make a Deadly Concoction

Rental property investors often utilize the services of an unseasoned realtor who does not fully understand rental properties, who does not fully understand return on investment, and who does not fully comprehend what cap rates are. Most of the time these investors just turn to their friend ‘the realtor’ or use any realtor they are familiar with or are comfortable with to purchase these types of properties sad as that may sound.

The fact is most real estate agents are not savvy enough to understand rental properties, cap rates, return on cash, return on investment, leveraged investing, and the common terms associated with investment properties. To compound this fact most investors initially are equally inexperienced and lack the proper expertise to locate and purchase a high performance investment property. No one needs to look further than this question: Why would an owner be selling a high performance investment property? That question should be the first of many asked by both the agent and the investor. One problem is that some investors are just so excited to get into a property they look beyond the truth and the numbers and just want to get control of the property. Oftentimes this is a flawed approach because most agents will hesitate to stop the eager purchaser for fear of missing out on a healthy commission.

The Property Management Profession is an Equalizer

After an investor has closed escrow, if the inexperience agent hasn’t offered to ‘manage’ the property for them, many of them decide to manage the property themselves (only licensed real estate brokers can manage rental properties). When these unsuspecting owners are faced with the subtleties of Fair Housing laws, Equal Opportunity issues, civil rights issues, anti-discrimination issues, bad tenant screening issues, notice of default issues, eviction issues, and finally collection issues many times they turn to a professional property manager or property management company to help rescue their sinking ship.

If rescued timely a professional property manager can turn around an investment property and help make the investor’s decision pay dividends. With a competent property manager the return on investment can actually be realized and the owner actually can have time to enjoy the investment, not dote on it or worry about it. The property management company will take care of the investment, the maintenance, the tenants and all of the concomitant issues associated with the property.

Property Management Education Course

Educating both inexperienced real estate agents and beginner investment property owners about prudent property management is critical for maximizing the investor’s return on investment. It is rare for an owner to successfully manage their property or properties and make the maximum possible return available in that particular marketplace. The reason it is rare is because the typical manager-owner is not utilizing the latest and greatest property management techniques, software, screening procedures, and most importantly is not keeping up with the ever changing landlord-tenant laws. Each January there are several seemingly ever increasingly tenant-debtor favored laws enacted which most people are not aware of. When a new law takes effect that is another potential pitfall for the lone-ranger owner to violate and end up on the wrong side of the complaint.

The sure-fire way around this potential issue is to hire a property management company to manage and protect the owner’s investment, and most importantly maximize the return on investment. One other way around this problem is to have every owner take a property management course and learn the profession from the ground up without going through the hard knocks of experiencing tenant problems first hand.

Finally, an owner could hire a property management company that in addition to all of the typical staff also has a real estate lawyer on staff who can solve and answer all of the legal questions that seemingly end up front and center. This would be a truly educated decision and an easy one for the owner to make.

How a Property Manager Can Be Prepared When They Get Sued

Withholding of a tenant’s security deposit is probably the number one reason a property manager can end up on the other end of a lawsuit or even in court. There are many precautions and procedures which a prudent management company or manager can implement which will help prevent this situation from occurring. Moreover, a property management course or continuing education in the nuances of proper statutory procedures can go a long way in preventing a lawsuit and subsequent lost time, energy and even money. Finally, an owner is responsible for the acts of a property manager and could find themselves in court as well if the manager has violated the law, has not properly counseled the owner or properly handled the tenant’s security deposit.

Implement Minimal Procedures to be Prepared

A prudent property manager has been educated to take the necessary precautions and follow the statutory guidelines for tenant’s issues like the return of security deposits. The necessary property inspections, the data collection of the condition of the property, the amount of money a manager is allowed to deduct, the statutory procedure for deductions, and the proper method of communicating all of these steps to the vacating tenant is tantamount to a successful defense against tenant lawsuits. If a property manager has done all of these things with diligence there is a very good chance that they will have the ultimate preparation in the unfortunate occasion when they get sued.

Pre-Tenancy Property Inspections Help Prevent Post-Tenancy Problems

Prudent property managers walk-through the property with the new tenant while there is no furniture or obstacles in the unit. The property manager takes photos, logs inspection data about each and every room in the unit, details the exterior of the property including any issues that exist and gets the new tenant to sign off or agree to the condition report. This same report is used at the end of the tenancy to compare and contrast the pre and post condition status. With photos and a signed inspection report it is difficult for a tenant to claim that conditions that exist now weren’t there when the tenancy began. Moreover, in some states notice of a pre-inspection at the end of the tenancy is given to tenants such that they are allowed to take advantage of the pre-inspection to repair or clean the unit which would otherwise be a deduction against their security deposit. This procedure, if properly conducted, actually prevents a lot of post tenancy issues as the tenant is fully aware of any conditions which might result in a deposit deduction, and they are given ample time and opportunity to correct the issues.

Pre-Tenancy Property Inspections Help Prepare Property Managers for Court

In the unfortunate event that a tenant disputes a property manager’s security deposit deduction and actually files a lawsuit the manager who has taken the time to takes photos and log inspection data will be amply prepared for the litigation. The manager should prepare their file in chronological order, should print out each and every photograph and date and label each condition. Importantly, each person who witnessed any conditions at the property like the gardener, the painter, the cleaner should all be contacted and asked for a witness statement. It is easy to get a statement via a sworn affidavit and at the same time ask these people to make themselves available to be witnesses in court. To be clear each property manager should have the following in preparation of any hearing:

1) A complete property file in chronological order including photos, invoices, and paid receipts;

2) A complete history of the written communications with the tenants included in the property file;

3) A list of witnesses with contact information;

4) Sworn affidavits from each witness; and

5) A thorough review of the facts and circumstances surrounding the issues, facts and tenant complaints by the staff members who dealt with the tenant.

Preparation is Powerful and Usually Successful

Professional property managers who take the time, energy and effort to adequately keep records of their properties and tenants will find that this preparation is worth its weight in gold come litigation time. Once a tenant becomes familiar with an adequately prepared opponent they may think twice about their attempts to sue. The best defense for managers or management companies is educating themselves in the proper procedures and record-keeping that will help them prepare for this process. If the manager has followed the law, has followed a detailed record-keeping system, prepares and presents an immaculate file to the hearing judge or court then the likelihood of success of defending one of these lawsuits is much higher than if they had not.

An Owner May be Liable for the Acts of its Agent

Both statutory and common law principals state that a hirer or principal of an agent may be liable for the acts of the agent. Property management companies who fail to follow the statutory guidelines regarding landlord tenants laws may find themselves in court on occasion. If a manager has attempted to take advantage of a tenant (not uncommon) or has committed statutory violations that could lead to liabilities for the unsuspecting owner. Even though the owner would ultimately have a remedy against the property manager this would be a very unfortunate situation for the owner. The owner can file a cross-complaint against the manager, but in either case the owner gets dragged into a suit because the manager was negligent or careless. Needless to say an owner or property manager doesn’t want to be in this situation in the first place, thus, it is important that the manager follow statutory guidelines and proper inspection procedures.

A Real Estate Attorney on Staff is Ideal and Can Keep Owners Out of Trouble

Professional property management companies who have a real estate attorney on staff have an advantage in these circumstances. A real estate attorney has the training, expertise, and procedural knowledge to help prevent these situations before they get out of hand. Moreover, in the event that these cases escalate an attorney will be able to prepare and handle the situation much better than someone without those type skills.

4 Essential Qualities of a Property Manager

Nowadays, owning a rental property, anywhere on this earth, requires hiring of a professional and efficient property manager. Working with these property managers is highly beneficial in many respect but all managers do not have the same competency to understand the needs and interest of the owners. For this reason, it is necessary that property owners consider certain things before hiring a manager. There are some attributes which are a must for any property manager.

What features a property manager should essentially have?

Here is a list of elements that every property dealer will expect from the management company.

Detailed and Organized

This is one of the prime characteristics that a property manager must have. The managers can conduct every task with in-depth information and knowledge. They should have information that the tenants are making on-time payment of their rent, must support financial records, process evictions, should send communications and letters, must have a track about the leases and should pay attention to minute details like maintenance. The managers have to look after the daily operations of a property. This is a significant responsibility when it is about a large complex.

Adequate Legal Knowledge

Having proper legal knowledge is a crucial aspect of any manager. Several property laws are there in the state and locally about which the manager must have adequate knowledge. These laws can guide on how to manage rental properties. When a property owner knows that he has eminent legal experts around for his help, he certainly remains legally sound. There are many hidden clauses in property laws, which one cannot know if one does not have comprehensive knowledge about the legal matters. Therefore, managers should acquire in-depth knowledge about property law.

Commitment to Work

One achieves greater satisfaction to work when one knows that he has employed a dedicated property manager to handle his property. Not only should the managers have enough experience in the industry they are working, they should also have competent knowledge about the industry. All these will enable the owner to endow a responsible manager to look after his business. A dedicated manager can only handle things with care and efficiently.

Excellent Communication Efficiency

A property manager must have a high degree of communicating ability. One of the prime tasks of the managers is to keep the tenants happy and content, and this is only possible when the manager is able to do effective communication. Tenants can contact the manager all round the clock. Thus, the property manager is easily approachable, and the tenants must feel comfortable in discussing property matters with him. It is his communication skill that will help in increasing the number of tenants.

These are some of the qualities of a property manager from which a property owner can benefit. While contacting any management company, make sure that it has all these attributes. This will make the owner feel that his property is under expert supervision.

Real estate agencies are many in the present world. This article deals with the characteristics that a property manager in East Victoria Park or any other place should have.

Property Management Services – A Real Estate Investor’s Best Friend

Do you own an investment property that you’re renting out, and you’re currently handling all of the chores of being a landlord yourself?

Are you thinking about investing in rental properties, but you’re not sure if you’re up for the task of being a landlord?

If you answered yes to either of those questions, whether you are holding onto or considering investing in a single-family rental (SFR), duplex, or triplex, you should think about engaging a professional property management firm to take the work off your shoulders.

Let’s take a look at what property management is, what a professional management company handles, and how to decide not only if it’s time to hire one but also how to hire the right property management firm.

What is Property Management?

Let’s start off with getting an understanding of what a property management firm does and doesn’t do. There are several critical tasks a property manager can help you with.

Setting the right rental rate: You can always ballpark this by looking through the classifieds, but a good property management company actually conducts thorough market studies to set a rental price for your property. This makes sure you have a great balance between maximizing your monthly income and keeping a low vacancy rate.

Collecting the rent: One of the most difficult aspects of being a landlord is collecting the rent. Property management firms have efficient, tried-and-true systems that will do a great job of collecting the rent and maintaining on-time payments.

Marketing and advertising your rental unit: When vacancies occur, you want the rental unit occupied as quickly as possible. A professional property management firm has experience that helps it market your property in just the rate way to make sure someone moves in quickly.

Finding and managing tenants: The property management firm will take the work out of finding and managing tenants for you. This means screening new tenants for criminal and credit checks, collecting references, and getting the lease signed. Once the home is occupied, handling routine and emergency maintenance and inspections are part of what a professional management company will do for you.

Managing relationships with contractors and other vendors: Do you have deep-seated relationships with all of the maintenance workers, tradesmen, contractors, suppliers, and vendors needed to properly manage your rental? Probably not. But a property management firm does and can get you the best work for the best price, while handling the burden of overseeing necessary maintenance projects for you.

Keeping you in compliance with the laws Housing regulations and property laws are complicated and confusing when you’re renting and maintaining your rental property. These can include local, state, and federal regulations, along with fair housing regulations like the Americans with Disabilities Act. A property manager can keep you out of hot water by keeping your property up-to-date and in compliance with all of these regulations.

Allowing you to invest from afar: If you’ve moved to a place where investing in rental units don’t make sense, you might think that investing in SFRs or other rental properties isn’t possible. With a good property management company by your side, you won’t be so limited in your investment opportunities.

I only have one property; so why do I need a property manager?

If just reading through all of the tasks that a property manager can handle for you isn’t convincing enough, consider this: do you want to be able to go on vacation without interruption? Do you really enjoy phone calls about backed up plumbing at 3:30 in the morning?

Chances are, you want the freedom to leave town for vacation or just have uninterrupted time with family for the holidays. You don’t relish the task of dealing with emergency maintenance chores in the middle of the night, and you probably dread the thought of trying to find a good tenant when your existing ones move out.

Even if you only have a single investment property that you’re renting out, you can benefit strongly from hiring a property management service. They have decades of experience that you’d be hard-pressed to match yourself, and can ensure your property is maintained impeccably while still maximizing your profit.

Okay, I’m convinced, but how do I know who to hire?

The best way to find out about quality management companies is based on the experience of others. If you are local to your rental property, attend your regional real estate investment association meetings to get recommendations from other landlords.

You want to make sure you find out how many units the company is managing, and how many employees they have doing the work. A trained employee with the right tools and proven processes can successfully manage between 30 and 40 units, as long as they’re not also playing accountant.

When you’re interviewing different qualified property management firms, here are the questions you should get answers to:

What is the cost? Generally, the monthly fee for property management is between eight and twelve percent, plus expenses. Remember you get what you pay for, so it is important to balance the cost and services.

How well do they communicate? You want someone who uses email, but is still responsive to the telephone. If you don’t get a response in a timely fashion, it’s time to walk somewhere else.

How easily can I terminate the agreement? If things work out, what will it take to terminate your agreement? Make sure you know this up front, along with any penalties.

How experienced are they with Section 8? This can be supremely important, since Section 8 housing and tenants are great income opportunities. Make sure they have adequate experience with such properties.

How to Be a Top Commercial Property Manager Today

To be a top commercial real estate property manager you need to have solid market knowledge but you also need a comprehensive set of personal skills to match the needs of the property and the clients that you work for.

Many managers will graduate from ‘residential’ property, and move into ‘commercial’ property as part of growing and expanding their career. Whilst the idea is good, there are many factors and issues involved in changing property type. Commercial property is very different and much more complex than residential property; the knowledge base required of a person providing management services is far more extensive.

I do not want to scare you away from commercial property management as a career; but I do want you to respect the skills and knowledge that you will need in the role. The fee for managing a commercial property is substantial, but with that comes the requirement for personal skill and property control on the part of the manager and the agency.

In talking about this, I am not at this time specifically bringing into the discussion retail property. Retail shopping centre management is even more complex than commercial management. The fees in retail property are for this reason generally higher than that which applies to managing commercial property.

Here are some other main skills required of the property manager in performing their daily and weekly duties.

Negotiation skills will always feature as part of the job specification. Negotiations will be diverse across many different situations including property leasing, contracts and negotiations, maintenance contractor’s, tenants, solicitors, accountants, and landlords. The commercial property manager needs to have professional skills and suitable training when it comes to these diverse negotiation requirements.

Leasing situations will arise continually from the managed properties. The larger the portfolio, the more frequent the leasing requirement. In my opinion the property manager should be well skilled in leasing structures and or leasing negotiations. In this way they can help the landlords that they act for as part of selecting a new tenants for the managed investment property.

Lease documentation will vary greatly from property to property. This then says that the property manager needs to understand the differences in leases, how to bring them about, and how to interpret them. Rent reviews, rental structures, maintenance, option terms, refurbishment requirements, and tenant covenants are all unique situations that require specialist review with each and every lease in a managed portfolio. Critical dates will arise from every lease document as part of the management process. Many an inexperienced property manager has overlooked critical dates in the leases only to find that the landlords position has weakened considerably as a direct result.

Income and expenditure analysis will occur throughout the financial year for a managed property. The income needs to be optimized, and the expenditure needs to be suitably controlled. The difference between the two is the net income and that will have a direct impact on the value of the property for the landlord. It is the property managers duty to ensure that the best outcome is achieved given the prevailing market conditions.

Tenant communications should be well maintained throughout the year. When tenants are overlooked or ignored by the property manager, relationships soon sour, hence this exposes the property to unstable rental and or vacancy factors. Keep in contact with all tenants on a regular basis. Record all communications in writing so that the necessary evidence is available if any lease situation becomes the subject of a dispute.

Landlord reporting and controls will be unique to the particular landlord. Whilst most agencies have some form of income and expenditure controls and specific reporting processes, it is up to the property manager to interpret the reports and provide the necessary recommendations. Every monthly report produced for the managed property should be carefully checked as part of the month end process.

Maintenance controls will involve essential services and maintenance contractors. The age of the property will have some impact on the strategies behind repairs and maintenance. The complexity of the property and the tenancy mix will also have impact on the maintenance activity. Every lease should allow for the permitted use relating to the tenancy. Maintenance may be part of that process and certain maintenance costs may be applied to the tenant or the landlord depending on the particular lease situations. I go back to the point that each lease needs to be fully understood by the property manager.

Property performance is achieved through a fine balance of all of the above issues. That is why special skills and knowledge are part of the job specification for a commercial property manager.