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Four Reasons You Should Hire a Property Manager Who Owns Rentals

Apr 14 2017

Here are four quick-and-dirty reasons why, if you’re in the market for a residential property manager for your investment rentals, you should hire one who has a rental portfolio of their own.

The PM understands why it's important to control expenses and improve cash flow.

If your goal is to buy and hold long-term rentals, it’s likely that your focus is on generating a decent-to-good cash flow to pocket as passive income, or use to reinvest, or rely on to quit your (perhaps not-beloved) day job real soon. A PM who owns a least a few units and has had to spend money to fix them knows a few things about expenses—for instance, when it’s better to spend more money now to prevent large expenses in the future, or to spend less now to meet more short-term cash flow goals. They’ve seen the hit to their bottom line when they hired the cheapest plumber to fix the ceiling leak and then had to go back and hire the bestplumber to fix that fix. But they’ve also seen the cost savings in buying a lesser-quality product than they would for their own homes to maximize cash flow.

The PM sympathizes with problem tenants and works hard to set realistic expectations to get them to pay rent.

A PM who owns rental property knows that it’s never okay to slack off on collecting rent from a problem tenant and create a situation where an owner hasn’t received a rent check in months—seriously cutting into their bottom line. On the other hand, they know that it costs money to pursue an eviction, and that sometimes people run into rough patches in life and need a flexible, temporary payment arrangement. They know firsthand what happens when NO money comes in—whether from a nonpaying tenant or a vacancy they’re trying hard to fill—and will work to get your tenant back on track and remain your tenant for the term of their lease and perhaps a renewal (or two) because they appreciate the second chance.

The PM understands discussions with the banks if you want to grow your portfolio.

Investing in buy-and-hold rentals takes a lot of financial analysis. You crunch numbers, jockey spreadsheets, negotiate deals and communicate with lenders about loan terms, interest rates, and the crazy world of underwriting. Your PM who owns a few duplexes and a quad has already been there and done that. They have experience to share with you, guidance to provide, opinions to offer and most likely, professional contacts with lenders, title agents, attorneys, and tax folks to share with you.

The PM understands why good tenant screening can be key to the long-term success of the property.

The experienced PM/owner has rented their own first apartment once and learned a lot about what not to do and what kind of tenant not to place in their rental. They’ve figured out good screening products and companies and the main reason to use them—to put a good tenant in the rental and keep them there. They’ve come up with a list of pre-qualifiers that will thin out the number of applicants to the best pool to choose from (i.e. three times the monthly amount of rent in gross income; no violent or drug felony convictions; a zero-balance on past evictions and two years eviction-free, etc.). And they don’t make exceptions to strict screening rules, because real estate investing is a business.

There are more reasons to hire a property manager who owns rentals when you’re looking for management, but the most important is because experience is the best teacher.

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If you’ve ever considered investing in a few rental properties in Philadelphia or Bucks County, PA now might be a good time. Prices are still low in Philadelphia, but have been on the upswing. According to the National Association of Realtors, the median price of an existing home in a US metropolitan area grew 13.7% between July 2012 and July 2013, the latest in a 17-month streak of year-over-year price increases. 

New landlords can choose from properties that are likely to appreciate and a large pool of potential renters.Licensed realtor Pat Mueller cites a few reasons for this trend: “Many families have lost their homes to foreclosure and are entering the rentals market for the first time in years. Mortgages are also harder to get now, so fewer people are qualifying for a new one.”The more skills you bring to the table to get into Houses for Rent in Philadelphia Philadelphia or Bucks County, PA and the more time you have to devote to your properties, the faster you can make a return on your investment. 

But investing in rentals can also be disastrous (or too stressful to be worthwhile) without expertise. Here are three professionals you may consult about your new rental properties, and what you can do to mitigate how much they cost you:Handyman:  You may need to hire a specialist for some work on your rental. If you need new outlets or new pipes, for example, hire an electrician, plumber or licensed contractor. Handymen usually tackle smaller, more manageable tasks, like:

  • Painting and paint removal
  • Drywall repair
  • Minor appliance repairs (fixing a leaky toilet or faucet, among others)
  • Installing tiling or flooring, moldings, windows, doors
  • Refinishing decks, cabinets and other wood items

When You Could Skip It: You could do any (or all) of these projects yourself if you have the time and interest in learning. Of course, this only works if you live relatively close to your rentals and are flexible enough to service them on short notice. And if you’re willing to respond to the occasional 5 AM basement flooding.

Average Savings: Any base rates or costs-per-hour vary from location to location in Philadelphia or Bucks County, PA , but nationally, you can expect to spend an average of $60 to $85 per hour for repair costs. It general costs less to hire an individual handyman than a handyman employed by a company. Expect an additional charge if your job requires a trip to the store for materials.

Resident Property Manager As the owner of a handful of rental properties, you may be able to manage them yourself, but if you want help, a single resident manager would probably be more cost efficient than a property management company. Resident managers may:

  • Serve as a handyman
  • Advertise vacancies in your units
  • Show apartments to prospective tenants
  • Review rental applications
  • Collect rents

When You Could Skip It: Again, the closer you live to your properties and the more spare time you have, the less likely you are to need a manager. The obligations of being a boss will also cut into the time you save on maintenance.

Average Savings: The national median wage for residential managers is just over $25 per hour. Research the wages in your community and adjust according to how much responsibility your manager will take on. 

Real Estate Agent: Once you’ve gotten your financials in order and done your own research on the neighborhood(s) you’re considering, you might contact a realtor to show you potential properties. You can also arrange for a realtor in Philadelphia or Bucks County, PA to show rentals once they’re ready to rent.

When You Could Skip It: It depends. Even if you’re a local, or have thoroughly researched the neighborhood(s) you’re considering, a realtor is a great resource for a first-time rental buyer. Realtors have access to data and statistics not necessarily available to the general public and first-time buyers may not know all the right questions to ask. Using a realtor to fill your Houses for Rent vacancies is less of a no-brainer, depending on your other time commitments or whether you plan to hire a resident manager who could do the same thing.

Average Savings: As a buyer of rental properties, as when buying your own home, sellers typically pay most, if not all, of the buyer’s realtor fees. In this case, Mueller points out there’s little reason not to work with a realtor. For help in filling your units in Philadelphia or Bucks County, PA, the services of a realtor would set you back between 10-20% of the unit’s rent per month.  Mueller recommends interviewing with several brokers before making your final decision to invest into Houses for Rent .

The Bottom Line: As a new landlord, you can’t necessarily control the flexibility of your schedule or the amount (and cost) of unexpected repairs to your properties. Rentals are a long-term investment. However, to maximize profits from your Houses for Rent, new rentals, you can buy close to home and start small. It is best to begin with just one or two properties. This will allow you to maximize the time you spend on your properties’ needs, and minimize the amount you’ll have to pay anyone else.

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