I would like to state at the outset that this particular post is very different from my past posts. In the past I have tried to educate readers about various aspects of landlord-tenant law. I will not be doing that this time. My goal with today’s post is to generate a discussion and to have you, the reader, provide me (and the other readers) with your thoughts and concerns regarding the topic of professional management companies and when a landlord should consider hiring one to handle the daily management of rental property.
You may be curious as to why I am writing a different type of post. The reason is quite simple and straightforward — in the last month or two I have received several phone calls from landlords that are frustrated with dealing with their tenants and the daily management issues. My response to these calls is often along the lines of “welcome to being a landlord,” but I have refrained from such comments lately as I have noticed that these are not just the usual rants about irresponsible tenants. Instead I am noting real frustration and a wish to get out of “landlording.” Many of the individuals that I have spoken with have been very upfront in telling me that if they could afford to sell their rental properties that they would but since they cannot they have decided that they want to hire someone else to take over the management. They then ask me if I can provide them with the names of some professional property management companies that I would reccomend.
After giving the caller some names of property management companies, I make a point of explaining to the caller that hiring a management company does not make all of their problems disappear. I explain to them that there are a lot of different management companies out there. I point out to them that just like landlords, property management companies have different styles and ways of running their respective businesses.
Giving up the daily management of your rental properties is a big decision. The decision should not be made lightly. A landlord needs to find a company or manager that s/he feels confident in and comfortable with. It is important that you interview any managment company that you are considering hiring. You will be trusting this company with the care of your real estate investment — take the time to get to know them and learn how they will handle their job. Some management companies are more “hands on” then others. Some are more “service oriented” then others. Some follow applicable landlord-tenant laws more than others.
Most management companies will handle everything that you can possibly think of if you want them to, such as:
– Finding tenants for your vacant units
– Showing the units to prospective tenants
– Screening applicants and vetting their applications
– Fielding complaints and maintenance requests
– Accepting rent
– Hiring contractors to make repairs or making the repairs themselves
and much more.
If you find the right property management company, it can be the best decision that you ever made. The exact opposite can be true if you choose the wrong company.
Even if you hire a company to manage your properties for you, it is important to understand that you — the owner — may still be held responsible/accountable if the management company does something wrong. If the management company does not understand fair housing laws and runs a discriminatory advertisement for your vacancy, both the management company and the owner could be sued. If the management company doesn’t make adequate and timely repairs and as a result a tenant is injured, there is a strong chance that both the owner and the management company could be on the hook.
Some landlords wish to retain some level of control even after they hire a management company. I know of landlords that still choose to be involved in the tenant selection process but leave everything else to the management company’s discretion. I have met other landlords that want to personally approve every repair that is made to their income properties. There are no “typical” situation. It all depends on what the owner wants and what the management company is willing to do.
Some management companies consist of 1 person. Others have hundreds of employees. Some offer their services on an a la carte basis while others offer various packages that the owner can choose from (kind of like a trim package for cars). Some only manage apartment complexes; others may take on the management of duplexes and single families.
I personally do not feel that there is a “right” time for each and every landlord to give up the daily management of their rental properties and turn it over to a professional management company. Its not like there is a certain “cashflow magic number” that dictates the hiring of a property management company. The best time to make that change — or even if the change should be made in the first place — depends on the specific landlord and his/her situation.
I believe that there are three issues that often casue the topic of hiring a property manager to the forefront for landlords. First, the landlord no longer has the time to properly manage their rental properties. Second, the landlord realizes that they are not “cut out” to handle daily management of rental properties. Third, a landlord gets “dinged” by a tenant. This could run the gamut from having an eviction action dismissed because of improper service of a 5 Day Notice, or getting sued by a tenant for making an improper deduction from their security deposit, or any other number of situations. These situations often arise becasue the landlord does not know th ebasics of landlord-tenant law for one reason or another. We have all met landlords that don’t have a “clue” what they are doing . . . they usually are the ones that are not members of an apartment association, do not attend seminars, and don’t read my blog : )
In my years as a landlord-tenant law attorney I have read many good articles that discuss what you should consider when hiring a property management company. One recent article that I came across is entitled What To Consider When Hiring A Property Management Company. Another article adressing the topic is entitled Should I Hire A Property Management Company For My Rental Property? What are the 10 Questions You Should Ask Before Hiring A Property Management Company? There are many more articles on the web that discuss this issue. I would suggest that you take the time to read these articles and others as they are very good at raising issues that you should consider when making this important decision.
If you have just finished reading the above paragraph and have now realized that this is the end of the post and are about to click away . . . DON’T. Please post a comment. If I don’t get any comments on this post then I will be forced to just go back to the boring old lecture format. Nobody wants that, do they : )