Property Management

What Is A Property Management Company And Do You Need One?

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Managing a rental property is no easy feat. Landlords stand a better chance at making a profit if they outsource the job to a property management company. But, what is a property management company anyway?

What Is a Property Management Company?

Property management requires a lot of time and work. For many landlords, it just isn’t worth the effort. All the stress that comes with managing a rental property is what drives most owners to sell. Fortunately, there is a way owners can keep their property and earn a profit without doing any of the hands-on work.

To put it simply, a property management company is a company that performs property management on behalf of rental property owners or landlords. Property management is the act of managing properties, be it residential, commercial, or mixed-use developments. This includes single-family homes, apartments, condos, and even shopping centers.

 

How Does a Property Management Company Work?

A property management company works by providing services to landlords in return for a fee. Property management companies usually employ a team of property managers, assigning one to each client or property owner. These companies also maintain a staff of workers who help property managers do their work behind the scenes. Workers can include accountants and lawyers, too.

Sometimes, property management companies will have in-house maintenance crews who can perform maintenance and repair work. Companies that don’t have maintenance personnel usually outsource property maintenance jobs to a separate but trusted provider. Property management companies also have a network of vetted and insured vendors who can perform various tasks for them.

 

What Does a Property Management Company Do?

Some landlords have a hard time understanding what a property management company is without knowing what services they provide. So, what do property management companies do?

The extent and nature of services can vary from one company to another. Some companies only offer a handful of services, while others offer all the services a landlord might be looking for. In general, though, landlords can expect a property management company to provide the following services:

  • Rental property advertising
  • Tenant screening and selection
  • Lease agreement preparation
  • Rent setting
  • Rent collection
  • Property maintenance and repairs
  • Tenant management
  • Property inspections (move-in, move-out, and routine)
  • Tenant and owner fund management
  • Vendor coordination
  • Accounting and bookkeeping
  • Financial reporting
  • Evictions
  • Legal compliance
  • Tax assistance

 

How Much Does a Property Management Company Charge?

Owners have to consider all aspects of professional property management before coming to a decision. For a lot of owners, the cost can make or break a deal. Monthly property management fees come in two forms: flat fee property management and percentage-of-rent property management.

 

Flat Fee Property Management

For this fee structure, companies will charge a fixed monthly rate to manage the rental unit. This can range from $100 to a few hundred dollars for a single-family home. Factors that can influence this fee include the type of property (commercial or residential), the location of the property, the size of the property, and what services are included.

 

Percentage-of-Rent Property Management

On the other hand, most companies will collect a percentage of the monthly rent as their monthly management fee. On average, property management companies will charge 8% to 12% of the rent. Owners should make sure companies charge their fees based on rent collected instead of rent due. This way, landlords don’t lose out should tenants fail to pay their rent.

 

Other Property Management Fees to Watch Out For

Apart from the monthly management fee, there are other fees that a property management company may charge. These include but are not limited to:

  1. Initial setup fee – The initial setup fee covers the cost of setting up a new account with the company. This includes the cost of opening a bank account, initial property inspections, and license renewal/registration. It also covers other administrative expenses associated with creating a new account.
  2. Tenant placement fee – Some companies include tenant placement as part of their monthly management fee, but others have it separate. The tenant placement fee covers the cost of advertising the property, screening tenants, showing the property, preparing the lease agreement, and performing move-in inspections.
  3. Vacant unit fee – Contrary to popular belief, managing a vacant unit also costs money. In fact, one can argue that it costs more money than an occupied unit. This fee typically covers the cost of maintenance and repairs as well as regular property inspections to ensure no squatters or trespassers are inside.
  4. Lease renewal fee – When a tenant renews their lease, some companies charge a fee. This is usually to cover the cost of lease adjustments as well as a market research analysis to determine whether a rent increase is appropriate.
  5. Eviction fee – If a landlord wants the property management company to evict a tenant, it normally comes with an eviction fee. Landlords have to pay this in addition to any court costs for the eviction.
  6. Early termination fee – Terminating a management contract before it’s due to expire typically comes with an early termination fee. This can be a fixed rate or the management fees for the remaining months on the contract combined.

 

Should I Use a Property Management Company?

It is easy to brush off the need for a property management company when other landlords seem to be doing fine without one. But, not all landlords are made equal. In general, it is a good idea to hire a property management company if an owner falls into one or more of the following situations:

  • property management companyThe rental property is not located close to the owner’s home.
  • There are several rental properties under the owner’s name.
  • The owner lacks the time to manage the rental property or properties.
  • The owner lacks the experience to manage the rental property or properties.
  • Hands-on property management is not something the owner wants to do.
  • The owner does not want to deal with consistent tenant concerns and calls.
  • The rental property has a high vacancy rate that only professional management can address.

 

What to Look for in a Property Management Company

Property management companies come in all shapes and sizes. With so many available options, it can be difficult for owners to make a decision. But, there are some key traits that make the best of the best truly stand out.

Here are the things owners should look for in a property management company:

 

1. The Right Credentials

Setting up a property management company is not something just anybody can do. In most states, a property management license or real estate broker’s license is necessary to operate. It also helps if a property management company has been certified by one or more of the following trade organizations:

 

2. Good Reviews

Owners should also look for reviews and testimonials of a property management company online. A quick Google search should turn up many results. Of course, big-name property management companies have a reputation, but owners should not discount smaller firms either. Larger companies may have tons of clients that an owner with only a few units won’t be prioritized.

A good way to look for a property management company with a proven track record is to ask for referrals from friends and family. Those that come highly recommended are lauded for a reason.

 

3. Real-Life Examples

A lot of property management companies sing their own praises but have nothing to show for it. One way owners can evaluate a candidate is by visiting properties they currently manage. Owners can check with their own eyes how well (or bad) each property is doing. If the property screams unmaintained, then that should be a huge red flag.

While owners are at it, they can talk to the tenants during property visits, too. This way, owners can get a feel of the management company’s performance. Tenants usually have nothing at stake in the situation, so they will likely be honest and tell owners how they truly feel.

 

4. Affordability

Cost is important to most landlords, so much so that it can influence their final decision. As such, owners should look for a company that fits their budget and addresses their needs at the same time.

Keep in mind that it is not always best to go with the cheapest option there is. A lot of companies charge low monthly management fees only to surprise owners with high hidden costs. Low rates also tend to mean below-average services.

 

5. Fair Management Contracts

Before signing anything, owners should carefully review the management contract with a lawyer to make sure it is not unreasonable. Because owners typically don’t have a lot of legal knowledge, it is easy to fall into a trap. If a lawyer spots something amiss, then owners should probably back out of the deal and look for a different firm. After all, a company that tries to swindle its client is not worth a second chance.

 

6. A Good Fit

Finally, it is important that owners find a company whose values and beliefs line up with theirs. A good way to gauge this is to interview the company and the property manager they intend to assign. Owners and managers have to get along and see eye-to-eye. Otherwise, there is a world of disputes and disagreements in store for both parties. This will eventually lead the owner to either not renew the contract or terminate it early.

 

What Does a Property Management Agreement Cover?

The property management contract serves as proof that both parties have an obligation to each other. As such, it should contain all pertinent information. In addition to a liability and indemnification clause, otherwise known as a hold harmless clause, the management agreement should, at the very least, consist of the following parts:

 

1. Scope of Work

Every contract should detail the scope of work. What is a property management company responsible for? This section should specify what services the company must provide on a monthly basis, what the screening process entails, how maintenance and repairs will be carried out, how rent payments (including late rent) will be collected, and the financial reports the company must provide the owner.

 

2. Owner Responsibilities

Unlike what some might believe, owners also have responsibilities in a property management deal. The contract should clearly state what owners must and can’t do. Some of the more common obligations include purchasing and maintaining proper insurance coverage and creating and maintaining a reserve fund for repairs and emergencies. Some of the things owners can’t do include entering the unit without permission and interfering with the tenant selection process.

 

3. Property Management Fees

Specifying the property management fees, including any extra ones, in the contract will prevent the company from blindsiding owners with surprise costs.

 

4. Contract Duration and Renewal

The property management contract should also have a clear start and end date. This way, both parties know when services should begin and when they should expire. In addition to this, the contract must also outline renewal terms, such as what owners must do to renew the contract and if there are associated fees that come with it.

 

5. Termination Clause

Lastly, the contract must indicate terms for cancellation. This clause should detail how much notice owners must give before terminating the contract and the company’s obligations upon termination. Owners would also be smart to find a contract that does not require a reason to terminate. Because terminations can come at great expense for the company, owners should expect to pay an early termination fee, too.

 

What Is a Property Management Company? Answered!

Clearly, hiring a property management company poses plenty of benefits for rental property owners. But, before diving into a decision, it is important to understand these companies from every side of the die.

If you need a property management company, allow Rental Choice to help. Search for the best company in your area today using our comprehensive online directory.

 

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Have Plans Becoming A Rental Owner? Here’s What You Should Know

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A lot of people aspire to own and manage a rental property. But, becoming a rental owner is not as easy as it seems. In fact, there are several things one must know and do to be a landlord.

 

A Beginner’s Guide to Becoming a Rental Owner

At first glance, it may seem like managing a rental property is simple work. Most people think all there is to the job is finding tenants and collecting rent. But, before you jump into any big decisions, there are plenty of other aspects you must consider.

Here is your guide on how to become a landlord.

 

1. Understand Rental Laws

One of the first and most important steps to becoming a landlord is to understand rental laws. As with a lot of businesses, which property management basically is, there are several laws that can apply to rental properties. The federal Fair Housing Act, for instance, is a big one. But then, most states also have their own state-level fair housing laws. There are even laws at the local level that can apply to rental properties and landlords, particularly when it comes to short-term rentals.

 

2. Invest in Property

The next thing you should do is find a suitable rental property. Top factors to consider when it comes to selecting a rental property include:

  • Location
  • Size
  • Type
  • Property value
  • Local rental market

It is important to strike the right balance when it comes to buying and owning rental property. If you buy a property that’s too expensive, you might have a hard time getting a return on your investment. But then again, a property that’s too cheap is usually a fixer-upper. And that would mean having to spend loads of time and money on renovations and repairs.

Of course, some people get into the rental game because they already have a house or apartment to spare. In that case, you will need to calculate whether or not you’ll be able to earn a profit from your current property. Owning a rental house means having to consider profitability in the equation and letting that inform your decision on whether to rent it out or simply sell it.

 

3. Get Insurance

There are typically no licensing or certification requirements to be a landlord. But, while not obligatory, it is smart to purchase sufficient insurance. The main policy landlords should get is landlord insurance. If the rental property is attached to your primary residence, talk to your insurance provider about the possibility of including it under your homeowners insurance policy.

 

4. Advertise

A new rental property owner should also know how to advertise their listing. Rental properties don’t just magically become tenanted. You need to get the word out there to attract applicants.

When creating your ad, make sure to use compelling language, but not too much that it might overpower everything else. Provide all the details of the rental, including any policies you have (no-pets policy, no smoking policy, etc.). Letting potential applicants know of these details upfront will make the selection process much easier. Remember to also accompany your listing with photos of the property.

 

5. Set the Right Rental Rate

If you thought being a landlord didn’t come with research and analysis, you’re wrong. You can’t collect rent if you don’t set it first. But, setting the right rental rate is not as simple as you might think. You can’t just decide on an arbitrary price and roll with it.

A good way to determine rent price is to do some local market research. See how much other landlords are charging for similar properties in your area. You also have to factor in your property’s monthly expenses and any amenities you have. Be careful, though. Charging too low a rent can cause a net loss while charging too high a rent can scare away potential tenants.

 

6. Screen Tenants

Not all tenants are made equal. Good tenants pay their rent on time and take care of the property, whereas bad tenants are the complete opposite. To ensure you land good tenants, screening is paramount. That means doing credit checks, background checks, and employment checks, as well as asking for references and talking to past landlords.

 

7. Draft the Lease Agreement

Becoming a rental owner also involves quite a bit of legal work. Apart from understanding federal and state laws, you need to be able to draft your own rental contract. Your lease agreement should include all pertinent details of the deal, including landlord and tenant responsibilities, a termination clause, and other lease terms. If you don’t know where to begin, hiring an attorney might be helpful.

 

8. Collect Rent

Now comes the most highly-anticipated part — rent collection. For a smooth process, you should have a standard procedure when it comes to collecting rent. That means setting a deadline (and a grace period), only accepting certain modes of payment, and imposing late fees. For new tenants, you will also need to collect a security deposit, which is typically one month’s rent.

 

9. Maintain the Property

When learning how to be a landlord, property maintenance is vital. There is a common misconception that landlords don’t do much work, but maintaining the property alone is already a big responsibility. You have to perform routine inspections to check for any damages and address any maintenance issues that your tenants report to you. As a landlord, you have to provide a habitable home for your tenants. It also helps maintain curb appeal, which has a direct impact on property value.

 

10. Keep Records

If you’re becoming a rental owner, you need to know how to document and keep records of everything. This includes copies of your insurance policy and lease agreements (and any addenda). You will also need to take and keep photos of the property when tenants first move in. Having these before photos will help you identify whether or not a tenant has damaged the property throughout their stay.

 

How Much Profit Do Landlords Earn?

It is impossible to determine exactly how much you will earn from owning a rental property. This is because there are a lot of variables, and prices can increase or decrease with time. To ensure you earn a profit, it is crucial to work backward. List down all of your potential monthly expenses and make sure you charge a rental rate that can cover all of that.

Some of the most common monthly rental property expenses include:

  • Mortgage payments (if applicable)
  • Maintenance and repair costs
  • Insurance premiums
  • Utility bills (for multi-family properties)
  • Management fees
  • HOA dues

Other one-offs or irregular fees include:

  • Real estate broker fees and closing costs (if applicable)
  • Marketing fees
  • Tenant screening costs
  • Pest control costs
  • Capital improvements
  • Property taxes

 

The Need for a Property Management Company

Managing a rental property can be overwhelming, especially for a new landlord. As such, many turn to a professional property manager for help. Property management companies offer a wide variety of services, including advertising, tenant screening, rent setting and collection, and maintenance management. Many also provide assistance with legal work, tax preparation, and evictions.

Who needs to hire a property management company? Landlords who:

  • Live far away from their rental property;
  • Own multiple rental properties or a multi-family rental property;
  • Have no time for property management;
  • Are not skilled in property management; and/or,
  • Have no interest in hands-on property management.

 

Before Making a Commitment

Becoming a rental owner certainly comes with plenty of benefits. A lot of people get into this business to earn passive income. But, becoming a landlord takes more time and effort. Before making your decision, it is essential to first evaluate your situation and understand what type of work goes into the job.

If you need a property management company to help you out, Rental Choice is the best place to go. Our online directory consists of trusted property management companies that you can narrow down by area. Start your search with us today!

 

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Is Landlord Responsible For Fallen Tree?

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Who is responsible for tree trimming in a rental property? Is landlord responsible for fallen tree or is the tenant? Here are the answers to the most asked questions about tenant yard maintenance responsibilities.

 

Is Landlord Responsible for Fallen Tree?

A landlord’s maintenance duties are not only limited to the interiors of a rental property. However, most landlords — and even most tenants — forget about exterior maintenance. As such, the issue of landscaping, particularly tree trimming, might not be discussed before a tenant moves in, resulting in confusion as to who bears the legal responsibility for fallen tree damage.

So, who is responsible for cutting overhanging tree branches? It depends.

 

Consult the Lease Agreement

First, consult your lease agreement to see whether tree trimming falls under the responsibility of the landlord or the tenant. In most cases, tree trimming is not covered by the lease agreement.

However, some landlords may ask their tenants to sign a lawn care or landscaping addendum. If there are no provisions regarding tree trimming, the responsibility typically falls on the landlord.

 

Landlord Responsibility for Trees in a Rental Property

landlord responsibility for treesTree trimming and removal are not considered as part of regular landscaping. However, it is still an essential component of preventive maintenance. It’s important to cut down overhanging tree branches because they may cause damage to the roof, windows, and other structures. They can also fall on power lines and cars, which can cause significant property damage as well.

Pruning dead or damaged branches keeps trees strong and healthy. Having healthy and well-maintained trees can enhance the aesthetics of a rental property. As such, landlords can reap additional benefits when they assume responsibility for tree maintenance.

Conversely, not assuming responsibility for tree trimming and removal can lead to potential issues. Several states require property owners to secure a work permit before removing a tree. Some areas also have restrictions on tree species, their height, and their diameter. Tenants are not usually privy to this kind of information. And so, if you have tenants cutting down trees without permission, it could lead to massive fines for the property owner.

 

Laws on Cutting Trees on Private Property

Not all states have laws on cutting trees on private property. As such, landlords should check with their state before undertaking tree trimming or removal on their rental property.

For example, Colorado and Illinois require a work permit before owners can remove trees on their private property. Meanwhile, California and Georgia have removal restrictions for specific tree species such as heritage trees (oaks) and hardwoods, respectively.

 

Trees on Public Property

There are also different regulations regarding trees that encroach upon public property, such as streets or sidewalks. In some areas, the city may remove overhanging branches even without permission from the owner. On the other hand, in other places, it is still the owner’s responsibility.

 

Trees on Private Property

What about trees that encroach upon a neighbor’s private property? It’s best to consult your state and local laws as well. However, there are two notable examples.

In California, if a tree straddles property lines, both owners are responsible for maintaining it. You can trim or cut down the tree even without notice or consent from your neighbor. If a tree is located on one property but has branches or roots that are invading a neighbor’s property, the neighbor can ask the owner to trim the tree. If the owner refuses, the neighbor can trim the tree—but only those that are encroaching upon their property. They must also trim the tree in a way that does not damage the tree.

 

In Florida, the law acknowledges that overhanging branches or roots that encroach upon a neighbor’s property may serve as a nuisance. However, owners are not liable for such nuisance. The neighbor is free to trim the tree but at his or her own expense. If a dead tree, branch, or root falls on a neighbor’s property, the owner may be held responsible for any damage. If the tree that falls is alive or healthy, the tree owner cannot be held liable for any damage. This also applies to tree damage due to natural disasters.

 

Frequently Asked Questions About Fallen Trees

Here is additional information that establishes the landlord’s responsibility for tree trimming and maintenance.

 

Is Tenant Responsible for Landscaping?

Tenants may have landscaping responsibilities, depending on the provisions in their lease agreement or landscaping lease addendum. These duties may include watering, mowing, and weeding the lawn.

 

Are Tenants Responsible for Trimming Trees?

Tenants may perform general lawn care or landscaping. However, major tree maintenance, which includes trimming and removal, should be handled by the property owner or landlord.

 

Is Landlord Responsible for Tree Damage to Car?

who is responsible for tree trimmingIf a natural disaster causes a tree to fall on a tenant’s car, your insurance claim is likely to be denied — unless “Acts of God” are included in your policy. However, if you have proof that there was neglect on the side of the landlord, you may be able to file a claim with your insurance provider.

For example, if the tree was damaged or diseased but the landlord did not address the issue, they could be held liable when the tree falls during a natural disaster. These cases are usually evaluated on a case-by-case basis so tenants should coordinate with their landlord and insurance providers.

 

A Definitive Answer to Is Landlord Responsible for Fallen Tree

Is landlord responsible for fallen trees? By now, the answer is clear. Landlords should remember to include tree maintenance in their list of duties as this reduces potential liabilities. Meanwhile, tenants should always work together with their landlords to ensure that the rental property is well-maintained both inside and out.

 

If you are a landlord who needs help with tree trimming and other maintenance tasks, consider the advantages of having a property manager. You can check out Rental Choice’s online directory to find the best property management companies in your area.

 

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