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As more people invest in rental
real estate, they're discovering how much time and effort is involved in
screening applicants and doing upkeep on the property, not to mention the
process of cleaning up after a tenant moves out or handling an eviction. As
a result, they often turn to property management companies. It's not always
a pleasant experience.
Rob and Amber Hill hired a
property manager to oversee a rental house they owned after they moved from
Atlanta to Savannah, Ga. When their tenant moved out, they paid the property
manager one fee to screen applicants and another to place a new tenant in
the house.
What the Hills didn't know until
later was that the "new tenant" was, in fact, already living there. She was
their tenant's live-in girlfriend. When the relationship ended, he moved out
and she stayed. The property management company simply had her fill out an
application and sign a new lease.
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"Her credit was total crap,"
says Robert Hill, the author of "What No One Ever Tells You about Investing
in Real Estate: Real Life Advice from 101 Successful Investors." "She lied
about her employment. She told them she had three kids; she had four. She
lied about having pets; they tore up the property. They didn't screen her at
all."
So, how do you find a good
property management company? Maybe the question to ask is: Do you really
need one?
Going solo
"It's not as much work as you think it would be," says Christine Karpinski,
author of "Profit From Your Vacation Home Dream" and the owner of several
vacation rental properties. "What is that management company doing when
there's a repair to be made? They're not going to the property. They're
hiring someone to do it. I can do that, too. I can use a telephone. I just
had a well go out in my property in Tennessee. I picked up the phone and
called the well-drilling company."
Jeffrey Taylor, author of "The
Landlord's Kit" and founder of the online landlord community, MrLandlord.com,
is another advocate of doing the work yourself. One reason is the expense.
It's common for property managers to charge a flat fee of 6 percent to 12
percent of rental income per month. Tenant screening and placement is extra.
For a small investor with one or two properties, that could pretty much wipe
out any profits.
That doesn't mean,
however, that you should be doing everything yourself. Both the Hills and
Taylor highly recommend attending a meeting of a local chapter of the
National Real Estate Investors Association
to ask other local investors for referrals on service providers.
