Whether a small-time investor with one property right next door to your own home or a large-scale, worldwide investor, there are certain, distinct advantages to hiring a property manager or property management service.
Let’s just say that you have what might seem to be the best-case scenario for a small-scale rental property: you own a duplex and live in one half. By trade or by hobby, you’re an electrician, or a carpenter, or even a real-estate agent. So you think you can rent out the other half of the duplex, look after the maintenance or tenants, and earn some easy money.
Reality check: there is always more to the job than it seems on the surface, even for this type of ‘best-case scenario’. It’s doubly true that there’s more to the job if you have several properties or live far from your investment.
In all cases, you need to consider seriously, and preferably not by trial and error, whether you have the time and ability to manage this business. Because that’s what it is – on any scale – a business. If you try and fail to manage your property on your own, you risk running down the value of your investment.
Know the law
First, there are laws regarding tenancy and habitation that are specific to rental properties. These may include the need for fire exits, maximum capacity for tenants, or permission to rent to individuals or families (if you own a co-op or condo, for example, there may be restrictions on children). It is always advisable to consult an attorney or licensed real-estate agent to understand any laws relating to your property. A property-management expert will already know the laws or have an attorney on contract (or even on staff) for exactly this kind of service.
Next, there is the issue of sourcing tenants. Whether you seek long-term or short-term tenants, finding the right tenant – one who will live up to the commitment set out in the lease or contract, who is capable of payment, who is not a criminal – is a job in and of itself.
Researching and implementing the best options for finding a tenant, such as placing ads in the local newspapers or online portals, may require local knowledge; and there is some skill in the craft of writing an enticing ad that attracts the largest selection of tenants possible (giving you the most choice) – but for the right tenant.
Then, there are background and credit checks necessary to be sure. A property manager, due to experience and local knowledge and an understanding of the local tenant pool, will be adept at writing ads for rental properties, know exactly which photos of the property to show, and already have a system in place for conducting the requisite background and credit-history check.
Each of your tenants, short- or long-term, should be required to sign some form of a contract that lays out unconditionally the terms of the tenancy, including payment obligations. While there are standard lease contracts available online, there is no way for the layman to know whether these ‘one-size-fits-all’ leases really offer you any protection.
Even the best property manager should either advise you to hire an attorney to check the contract (lease) before you or your tenant sign it, or more likely, have an attorney at hand already familiar with the standard lease and who can double check that it provides adequate protection for you and your investment.
It may also come to pass that the tenant you select will make requests to have the lease changed in one way or another – perhaps they have a pet and would like to have in writing that the pet is allowed. Changes to an existing lease should always be reviewed by an attorney, as there may be some instances where the wording used in any changes nullifies the terms of the rest of the contract.
This is especially important for rental units in holiday areas where there is a frequent exchange of tenants, such as once every one or two weeks.
There really is a high level of owner involvement required at this stage, especially if not employing a property manager. From scheduling the bookings in advance, to meeting and greeting the renters upon their arrival, providing them with a key and instructions/introduction to the property, collecting payment, contract signing… and then returning again at the end of the stay to collect the key and any outstanding money due and inspecting the property for damages.
It’s a highly involved and ongoing effort. Do you have the time?
In between tenant arrivals, short- or long-term, you will need to schedule a cleaning service as well as any maintenance workers to clean and adjust and fix anything that either was broken or damaged by the last tenant, or is just starting to show signs of wear and tear. On call you will need to have a cleaner, plumber, electrician, carpenter, television/cable/satellite repairman and gardener, to name a few. And then you will need backups for them all – what if your tenant is due to arrive in an hour and the cleaning service can’t make it until tomorrow?
The work described for tenant changeovers is the absolute basic necessity. You are, after all, providing more than a place for renters to stay, but a service as well. For example, if a leaky faucet is keeping the tenant awake at night, he or she will expect you to come and deal with is – immediately if not sooner. If the toilets back up, the satellite television goes out, the neighbour’s cat sneaks inside and leaves an extra surprise on the living room floor, you will get a call and be expected to handle the situation with care, concern and a bright smile on your face at all times.
And no matter how much time and effort you put into selecting just the right tenant, you know that there always be a few who will complain incessantly about everything, either because that is their nature or because they are bucking for a discount on the final bill. You must have the patience to deal with it all, coming at you on a regular basis, and the ability to keep calm and even negotiate with the tenant when something truly does go wrong.
More than perhaps any other skill a good property manager possesses, this is the one to value most. Even if you are prepared to deal with the legal obligations, tenant sourcing and checking, and all the work to hire cleaners and maintenance experts, ask yourself this question: how much would you pay not to receive a phone call in the middle of the night from a tenant who needs to complain that the mattress is lumpy or smells funny?
In my estimation, a property manager who can deal with all of the above – and manage to smile the whole way through – is worth his or her weight in gold.