What First-Time Real Estate Investors Should Know About Property Management

For new investors, single-family rental properties can be an appealing option. Part of that appeal comes from the ability of rental properties to generate long-term wealth. But it is critical to note that achieving your investing goals with real estate is only possible with good property management. In contrast to popular belief, managing a rental property involves more than collecting a rent check each month. In fact, understanding the full scope of property management responsibilities and implementing the right plan of action just might be new investors’ key to avoiding costly mistakes and ensuring the highest possible returns.

Understanding the Role of Property Management

Property management for rental properties involves a broad range of day-to-day (as well as less frequent) tasks. For example, managing a single-family rental property may involve one or more of the following responsibilities on any given day:

• Marketing and advertising rental properties: this includes planning, creating, and posting marketing and advertising materials, responding to inquiries, scheduling and attending showings, and more
• Tenant screening and leasing: this includes preparing and distributing applications, running background checks, verifying employment income and rental history, preparing lease documents, overseeing lease review, signing, and enforcement, move-in and move-out inspections, and related activities
• Rent collection and financial reporting: this may be partially automated, if you choose to use a rent collection application, but oversight is still required, not to mention monthly and yearly financial reporting, tax filings, and more
• Legal compliance and documentation: this involves a broad range of tasks, which may include verifying that tenant screening processes, as well as lease and other documents, are in compliance with state, federal, and local laws and regulations, and so are all interactions and actions taken with or against a tenant, including eviction
• Property maintenance and repairs: this includes all regular, seasonal, and annual property maintenance required to keep the property in habitable condition, as well as repairing, replacing, and updating property fixtures and systems as they age

While no two days of property management will look the same, the point is that rental property owners can expect these and other property management tasks to take up a significant amount of time and effort. The good news is that effective property management offers the reward of protecting both your property’s value and your rental income.

Tenant Screening: One of the Most Important Steps

One of the most important - and yet often most overlooked - steps of effective property management is tenant screening. In fact, creating and implementing a comprehensive tenant screening process can be the difference between a smooth and successful rental experience and a nightmare. It is hard to overstate just how important selecting a tenant is for the overall success of a rental property.

For this reason, it is important to collect detailed information from each adult applicant and to complete a minimum of the following screenings:

• Background check
• Credit check
• Income verification
• Rental history review
• References (non-relatives, if possible)

By carefully completing these and other appropriate screening tasks, it is possible to get a clearer picture of just who will be living in (and helping care for) your rental property. In fact, effective tenant not only reduces the risks of late payments, it can also help prevent property damage and decrease your chances of needing to carry out evictions.

One final note on tenant screening: there are many services and software programs that can help with your tenant screening process, all of which can make things easier for you. However, be sure to research the ongoing costs of any platform you may want to use and compare the capabilities with a more comprehensive options, such as hiring a professional property management company.

Maintenance and Repairs Protect Your Investment

Along with effective tenant screening, proactive property maintenance is probably the most important (and often overlooked) aspect of owning profitable investment properties. But it should be top of the list for all investors, whether you’re new to rental properties or a seasoned veteran. That’s because proactive rental property maintenance protects your property’s value, reduces costs, helps keep tenants satisfied with their home, and when the time comes, makes turnover more efficient as well.

At a minimum, a good property maintenance plan should include:

• Routine property inspections: this should include both interior and exterior features and major systems, appliances, and more
• Preventative maintenance schedules: seasonal and annual maintenance tasks should be planned and carried out consistently, particularly on HVAC, plumbing, and electrical systems, safety features, and appliances, just to name a few
• Coordinating repair vendors: one thing professional property managers do is develop relationships with local repair and service vendors, so that when repairs are needed, there is no scramble to find a reputable provider. This can also help keep costs under control.

But perhaps the most important thing about proactive maintenance, and one that is often overlooked, is that consistent maintenance helps prevent expensive emergency repairs later. Rather than wait for something major to break and then deal with emergency repairs, often in the middle of the night, preventative maintenance helps rental property owners focus on keeping things running smoothly, planning ahead for replacements and updates, and keeping maintenance costs within budget year-round.

Should First-Time Investors Hire a Property Management Company?

As you can see, rental property ownership is not a passive investment. Instead, it takes time and effort to keep a rental property maintained and tenants satisfied with their rental experience. For this reason, many investors choose to shift some of the burden onto professional property management services. Unlike self-managing a property, in which all of the responsibilities are yours to figure out (hopefully not through costly trial and error), hiring a professional property manager holds many benefits. For example, working with a property management company:

• Saves time and reduces stress
• Offers access to established vendor networks
• Provides professional tenant placement
• Includes automated rent collection and financial reporting
• Provides expert knowledge of laws & regulations and rental property best practices

For first-time real estate investors or those managing multiple properties, professional property management can be especially helpful. Having a local market expert on your team can not only help ensure your properties are properly managed, but can also give you insights into market movement and conditions, and even help you prepare to expand your portfolio over time. That is a valuable service that is hard to replicate on your own.

Build a Strong Foundation for Your Rental Investment

For new rental property investors, learning the fundamentals early can go a long way toward protecting your investment and creating reliable rental income.

At the same time, if you’re a first-time real estate investor looking to simplify the process and protect your investment, the team at Real Property Management is here to help. Contact your local office today to learn more about our quality professional property management services and how we can support your long-term investment success.