Profiting From Real Estate Investments An Investor Newsletter From HomeVestors Of America, Inc. By Marcie Geffner / Vol. 1 No. 16 08/31/2006 How To Hire A Property Manager Owning rental property can be an overwhelming experience for both new owners and longtime investment veterans. Fortunately, that's why help is available in the form of a professional property manager. Property managers help owners with a variety of tasks. A manager can find good tenants for vacant rental homes, condominiums and apartments; organize repairs, maintenance and improvements; perform accounting and bookkeeping duties; collect rents and other fees; handle evictions; give advice about property management; and even help the owner reposition the property to improve its income-earning potential. Nonetheless, the owner needs to understand that not even the best or most competent manager can take over the owner's own legal responsibilities for the property. In fact, the opposite is the case: The manager acts as the owner's agent and the owner is legally responsible for most of the manager's actions, except in cases of fraud and other limited situations. Large-scale property management firms that rely on economies of scale to manage huge numbers of apartment units, office suites or warehouse space may be reluctant to sign on a one- or two-house owner, but there are other choices in the marketplace. For instance, the local apartment association may be able to make a referral to a suitable property manager. Some real estate brokers also offer property management services to individual property owners. It's important to hire a manager who is willing and able to perform those tasks that the owner doesn't want to perform personally. Some owners might want to take care of maintenance or repairs on the property themselves while others might want to do their own accounting and bookkeeping, for example. The owner should make a list of tasks that the property manager is needed to perform and discuss those specific duties with the candidates. The owner should find out as much information as possible about the property management company. Here are some questions to consider: How much experience does the manager have in property management? What state licenses or other credentials does the manager have? Does the manager have errors-and-omissions insurance? If the property is vacant or becomes vacant, will the manager get it ready for the next tenants to move in? Will the manager interview prospective tenants and show them the home? Will the manager advertise the vacancy for the owner and at whose expense? Will the manager help the owner comply with fair housing regulations, the Americans with Disabilities Act and other applicable local, state and federal laws? Will the manager collect and deposit rent payments? What will happen if the rent is late or a resident has to be evicted? Is the manager qualified to handle bookkeeping and accounting? How much money will be the manager be authorized to spend without prior authorization for the expenditure? Will the manager be authorized to sign checks on the owner's account? If so, what types of controls are in place to protect the owner from misuse of funds or outright embezzlement? What types of reports will the manager submit and how often? Who will perform maintenance and repairs on the property? Who will shop for property and casualty insurance? Will the manager inspect the property on a routine basis? Will the manager secure the property in the event of a disaster or emergency? The owner should be sure to ask about the manager's fees, which will depend on the location of the property, the number of homes or housing units that will be managed for the owner, and the types of services the manager will provide. Some managers charge a monthly fee and others charge a percentage of the rent for the property. Some services may cost extra, so it's important for the owner and manager to agree in advance on what's included in the fee and what isn't. The owner and manager should sign a written agreement that explains the services the manager will provide and how much the owner will pay for those services. The agreement also should include contact information, a termination or renewal date, and remedies for any breach of the agreement. The owner should discuss the agreement with a qualified attorney. Finally, the property owner should remember that the manager is only a manager, not a substitute for the owner in person. Active involved owners keep a close watch on their property and their managers and make sure that the property is being managed to meet their own objectives. Copyright 2006. Marcie Geffner. All rights reserved. COMING NEXT ISSUE: Holding the line on remodeling costs. The Investor e-Newsletter is provided free by HomeVestors of America, Inc. 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