According to a Forbes article, investors need to include the time and effort of landlord duties into the equation of self-management. Rental properties are valuable assets that must be managed over time as long-term investments. Investors new to rental properties might think that property management is a breeze and believe they go the self-management route. However, self-managing means finding and keeping tenants, complying with local and state regulations, collecting and managing security deposits, accepting rental payments, tenant relations, repairs, and maintenance. There is no right or wrong answer to deciding to self-manage or hire a property management company because investing preferences and circumstances vary from investor to investor.
Below are duties associated with property management.
Tenant Acquisition
Owner and property managers use marketing to find new tenants. They use real estate tools to determine rent pricing. Knowing how and where to acquire tenants is crucial to keeping the units occupied. The owner/manager must have a reliable screening process to delve into each applicant’s rental history, credit and criminal background to determine if they are a good fit.
Security Deposit Management
The laws in Colorado concerning security deposits are strict. Some self-managing owners with poor records or lacking experience can get in trouble by incorrectly handling security deposits. Click here to view our blog titled “How Should Property Managers Manage Security Deposits in Denver?“
Strong Lease
DenCO Property Management and Sales (DenCO) believes a strong lease sets expectations for the landlord and tenant. Our lease agreement is the result of over 20 years of property management experience and lists the responsibilities of the tenant and the property management company. A well-thought-out lease sets the foundation for a successful rental experience for all parties concerned.
Rent Collecting
Owners and property managers should make rent collection easy by allowing tenants to pay online. It is always challenging when tenants get behind. It takes good negotiating skills and experience to encourage tenants to keep current on their rent. Unfortunately, some fail to pay, and the owner/manager needs to evict them. Owners who choose self-management need to be aware of eviction laws in Colorado and understand that evicted tenants have rights that must be respected.
Rental Property Expenses
Owners can expect two types of expenses – capital and maintenance. Maintenance expenses keep the property in working order, with well-maintained properties attracting better tenants. Owners can deduct maintenance and repairs from the property’s monthly rental income. Capital expenses improve the property and are depreciated over time. Savvy investors save a little monthly to cover a future roof, heating and cooling system, or water heater replacement.
Repair Tenant Requests
Owners/managers should make it easy for tenants to request repairs using online forms. Experienced landlords have a list of reliable service companies for appliance, plumbing, electrical, HVAC, and roofing issues. Emergencies need immediate attention to protect the rental. Typical Common emergencies include burst pipes, heating not working, no air conditioning, or flooding.
Financial and Records Management
Owners/managers keep track of rental income, expenses, and receipts for each property for accounting, budgeting, and financial planning purposes. Accurate records simplify tax reporting and allow owners to prove their income and expenses if audited. Good records also help owners understand the profitability of their investments and when to reinvest.
Documenting all tenant interactions allows owners/managers to manage their properties to the satisfaction of their renters, which is good business because happy tenants tend to renew and stay. Owners who self-manage or hire a property management company know they will eventually find themselves in a small claims court. The adage is true – the party with the best documentation usually wins in court. Proper documentation records actions, agreements, and communications between tenants and other parties.
How Property Self-Management Works
The most significant benefit of self-management is that owners save on property management fees since they perform the above-mentioned duties. The big negative is that it takes time to manage a property. Owners who decide to self-manage do not have the economies of scale that most professional property management companies possess, such as tenant screening processes, maintenance staff, and knowing what to do in most situations. Wrong decisions can impact cash flow and have negative legal ramifications. Also, property managers have a brokerage license and can access real estate resources, which is essential for effectively marketing a property and determining rents.
Benefits Of Hiring A Property Management Company
Some investors prefer to use their time to expand their real estate investment portfolio rather than self-managing. Sometimes, inexperienced owners get emotional or lack the time to address issues adequately. These owners should hire a professional property management company that handles it all for a monthly fee.
It can be rewarding for investors to find a professional property management company that meets their expectations and gives them a steady rental income flow. A well-written property management contract helps investors set clear boundaries and dictates how their properties should be managed. Rental investors should communicate regularly with their property managers and follow up if something seems amiss.
Owners needing help managing their rentals should hire DenCO. DenCO manages over 150 rentals in the DU, Washington Park, and other neighborhoods in the Denver area and has been in business since 1999. Call us at 303-722-9688 or click here to complete a Contact Us form.
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