Rental Property, Who is managing your property?

The Florida building boom resulted in many first time investors becoming owners of rental property.  Many homes were purchased through investment clubs or infomercials offering huge profits with little to no money down.  While many investors realized unreal profits during this boom those that got in to late and didn't get out in time all of a sudden became landlords.  In some cases the property management contract was included with the purchase documents and many owners had no clue they had signed a contract for management of their properties.  We have been involved in the building and management of homes as a service provider since early in the boom. 

I am baffled that property owners do not take the time to research the company or the owners of their management company prior to turning over their large out of state investment in real estate.  As a service provider we have seen owners taken advantage of and screwed out of their money and while they may complain they don't seem to want to change how their property is managed.  I assume that since they do not have to reach into their pocket that they accept the lowering of their income by being required to pay excessive and hidden charges as it is subtracted from the rental income. 

The Internet is a great resource to find out information about companies and the owners of those companies.  I would suggest that owners of investment properties seeking property management use this resource to get as much information as possible prior to signing a contract for management.  I recommend not only searching the name of the company but the name of the owner.  While not everything on the Internet is completely accurate you can find the experiences that others might have had with the companies you are considering.  There are many consumer and rip off sites that will specifically provide a forum to communicate good and bad experiences with companies or people.

While past history is not always an indicator of current or future performance, it is a factor to determine if this is the right company to trust with your investment.  I have written previously regarding excessive and hidden charges and asking questions to help you make the right decision in choosing a property manager and I hope some day this information will prevent someone making a huge mistake.  I have worked for numerous property management companies in maintaining the properties you own and it was very difficult to balance our need for a source of income vs seeing owners treated with disrespect and being taken advantage of.  Many of the companies we have worked for do a good job and provide value for the service they offer.  I do not intend to represent that all management companies are bad but as in any profession there are those that you want to do business with and others you will want to stay far away from.

Take the time to do your homework and research your options.  Make sure you understand all of the ways in which companies will make money from your property.  There are no guarantees that you will find the perfect arrangement but your involvement in the beginning of the process and throughout will go along way to ensure your property provides a steady income and is protected in the long run.

We will soon be establishing a website to provide property owners with a resource to provide information and material to ensure your property is properly managed.  We currently have some information available at http://www.onlinehomeresource.com/ and you can always email me at onlinehomeresource@gmail.com.  Subscribe to this blog or feel free to leave comments regarding your experience.

Investment Property Owners - Information on Property Management part 1

The owners of investment properties will have to determine how the management of their property is handled.  Out of state owners will generally have to rely on a property management company to handle the rental and maintenance of their properties.  The selection of a property manager is one that should be researched very carefully as the hiring of a management company will determine how well your property is managed and will impact how much you receive from your rental.  The commission structure is one area of consideration but should not be the sole determining factor in selecting your manager.  In our area (Florida) the monthly management fee is generally 8% to 10% of the rental income.  A number of property owners do not understand that the fees dont end there.  The largest expense area involved in owning rental property will be repair and maintenance.  Not only is it necessary to maintain your property and protect your investments but it is often used as a source of secondary income by the property management company. 

Our experience has been that there is a fee or percentage of invoice that is collected by management companies for coordinating the maintenance or repair of your property.  Property management companies are required to disclose the practice of adding fees on to the service performed on your behalf.  Initially you may not see this as a big deal but if you add up the numbers over the period of management you might be surprised how much extra you are paying for repairs or maintenance to your property.  As a vendor who provides maintenance services to property managers we have been required to add a percentage into our invoices so that the owner of the property believes that is what the service cost but come time to pay us for the service we must provide discounting of 15% to the management company.  In other cases our bid or pricing has been marked up as much as 100%.

We have seen companies form just to notifiy vendors by phone or email of necessary repairs who then collect huge percentages for making a phone call or sending an email.  Recently we spoke with an owner regarding a mail box that was installed at one of his properties who was outraged over being charged $150.00 for installing a plastic mailbox and post.  We were in a position of having to explain that our charge for providing and installing the mailbox and post was only $75.00 and the remaining $75 was split between the management company and the middle coordinating company.  I have estimated that my profit on going to the store, purchasing the mailbox and post, driving to the property, removing the damaged mailbox and post, digging the hole, assembling the mailbox and post, purchasing and installing the address numbers on the box, putting the post in the ground and covering it up was roughly $23.00.  The property manager received 15% with the balance kept by the coordinating company.

WOW !! I am in the wrong line of work.  While I understand that the coordination of maintenance request require some effort I believe that this is outrageous.  Take this example and use the same ratio for replacing and A/C unit or a plumbers visit. 

When the fees are deducted from the rental income and you are not directly reaching into your pocket I guess it is easier to take but that is your money.  Someone else reached into your pocket and took the money out for you and you didnt even know it.

I will have more tips for owners of investment property in the very near future.  Let me know what you think.  Visit http://www.onlinehomeresource.com/ for specific how to's and help for DIY projects.