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For individuals who are not yet where they want to be financially, improving their situation often involves increasing income, reducing expenses, or pursuing a combination of both strategies.
Among the various ways to enhance earnings, real estate investment can present a potentially lucrative opportunity. This approach can generate passive income, offer long-term property appreciation, and eventually result in considerable profits if the property is sold.
However, while owning and managing rental property can yield financial benefits, it also comes with notable challenges. Some property owners discover they are not well-suited to the day-to-day responsibilities of being a landlord, such as finding tenants, handling tenant complaints and questions, and maintaining the property.
In such cases, hiring a professional property manager can alleviate the burden by handling these and other tasks. Property managers can screen tenants, coordinate maintenance and repairs, collect rent, recommend what rent to charge, deal with problematic tenants, and more.
When hiring a property manager, proximity is an important factor. Selecting a manager located near the property — such as a Houston-based property manager for a Houston rental unit — can improve responsiveness and efficiency in managing the property. Investment property owners who make the decision to buy real estate in far-away cities or other states often discover how difficult it can be to be a long-distance landlord.
Rental property owners who retain the services of property managers should consider the proximity factor before choosing a company that will help with screening tenants, setting the right rent, and drafting good leasing agreements.
Screening
One critical area where property managers provide value is in the tenant screening process. Without thorough vetting, property owners risk renting to individuals who may not pay rent reliably or follow lease terms.
The Harvard Joint Center for Housing Studies found in a 2020 survey that 23% of landlords — almost one in four — sought eviction in 2020. And another survey conducted by DoorLoop shows that nearly half of landlords (48.7%) have asked tenants to evacuate early.
Property management companies typically have established procedures for assessing tenant suitability. These may include interviews, reference checks from previous landlords, verification of income, and criminal background checks. Furthermore, property managers are familiar with local laws governing tenant selection and can ensure the screening process doesn’t violate the U.S. Fair Housing Act.
Rent
Another common pitfall among landlords is setting an inappropriate rental rate. Determining the right rent requires understanding the local market and supply and demand. Mispricing can have negative consequences. Rent set too high can deter prospective tenants, leading to longer vacancy periods, while rent set too low can jeopardize income-generating potential. Property managers familiar with specific markets can help rental property owners set the right rent.
Lease Agreements
A third mistake some landlords make is thinking that verbal agreements, rather than written leasing pacts, are sufficient. If both parties abide by the terms of a verbal agreement, the landlord and tenant may be able to avoid issues. The problem arises if there’s a disagreement.
Without a written contract, misunderstandings about rent due dates, lease durations, maintenance responsibilities, or security deposit conditions can escalate into serious conflicts. Property managers can ensure that leases are properly drafted, legally enforceable, and comprehensive enough to cover all the bases. A well-prepared lease agreement provides clarity for both parties and minimizes the potential for future disputes leading to small claims court.
Ultimately, while rental property owners could potentially manage rental properties independently, property management firms offer several advantages.
By leveraging the expertise of property managers, rental property owners can avoid common mistakes, stay on the right side of the law, and protect the long-term value of their investment. Investing in property management firms can help investment property owners protect their real estate investments.
