You Must Have Professional Property Management

• Tweet
• Sharebar

• Tweet

By Gustave E Tucker & Kent A Stephens

Once an investment property has been acquired by the investor, effective property management is the key to making the investment payoff financially.  This brief article will focus primarily on the overall role of the Property Manager with a focus on the tenant selection and management process.

What is the role of the Property Manager?

The role of the Property Manager is to develop and execute a business plan to achieve the property owner’s financial objectives on their timeline. This business plan will have two main components: 1) Leasing of the property, and 2) Management of the property. The Property Manager must be a licensed Real Estate Broker in good standing with the state of Illinois.  This is for the investors legal and financial protection. The following are some of the key components of each area of the business plan:

Leasing:

§          Determine market rent level

§          Make recommendations to increase marketability

§          Market rental property for lease

§          Show property to prospective tenants

§          Process deposits and screen tenants via credit checks, criminal background

checks and previous landlord and employment verifications

§          Negotiate leases

§          Ensure all fair housing laws are followed in the leasing process

Management:

§          Collect and deposit rents

§          Pay invoices out of rental income

§          Enforce terms and conditions of the lease Agreement

§          Handle repairs/ maintenance

§          Supervise turnover of tenants

§          Provide financial statements (quarterly and annually with receipts)

What are the keys in selecting the right tenants?

Tenant selection is the most critical component of the property management process. At the end of the day, if the tenant does not perceive the property and the property managers as providing superior value, rental payments will not be made on time and the tenants length of stay will be shortened. The following are the three key steps in tenant development:

1.  Attracting top tenants through your communication process

a.  Advertising

b.  Referral Networks

2.  Selecting top tenants through your selection process

a.  Your application will determine the type of tenant you attract

b.  Thorough reference checks yield key information

i.  Credit Checks

ii.  Landlord Referrals (2-3 generations)

iii. Criminal Background Checks

iv.   Employment Checks

c.  Effective interviewing and personal communication with your prospective tenant is key to setting the right tone and direction for your business relationship.

3.  Managing the tenant relationship through the use of the correct legal documents and knowledge of local legislation governing landlording.

a.  Applications

b.  Leases

c.  Management Forms

The Benefits of your INVESTMENT in Professional Property Management:

Utilizing a professional property management company is an investment in the success of your Real Estate Investing Career. I encourage you not to try and “cut costs” in this part of your business.  This area should not be considered a cost but an investment. What are the benefits?  I will mention just three:

1.  Maximize your return on investment by benefiting from other’s experience.

2.  Minimize your personal time investment in managing your investment.

3.  Minimize your legal exposure by using a management company.

The typical investment for utilizing a management company to provide a tenant for your property is one month’s rent per tenant. The ongoing management of the property will be a percentage of the rents collected.

***************************************************************************
Gustave E Tucker & Kent A Stephens are Co-Founders of Six Degrees of Assets, Inc.  For more information contact them at 888-437-4605 or www.sixda.com