×
Generic filters
Exact matches only
Generic filters
Exact matches only
A Landlord's Ultimate Guide to Residential Property Management

In speaking with hundreds of investors over the years, I’ve come to realize that many people frequently underestimate the importance of having an effective residential property management setup. This surprises me because, from my experience, I know that rental property management is a key factor when it comes to how a piece of real estate will perform. With that said, my aim is to spread the word on how the property management role should be taken seriously. This applies to both scenarios of the landlord themselves taking care of the rental or a professional property management company filling that role – although I never recommend managing your own properties.

First, I’ll provide a brief overview of the scope of property management…

When managing a residential single-family or multi-family duplex, a wide range of responsibilities are included such as timely repairs, streamlined rent collection, and more, that are aimed at making sure everything runs smoothly and performs well. Overall, good property management is essential for maintaining a positive living experience for tenants, and keeping the property’s value on the rise, as well as ensuring a high ROI.

We’ll discuss this in more detail below, but I can’t stress enough how crucial it is to use residential property management companies to care for your rentals, as opposed to taking on this role yourself. PMs have extensive experience, don’t let things fall through the cracks, and allow you to earn passive income.

Ok, now let’s dive into this guide so you’re well-versed on all things pertaining to property managers and how important their role is:

1. Core Responsibilities of a Property Manager

Guide to Residential Property Management Companies for Real Estate Investors

Since I started my investment journey, I’ve gained a large number of rentals, and so I know firsthand what goes into maintaining them. In fact, I started out managing them myself, but I quickly realized it was taking up all my time. At this point, I decided to pass all the responsibility over to professional residential property management companies. However, whether you manage your own property or hire someone to do it for you, overseeing the day-to-day operations involves many moving parts. With that said, let’s take a look at the main responsibilities of a property manager:

Attracts Tenants Through Effective Marketing & Engaging Property Tours

Property managers draw in tenants through marketing strategies and offering property tours. They leverage online platforms, social media, and traditional advertising, to cover their ground and reach a large audience. Additionally, an online presence that includes high-quality photographs, virtual tours, and detailed descriptions, can draw in potential tenants.

Conducting live property tours is a big part of the process. During these tours, property managers can highlight key features, answer questions, and build trust with potential renters. Creating a positive experience during these tours will ensure the property stands out from the competition, which can lead to filling the vacancy sooner rather than later.

Rental Property Management Includes Thoroughly Screening Tenants

Once the applications start coming in, the screening process begins, which is an essential part of a property manager’s role. You see, you can always place a tenant, but making sure they are reliable and financially stable is the main goal. It’s imperative to sift through and find good tenants because they can be the determining factor on whether or not your property performs well. For those who have the experience and tools to properly weed through tenants, this can actually be an easy task.

What do PMs look for when screening a potential tenant? Well, they verify their identity, check their credit report and score, as well as ensure they have no evictions. The potential tenant’s rental history is evaluated, and certain elements, such as employment and income, are verified. A criminal background check is performed and personal references are requested to determine their character. The bottom line is that it’s a residential investment property manager’s responsibility to ensure that a tenant will pay rent on time and not destroy the rental, so starting out with a good tenant will make all the difference. For those who are interested in vetting renters, I suggest diving into my article on safeguarding your rental property that covers tenant screening in detail.

Lease Administration is a Major Part of the Role

A rental property lease is a legally binding agreement between a landlord and a tenant that sets the stage for the responsibilities and rights of both parties. As you can imagine, a PM would need extensive knowledge of the ins and outs of lease agreements to avoid legal issues, and this is one reason a property management company is always my first choice for overseeing my rentals.

The lease should include information such as what the rent will be, what day of the month it’s due, the duration of the lease, security deposit details, maintenance responsibilities, policies on pets, subletting, early termination stipulations, and other specifications that apply to the rental. Besides signing the final lease agreement, it’s important to keep records of all lease-related documents, as well as communications. If you’d like to learn about this, we have a brief overview of lease basics for landlords.

Handles and Refunds Security Deposits

Core Responsibilities of a Property Manager for Residential Sing

Another significant aspect of rental management services is handling the security deposit. This may seem like a simple task where a landlord just sets the amount and collects it, but it’s much more than that. There are laws pertaining to rental deposits, and they can differ depending on which state the property sits in.

It’s best to have an expert handle money-related items such as this because they’ll know all the rules and regulations. For instance, there are maximum deposit amounts, timeframes for deposit returns, allowable and disallowable uses, documentation rules, and so on. A landlord may even be required to provide the tenant with a security deposit refund document after move out. So, as you can see, security deposits must be handled carefully to avoid a potential lawsuit. My latest article has a whole section on security deposits that you should read if you’d like to increase your knowledge on the topic.

Collects Monthly Rent and Keeps Track of Financial Records

As for rent, because it’s the source of the property’s cash flow, and pays the mortgage, it’s essential to have it managed properly. The amount of rent charged should be based on market research, which a good rental property manager conducts often. The first month’s rent is typically collected with the security deposit and the property manager proceeds to collect rent every month after.

The PM will typically provide multiple payment options, such as an online portal, direct deposit, or check collection, to make it simple for the tenant to pay. They monitor payments to watch for delinquencies and send reminders or notices when needed. When a tenant fails to pay, the property manager might need to start collection efforts or begin legal proceedings to recover owed rent.

They also handle financial records, which includes rent payments, as well as expense reports. When residential property management companies are hired to care for a rental, they should provide landlords with comprehensive financial summaries.

Manages Renter Relations & Retains Tenants

Rental property management is tasked with handling tenant relations. This includes letting the tenant be heard, addressing complaints, and resolving conflicts quickly and professionally. An experienced PM will ensure they have a great relationship with the tenants because this leads to continual lease renewals. In turn, this can help reduce vacancies and the costs associated with them. Here’s a related article I put together that you’ll find informative – Keys to Keeping a Good Tenant in Your Rental Property.

Performs Property Repairs & Upgrades

A wide variety of maintenance tasks are included in the job to ensure the upkeep of a property. Fixes can apply to kitchen appliances, HVAC units, leaky faucets, broken heaters, busted water pipes, and the like. Also, a reliable PM should always be on call for emergency repairs. This is where I feel it’s essential to utilize rental property management companies instead of taking this task on myself. Why? Because they’ll handle that 3 am phone call when the heater breaks in the winter.

Managers should also be on the lookout for items that need to be upgraded, such as worn-out cabinets and countertops. You can get a better idea of the items that are commonly updated by heading over to this post I put together – Rental Property Upgrades That Make a Landlord’s Life Easier.

The bottom line is that keeping the rental in good shape upholds the property value, keeps the tenant in place, the cash flow consistently rolling in, and just makes for a good experience for the renter and the landlord.

Turnkey Property Managers Handle All Aspects of Vacancies & Turnovers

All rental properties will become vacant at one point or another because it’s not typical for a tenant to stay in one place forever. That said, property managers will handle all aspects of rental turnovers, ensuring the transition between tenants is speedy and without issues. This includes tasks such as conducting thorough inspections to check for damage or needed repairs, coordinating maintenance work, and making sure each unit is like new, clean, and ready for new tenants. This is a tremendous amount of work, complete with a new paint job, new carpets if needed, and the like.

PMs will also handle, as mentioned, filling the rental with the next tenant. The goal is to get the rental filled as quickly as possible so there isn’t a big disruption in the cash flow. Steady cash flow allows the landlord to avoid paying the mortgage out of their own pocket. That said, you’ll want to make sure you know what you’re doing when it comes to vacancies and property turnovers, or hire someone that does. While we’re on the topic, dive into the following article – Do Vacancy Rates Matter in Real Estate Investing?

Takes Care of Evictions Quickly to Minimize Financial Costs

This is where things get a bit tricky if you’re self-managing because the individual overseeing the property will need to be well-versed in the eviction process and the law surrounding it. I don’t wish an eviction scenario on any investor, but it can happen, especially if they own multiple properties. However, the chance of it happening is greatly reduced when you have a property manager who looks for red flags during the tenant screening process. If you’re not familiar with or comfortable handling a possible eviction, it’s best to work with an experienced residential property management company who can take care of it for you.

I’ve dealt with evictions in the past when I managed my own rentals, and it’s not fun. In fact, it cost me thousands of dollars, in part because I was set up in a non-landlord-friendly state. My recommendation to you for streamlining the eviction process is to definitely hire a property manager to care for your rental. Also, moving forward, try to make sure your properties are situated in landlord-friendly states that side with the landlord in situations such as these. You can find out what states to consider by checking out my article – 5 Most Landlord Friendly States for Real Estate Investors.

2. DIY vs. Professional Property Management

Information on Rental Property Management for Landlords

You may have gotten a hint of my opinion so far as to whether you should manage your rental properties yourself or hire a professional to take on the job. Over the years, I’ve found that, without a doubt, choosing not to manage your rentals on your own is a smart decision. However, I realize everyone has their own preferences. So, in this guide to residential property management, I’ll lay out a comparison of DIY vs hiring a professional to manage your rentals so you’re well informed.

Managing Rental Real Estate Properties on Your Own

Let’s dive into the PROs and CONs of DIY property management so you can decide for yourself if this is the right path for you as an investor:

The Case for Self-Managing Your Rentals

Although most landlords prefer to have a passive experience by letting a professional take care of their investment properties, there are many individuals out there who love being directly involved. These are the people who typically have the experience and the know-how to handle all the tasks involved in caring for the tenants and the properties. They may be a hands-on person who lives near their rentals, and someone who has the free time to dedicate to the day-to-day activities that may pop up.

By managing their own rental properties, they are able to have full knowledge of every aspect of what’s taking place behind the scenes. This includes getting to know their tenants, having full knowledge of the financials, and being familiar with the needs of the property firsthand in regards to repairs and upgrades. The bottom line is that taking on this role brings enjoyment to some investors and provides them with complete control. Those who do self-manage will want to check out the Landlord Studio website. It provides landlords with a streamlined way to track expenses, screen tenants, and more – I highly recommend it.

I’d also like to add that self-managing a residential property, such as a single-family home or a duplex, can be a bit easier than, let’s say, an apartment complex. However, this only applies to property owners who self-manage a small number of homes. Once their portfolio starts to grow, it would be wise to have a management company handle them for you. If you’re new to the game, you’ll be interested in the following articles on residential rental properties:

The Downside of Self-Managing Your Rentals

Taking care of your own investment properties yourself isn’t for everyone, and many investors have found out the hard way that it isn’t the best approach for them personally. Some start out on this path with the goal of keeping more money in their pocket by not having to pay the 6-12% management fee. But in reality, managing properties on your own is not as efficient cost-wise. In addition to this, self-management has several disadvantages attached to it.

The time commitment required to manage a rental can be substantial. The time-consuming tasks that come with the job range from marketing the property and screening tenants to handling maintenance requests, legal compliances, and all the core responsibilities I listed above. Also, it’s worth mentioning that emotional involvement can sometimes interfere with judgment, leading to making decisions that may not align with the property’s best interests. Most importantly, self-management generally prevents investors from buying properties in other states that have exceptional housing markets.

The hands-on approach can become particularly stressful when dealing with difficult tenants or unexpected issues like emergency repairs. This especially rings true when a landlord gets an emergency repair call in the middle of the night. So, while self-management might initially seem cost-effective, the hidden costs of time, stress, and potential legal missteps should not be underestimated.

Utilizing Residential Property Management Companies

Based on my experience, I don’t really have any cons to state about hiring a property manager. Well, maybe just one, and that would be if you love the hands-on experience and want complete control of your properties, then hiring a company to manage them wouldn’t be the right choice for you. If you’re on the fence though, I suggest watching my video – Is Hiring a Property Management Company Right for You?

 

Ok, now let’s jump right into the PROs of having a company handle the job for you:

Their Expertise & Resources Help Landlords Save Money

One major advantage of utilizing residential property management companies is their ability to help landlords save money. This can be attributed to a few factors: Their established relationships with local maintenance and repair professionals helps them know who can complete a job efficiently and correctly on the first attempt as to not waste time and resources. Additionally, they often receive bulk discounts on commonly replaced items which can significantly lower operational costs.

Their expertise in tenant selection is crucial because one bad tenant can lead to a drop in ROI due to rent that’s not being paid, as well as costly damages, which can run into the thousands. PMs also conduct extensive market research so they are informed on the going rental rates for the area. Staying on top of rising rental rates ensures the cash flow will keep increasing and the ROI will rise as well.

Here are two articles you’ll enjoy that are related to the topic:

Professional PMs are Fully Versed in State and Local Laws

Residential rental property managers should be fully versed in state and local laws. This knowledge will make sure they can navigate the legal aspects of rental properties, including tenant rights, lease agreements, property maintenance regulations, and the eviction process. By staying informed, property managers can mitigate risks, avoid potential legal battles, and keep costs at bay. If you’re interested in reducing your risk factor, then see my article on risk mitigation strategies for real estate investors.

Not Managing Your Rentals Yourself Allows for Out-of-State Investing

Investing in long-distance real estate, especially properties not in your home state, can generally lead to higher profits. Although many investors just don’t feel comfortable branching out to distant locations, it’s worth considering because it’s really a financially sound strategy. Why is this the case? Because long-distance investing opens up access to markets with higher returns, lower property costs, stable vacancy rates, and better economic growth.

Investing outside your backyard can be nearly impossible if you’re self-managing, and this is where property management companies come into play. They live locally and, because of that, are able to easily oversee the day-to-day operations of a property. This allows the landlord to target landlord-friendly states and low-vacancy areas. The bottom line is that by partnering with a management company, individuals can invest remotely allowing them to leverage the best market opportunities.

For more information on investing out-of-state, head over to my recent post titled – Long-Distance Rental Real Estate Investing, a Proven Strategy for Wealth Building

It’s a Full-Time Job That a PM Will Gladly Handle for You

As you can imagine, managing a rental is a full-time job. That said, I’m guessing you’re interested in investing in real estate so you can leave the 9-5 lifestyle and not ramp up your hours. A professional PM can turn the management process into a passive experience for you by taking on all required tasks. From marketing to screening, repairs and tenant turnover cleaning, as well as handling evictions and vacancies, rental property management companies take care of it all so you won’t have to. Additionally, some PMs are always on call, so hours can extend well into the evening if an emergency were to occur.

3. Choosing the Right Property Management Company

If you’ve decided not to self-manage your rental properties, then you’ll want to begin the process of vetting a company that can handle it for you. To make sure you’re on the right path, dive into my video on this very topic and then read the details I provided below that cover what to look for in a good company, as well as red flags to watch out for.

Five Questions to Ask a Property Manager

 

Criteria for Selecting a Management Company

Choosing the best rental management company for your needs is essential to ensuring your investment is well taken care of and provides the returns you’re hoping for. Here are some key factors to consider:

  • Experience & Reputation: Seek out a company that has been in business for at least five years, and be sure to check their reviews and request references.
  • Variety of Services: Residential property management companies should provide a wide range of services, from tenant screening to security deposit handling.
  • Reliable Maintenance & Repairs: The company you’re considering should be on the ball with maintenance and repairs, and that they can take on emergency calls that come in after midnight.
  • Cost & Fees: Since a high ROI is every investor’s goal, it’s important to compare costs to ensure you’re getting a fair price without compromising quality.
  • Communication: The investment property management company should be quick to respond to the landlord and the tenants, and provide regular updates on the property.
  • Local Market Knowledge: You’ll want a PM with extensive knowledge of the local housing market so they can effectively set competitive rental rates.
  • Modern Technology: Up-to-date technology for managing properties is imperative. Accepting checks for rent shouldn’t be their only option. They should provide tenants with an online portal where rent can easily be paid and documented.
  • Licensing & Certification: Ensure the company is licensed and certified in property management, and that they’re in line with all local and state regulations.

Red Flags to Watch Out For and How to Vet Potential Companies

When evaluating residential rental property management companies, one significant red flag to be mindful of is long vacancies. If a property in a good market remains unoccupied for an extended period, it could mean there are potential issues in the management process. In contrast, an established track record of fast-filling vacancies indicates the company has an understanding of the current market dynamics.

It can also be a red flag if they manage properties that are frequently vacant. A good residential property management team will have a high tenant retention rate where renters keep renewing their lease. This is important because a high tenant turnover rate can become very costly.

Another crucial warning sign is if the management team is frequently unavailable or too busy to address your needs or your tenants. Effective property management requires good communication and the ability to quickly address problems. Additionally, inconsistent pricing with market rates can be a big issue. For instance, rent prices that are too high may push away potential tenants, while prices lower than the market average may give the impression that there may be something wrong with the property.

Power Resources for Real Estate Investors

Before we move on, take a moment to head over to these real estate-related financial resources that can kick-start your investment journey:

Also, here are a few must-read articles that you’ll want to bookmark for future reading:

Invest Wisely by Hiring a Property Management Company to Oversee Your Rental

Those who’ve been in the rental real estate industry for a while now understand that managing a rental property themselves can be both time-consuming and costly. They eventually realize that professional property management companies can be financially beneficial, as well as free up valuable time. At Morris Invest, a well-established full-service real estate investment company, we appreciate the significant advantages that come from effective property management. To ensure this, we assign a seasoned property manager to each rental property we offer to our clients. We also place trustworthy tenants to make sure investors achieve financial success from the start.

If you’re interested in investing in a cash flowing rental where all aspects of the purchase and the management are handled seamlessly, we encourage you to schedule a call with our team. For more information on how we can help you begin or expand your investment journey, visit our Morris Invest & SDIRA Program Overview page.

Schedule a consultation

Chat with us