While real estate can make you wealthy, it should not be a passive investment. Like every creation of man, it is dust to dust – if it isn’t maintained and periodically refurbished, real estate will eventually fall into disrepair and deteriorate to the point where it can no longer be used.
One of Platinum Properties Investor Network’s goals is to help our clients retain qualified property management companies (PMC’s) to ensure that their valuable investments maintain their market value and to free the investor of the time and worry often associated with owning rental property in a place far away from where they live.
A good property management company is essential for successful real estate investment.
What exactly does a property management company do, and why are they so important?
First, PMC’s are responsible for keeping qualified tenants in the property. They screen tenants for financial ability and creditworthiness, and to be sure they do not have histories of disruptiveness or destructiveness. This includes income verification, employment verification and checking with prior landlords regarding earlier experiences. It also includes lease negotiation.
Second, PMC’s work to minimize vacancies. One quick way to turn a positive cash flow to a money pit is to have the property sit vacant. Not only does a vacant property result in a loss of income, but it also is vulnerable to vandalism and deterioration from the elements.
Third, PMC’s are responsible for collecting the rent on time and evicting tenants that are seriously delinquent. As difficult as it may be to evict families in their time of financial distress, your ownership of investment property is a business-for-profit, not a philanthropic welfare agency. Replacement paying tenants must be found quickly, and delinquent rents must be collected.
Fourth, PMC’s are responsible for maintenance and supervision. This can range from the routine, such as janitorial services and landscaping, to more serious situations such as pest infestations, to emergency situations such as failures of the heating and air conditioning systems, plumbing leaks, electrical malfunctions, roof leaks, etc.
Part of the PMC’s job is to have a number of approved tradespeople such as plumbers and handymen available to do the work quickly, professionally and for a fair price. This may include competitive bidding where appropriate (there may not be time for competitive bids in emergency situations).
Fifth, PMC’s are responsible for paying bills associated with the operation of the property, such as for work done in conjunction with maintenance and supervision (see above).
Sixth, PMC’s are responsible for keeping the books and providing the owner/investor with financial reports itemizing the expenses and income from the properties under management. This must be done on a timely basis for tax purposes and so that the investor knows the financial status of his or her investment as soon as possible. Part of the reporting function should include recommendations for improvements so that the value of the property is maximized.
Seventh, PMC’s should monitor the properties for conditions or situations that could lead tenants to leave or not renew their leases. The relationships between tenants and owners (via the PMC) should be keep in good standing so that the tenants are happy and the owners are not placed in a position where they will have non-income producing properties. This means representatives of the PMC should conduct periodic personal inspections of the property rather than waiting for a complaint. Preventive maintenance is always preferable than waiting for a problem to become serious enough to require major investment or corrective work.
Clearly, property management is a very important part of real estate investing, especially where the property is located far from where the investor resides. That is why it is very important to work with a firm such as Platinum Properties Investor Network – a company that always places the best interests of its clients first.