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How do property management companies work?

How do property management companies work

Starting out in real estate investing involves a learning curve. A great property management company can help owners learn a lot about how to be successful in the local real estate market, but many prospective landlords hesitate to reach out. Their number one question is often: How do property management companies work?

Here’s a comprehensive guide to how property management companies work, typical fee structure, and services offered.

Hiring a property management company

Ask these specific questions when hiring a property management company to determine if they offer the services you need, and whether they’re good at what they do:

  • How many properties are you currently managing?
  • What experience do you have managing properties like this one?
  • What are your licenses and certifications? (Then verify.)
  • Have you ever had to evict a tenant? How did/would you handle that?
  • What is your average occupancy rate?
  • How long does it typically take for you to fill a vacant property?

Remember that these questions are just a starting point. You may have additional questions, depending on your property type, location, or other special considerations.

The property management fee structure

After an initial setup fee that covers the creation of marketing plans and other property-specific needs, the primary monthly property management fee can be structured as a flat fee, or as a percentage of rents collected. Fees can range from 7 – 12 percent of gross monthly rent. Typically, property management fees are higher for single-family properties and lower for multifamily properties.

Other fees aren’t monthly, and may include:

  • Tenant placement fee (covers advertising, screening, and lease preparation)
  • Vacancy fee
  • Eviction fee (plus court costs)
  • Early termination fee

The Maintenance Fee is usually included in the monthly management cost and placed into a Reserve Repair Fund to pay for emergency repairs. Landlords sometimes have approval authority for every expense out of this account, but property managers usually require a minimum balance be kept in the reserve at all times.

What can influence property management fees

All of the various property management fees can vary depending on certain property features or influencing factors:

Class A Management offers comprehensive property management services and can customize a package that fits your property, budget, and investment goals. Contact us today to learn more about how your single-family or multifamily property can become the crown jewel in your portfolio. We take pride in offering our clients complete transparency, and we’ll be happy to answer your questions and explain the Class A Management fee structure and provide references to existing clients.

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What is Property Management?

What is property management?

Property management is a scalable service that helps real estate property owners manage successful investments. Property management companies come in many different sizes, from a single property manager who lives on-site in an apartment complex to a large-scale company that manages properties for many different landlords for a fee.

What does a property manager do?

Property managers work to keep properties maintained and rented within a fair and profitable business model. From marketing to general repairs, managers work for both the property owner and the tenant to provide excellent customer service.

It all begins with establishing a relationship and management contract with the property owner. Property managers then set the rent, market the property to find and vet the right tenant, and work with the tenant to make sure the property stays in good working order and that the rent is paid on time.

Benefits of property management

Landlords who manage their own properties sometimes end up spending most of their time finding tenants or performing maintenance and repairs. Property management companies can ease that burden by employing industry best practices and leveraging resources not available to property owners. These companies often have rental applications and contracts designed to protect property owners and tenants from unfair practices and litigation, which is a win for everyone involved. Property managers also maintain real estate properties, which preserves their value. In addition, a good management company will provide a landlord with detailed expense reports and documentation that help simplify taxes for owners.

How to find a good property manager

The best property management companies offer consultation services even before purchase, helping prospective property owners through the vetting and real estate purchase process. Comprehensive property management services include marketing, operations, maintenance, accounting, and even disposition consulting when it’s time to sell. Ask any property management company you’re considering about their professional affiliations, what their occupancy rates are, and how they approach tenant disputes or non-payment issues.

Whether you’re hiring a management company or looking for a great rental property for your next home, finding a company with a great track record is essential for long-term success. Class A Management offers comprehensive management services, and our seasoned professionals are committed to serving our landlords and tenants fairly and efficiently. Contact us today to learn more about how we can customize a services package for your single-family or multifamily property. Maximize your investment with a team that offers the respect, value, and experience you and your tenants deserve!

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4 reasons why multifamily makes the best real estate investment

why multifamily

Investors know that volatile markets can send financial gains plummeting, but real estate investing is typically a viable shelter that appreciates in value. Let’s explore four reasons why multifamily is the best investment in the real estate market.

Less risk for lenders means easier financing

Multifamily properties like apartment complexes require a higher initial investment than single-family real estate properties. That might seem like a deal-breaker, but the reality is that while multi-family loans are larger, they’re less risky for lenders because they generate cash flow even when not fully occupied. A single-family home, on the other hand, could be seen as high-risk because, when vacant, it generates no cash flow and carries a higher probability of borrower default.

Higher occupancy equals cash flow for landlords

High occupancy rates are the primary goal with rental property investments, but a single-family home that is unoccupied is a liability that many investors cannot afford to risk. While rents may offer a higher profit margin for single-family properties, multi-family rentals are more affordable for prospective tenants and easier to market for more stable income. Granted, there will always be certain markets in which single-family properties are in high demand, but a successful multi-family investment property rarely sees occupancy rates that result in negative cash flow.

Ease of maintenance and upgrades

Attached multi-family properties are also easier to maintain due to efficiency of scale. Any real estate investment will require regular maintenance such as roofing repair and replacement, and that’s where multi-family properties help investors save money by sharing a common roof. Owners can also save on other upgrades like windows and doors, insulation, and exterior painting for multiple rentals within a single building.

Multi-family housing is recession-proof

Despite high-profile news stories about renters being unable to pay their rent during the pandemic, the National Multifamily Housing Council recently reported that more than 80 percent of apartment renters were current on their rent in March, and those numbers have been steadily increasing. When you also consider that current interest rates are at an all-time low, it seems that buying multifamily properties could be a good hedge against hard times.

Hiring a property management company is always a good move for multi-family investors who don’t want to spend their time marketing, collecting rent, and performing maintenance and repairs. Class A Management professionals are prepared to handle all the details, from pre-purchase consulting to deciding when it’s time to sell, and everything in between. Contact us today to learn more about how to maximize your return on investment with a team that wrote the book on multi-family property management best practices.

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What does a property manager do?

What does a property manager do

Real estate investors are highly self-sufficient, independent thinkers who ask a lot of great questions. They want to know where their money is going, what benefits they’ll receive when paying for a service, and how that translates into building a portfolio that provides security and wealth. Our favorite question, of course, is: What does a property manager do?

Here’s a quick list of everything that great property managers can do for real estate investors, in order of importance.

Generate positive cash flow

Investors take a risk buying rental properties, and a good property manager understands that risk and knows that time and occupancy rates are of the essence. Here’s how property managers generate cash flow for investors quickly and reliably:

It’s all about the rent, and collecting that rent depends on a lot of factors that a reliable property management company can manage on a daily basis so that owners see positive cash flow.

Protect landlords from costly legal and tax situations

Laws in place to protect tenants and property owners vary from state to state, and even within local municipalities. Those laws are in place to protect everyone from unfair or discriminatory housing practices, and it’s a property manager’s job to follow local and state laws when vetting tenant applications and writing leases, collecting rent, and even handling evictions.

In addition to following local and state laws regarding landlord-tenant agreements, property managers also provide monthly income and expenditure reports that keep property owners apprised of a property’s performance. That information helps owners make important decisions like when to invest in an upgrade or renovation, or even when to sell a property to maximize profit.

Property managers also provide owners with tax documents necessary for annual IRS filing. Those include annual investment property expense reports and 1099 forms so owners can claim rental property income.

Keep properties in good repair

A property that is well-maintained will provide rental income much more reliably than one that’s allowed to fall into disrepair. Property managers make sure that valuable rental investments continue to provide owners with cash flow by regularly providing the following services:

  • Regularly scheduled inspections
  • Emergency repairs
  • Upgrade recommendations and consulting

Finding a property management company that offers comprehensive property management services doesn’t have to be time-consuming. Contact us today to learn more about how Class A Management can relieve you of some of the burden of rental ownership while protecting your investment and helping grow your portfolio. It’s what we do.

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Help Your Tenants Stay Healthy

Push Ups, Tenants Healthy

Showing concern for a tenant’s health might not be considered as a part of landlord management but there are a few reasons to why it should be done. For instance, if your tenant is unwell, there are high chances of absenteeism at work. Not turning up to work for a long period will result in deduction of income ultimately resulting in difficulties to pay off the rent.
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