Many new investors fear purchasing apartment buildings believing their lives will be completely taken over by the tenants and the building upkeep. What they should realize, however, is they can invest in an apartment or complex and avoid the hassle of hiring plumbers and janitors or even speaking to a tenant. They simply need to hire an experienced and capable apartment management company to manage their investment.
While the owner will find many advantages to outsourcing management of the apartment to an experienced manager, there are some disadvantages as well. Owners should ask several questions before hiring a management company to protect his investment from damage and financial losses.
Many apartment management groups charge between five percent and six percent of the gross income from the property. For example, your apartment building brings in over 650,000 dollars gross income. The management company will charge you 3,900 dollars to manage the building. Remember your gross income not only includes rents collected but also any laundry facilities income and other additional income collected from the building.
Some advantages of an apartment management company are the following.
- These are experienced managers in the renting business. They have connections and access to dependable contractors, maintenance crews and leasing firms.
- The company deals with the tenants, freeing the investor of the tasks of renting, settling disputes, hiring contractors and seeing to all the other daily issues in apartment ownership.
- The management company is familiar with the rules and any laws and regulations in your area.
- Lenders prefer the investor hire a company to manage the apartment investment.
- Management companies work in all areas of the country. They are not restricted to a certain geographic area.
Some disadvantages are that the company has access to your money, they often do not pay attention to your bottom line and some will not treat the property as if they owned it.
Outsourcing the management of the apartment building to a good company often outweighs the disadvantages. Having a good manager who communicates effectively with the owner and the tenants can help increase the profits of the investor.
The investor should interview several apartment management companies before finding the best fit. The management company should offer several services including high tenant retention rate, good guest service, keeping costs low and within a budget. They should provide preventative maintenance and supervision of contractors hired to perform work.
The investor should ask the company a series of questions during the face to face interview or with a phone call. There are different areas of management that should be addressed. For example, in the fees and services category, you should ask what monthly fees the management company charges? How often do they inspect units? Is there a fee charged for leasing the apartment? How many other properties do they manage?
Another area is the management of tenants. How often is rent collected? Do they have a typical notice period? How are prospective tenants found and screened? How are non payments of rent dealt with?
In the maintenance category, ask what action is taken when the tenant damages property? What is the routine for minor and major repairs? What length of time have they dealt with their current contractors, such as cleaning services, electricians and groundskeepers?
There are many other questions the investor should consider that relate to their particular property. Hiring an apartment management company can be a good investment if the right team is appointed.