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Property Management Blog

Published on Saturday, November 29, 2008

Pros and Cons Of Apartment Management Companies

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.

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Author: Web Master

Categories: Property Management




Landlord Knowledge Base

If you’ve ever considered investing in a few rental properties in Philadelphia or Bucks County, PA now might be a good time. Prices are still low in Philadelphia, but have been on the upswing. According to the National Association of Realtors, the median price of an existing home in a US metropolitan area grew 13.7% between July 2012 and July 2013, the latest in a 17-month streak of year-over-year price increases. 

New landlords can choose from properties that are likely to appreciate and a large pool of potential renters.Licensed realtor Pat Mueller cites a few reasons for this trend: “Many families have lost their homes to foreclosure and are entering the rentals market for the first time in years. Mortgages are also harder to get now, so fewer people are qualifying for a new one.”The more skills you bring to the table to get into Houses for Rent in Philadelphia Philadelphia or Bucks County, PA and the more time you have to devote to your properties, the faster you can make a return on your investment. 

But investing in rentals can also be disastrous (or too stressful to be worthwhile) without expertise. Here are three professionals you may consult about your new rental properties, and what you can do to mitigate how much they cost you:Handyman:  You may need to hire a specialist for some work on your rental. If you need new outlets or new pipes, for example, hire an electrician, plumber or licensed contractor. Handymen usually tackle smaller, more manageable tasks, like:

  • Painting and paint removal
  • Drywall repair
  • Minor appliance repairs (fixing a leaky toilet or faucet, among others)
  • Installing tiling or flooring, moldings, windows, doors
  • Refinishing decks, cabinets and other wood items

When You Could Skip It: You could do any (or all) of these projects yourself if you have the time and interest in learning. Of course, this only works if you live relatively close to your rentals and are flexible enough to service them on short notice. And if you’re willing to respond to the occasional 5 AM basement flooding.

Average Savings: Any base rates or costs-per-hour vary from location to location in Philadelphia or Bucks County, PA , but nationally, you can expect to spend an average of $60 to $85 per hour for repair costs. It general costs less to hire an individual handyman than a handyman employed by a company. Expect an additional charge if your job requires a trip to the store for materials.

Resident Property Manager As the owner of a handful of rental properties, you may be able to manage them yourself, but if you want help, a single resident manager would probably be more cost efficient than a property management company. Resident managers may:

  • Serve as a handyman
  • Advertise vacancies in your units
  • Show apartments to prospective tenants
  • Review rental applications
  • Collect rents

When You Could Skip It: Again, the closer you live to your properties and the more spare time you have, the less likely you are to need a manager. The obligations of being a boss will also cut into the time you save on maintenance.

Average Savings: The national median wage for residential managers is just over $25 per hour. Research the wages in your community and adjust according to how much responsibility your manager will take on. 

Real Estate Agent: Once you’ve gotten your financials in order and done your own research on the neighborhood(s) you’re considering, you might contact a realtor to show you potential properties. You can also arrange for a realtor in Philadelphia or Bucks County, PA to show rentals once they’re ready to rent.

When You Could Skip It: It depends. Even if you’re a local, or have thoroughly researched the neighborhood(s) you’re considering, a realtor is a great resource for a first-time rental buyer. Realtors have access to data and statistics not necessarily available to the general public and first-time buyers may not know all the right questions to ask. Using a realtor to fill your Houses for Rent vacancies is less of a no-brainer, depending on your other time commitments or whether you plan to hire a resident manager who could do the same thing.

Average Savings: As a buyer of rental properties, as when buying your own home, sellers typically pay most, if not all, of the buyer’s realtor fees. In this case, Mueller points out there’s little reason not to work with a realtor. For help in filling your units in Philadelphia or Bucks County, PA, the services of a realtor would set you back between 10-20% of the unit’s rent per month.  Mueller recommends interviewing with several brokers before making your final decision to invest into Houses for Rent .

The Bottom Line: As a new landlord, you can’t necessarily control the flexibility of your schedule or the amount (and cost) of unexpected repairs to your properties. Rentals are a long-term investment. However, to maximize profits from your Houses for Rent, new rentals, you can buy close to home and start small. It is best to begin with just one or two properties. This will allow you to maximize the time you spend on your properties’ needs, and minimize the amount you’ll have to pay anyone else.


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