Owning rental properties can be a great way of earning consistent recurring income outside of a typical job. However rental income not always entirely passive income.
Owning a rental property involves management tasks, such as advertising for and screening tenants, collecting rent, and doing maintenance and repairs. Most owners of investment property are not up to doing all of these tasks and elect to use the services of property management company.
Turning over management, though, is not a one-size-fits-all proposition, and not every property management company is the same. If you own a rental property, consider your property management options.
What does it cost?
Hiring a property management company allows a rental property owner to be a more passive real estate investor, but it comes with a price. Fees vary by area, property type, and company, but most San Jose property management services will typically cost between 7% and 10% of the gross monthly rent depending of the type of rental property.
There may be separate fees for marketing the property for rent, screening tenants, ongoing maintenance and repairs, and other tasks a company may provide. Before selecting a property management company, it’s important to fully understand the entire cost structure.
How are funds handled?
Most rental property owners prefer to use a management company that does all the work including collecting the rent, deducting their fees, and depositing a check to the owner’s bank account. Other rental owners prefer that their tenants make monthly rent payments directly to them, in which case they’d make a separate payment to the company for management fees.
You must decide how involved you want to be when choosing your management company.
When hiring a property management company, then, you should have a clear understanding of how rent collection and deposits to your account will be handled. The same goes for security deposits and late fees. Make sure you know how tenant funds will be handled. Remember that because of high rental rates in the area, a San Jose property manager will be working with relatively large sums of money on a regular basis.
How are maintenance and repairs covered?
One of the biggest headaches for rental property owners occurs when an emergency repair is needed. No one likes to be woken up at midnight because a furnace stopped working or a toilet is clogged. Some property management companies provide 24-hour answering services to tenants so that the owner doesn’t have to deal with those phone calls.
Property management companies may also provide regular, ongoing maintenance on properties to keep them properly up-to-date. Most of the time a management company will require the owner to keep a reserve fund to cover maintenance and repairs. When outsourcing property management, you should be comfortable with the agreement on how repairs and maintenance are covered.
Do you want full-service management?
Some property management companies will offer alternative services for property owners who are willing to handle some of the regular management responsibilities on their own. Some rental owners just want a management company to provide one-time services that include advertising and showing the property, tenant screening and writing up the lease agreement. When the tenant occupies the property the owner collects rent directly from them and does all the property maintenance and upkeep on their own.
Remember that full-service property management is the closest to truly passive investing a rental property owner can get.
How do you evaluate property managers?
Hiring a property management company can be a lot like choosing a candidate for a job opening. You’ll want to examine a potential provider’s resume, ask some questions, and do some background checking.
You can start with online reviews for your area. If you did an internet search for San Jose property management services, you should be able to find ratings and reviews for various companies. A solid track record with tenants and property owners is a good sign, as are licensing and certifications and years of experience in the business. You should also check out the Property Management Company Evaluation Guide for Rental Owners on the Valley Management Group site.
Valley Management Group has been providing property management services and managing properties in San Jose and throughout Santa Clara County for 40 years. They have many high ratings from owners and tenants and provide one free month of management services for new rental owners.
Reviewed and Approved by Lloyd Kipp
Property Manager and Owner of Valley Management Group