Acquiring a rental property might sound like a good way to generate passive income in the form of rent, but how much income you generate – and how passive it really is – can come down to one question: Who is going to manage the property?
There are plenty of rental property owners who manage their units themselves, which means there are plenty of owners who quickly discover it can become like a part-time job. A way to make rental income a more passive proposition is to hire someone else to manage the property for you.
Hiring someone else, though, comes at a price. Whether paying someone else to handle things for you is worth that price is an individual choice for every real estate investor. And not every property manager is the same.
Here are questions to ask before you hire a property manager.
What is Your Own Time Worth?
San Jose property management companies typically charge between 7-10 percent of a property’s gross monthly rent depending on the type of rental. So, if you own a property that rents for, say, $2,500 per month, it may cost you up to $250 a month to have someone manage it for you.
Is that worth it? Only you can answer that question. If you have the time on weekends and evenings to show the property to prospective tenants, do tenant screening, collect rent, and manage the books, you can do all that and keep the $250 in your pocket. If you also don’t mind the occasional midnight call from a tenant when there’s an emergency, you can also save on property management fees.
It might come down to what your own time is worth to you.
What Are the Value-Adds?
Almost any owner of any rental property will tell you that the biggest headache is a problem tenant. The primary way to avoid problem tenants is to use a screening process that helps you attract and retain good tenants instead.
A property management company should save you time by handling the day-to-day functions of renting out a property, but one that’s experienced and adept at attracting, screening, and retaining good tenants provides added value. If a good tenant is worth their weight in gold, a property manager that can find and keep good tenants probably is, too.
What’s the Appropriate Cost of Expertise?
Every rental property owner must adhere to federal, state, and local codes and ordinances or risk potential loss in terms of fines or even lawsuits. They say all real estate is local, and owners of rental property must be on top of all legal requirements down to the local level.
If you work with a local Santa Clara property management company they will provide knowledge and expertise about the local real estate market. If you have that expertise yourself, including a firm grasp of legal requirements and an understanding of market rental rates, rental demand, and the area’s economic situation, you can perhaps save money by managing your own properties.
If you don’t have the requisite expertise, which can sometimes determine how profitable rental property is, it might be worth hiring someone who does.
Do You Have the Right Local Service Contacts?
If you’re a rental property owner, it’s almost a certainty that there will come a day (or night) when you’ll have to hire someone to do work at your property. If a tree falls in the yard or on the house, do you know the tree company to call to have it removed? Do you have a roofer contact if there’s structural damage?
A San Jose property management company that has years of experience has years of relationships with San Jose contractors. They DO have tree companies, roofers, plumbers, electricians, etc., on speed dial – all whom they’ve vetted as reliable, trustworthy, and likely affordable.
There are times when having the right contacts can be a make-or-break proposition for rental property owners.
Property Management from Valley Management Group
If you’re looking for a property management company, check our guide “Property Management Company Evaluation Guide for Rental Owners”. Valley Management Group is a property management company that provides trustworthy and affordable services to owners who have rental properties in San Jose and throughout Santa Clara County. If you own rental property in San Jose or anywhere in Santa Clara County call 408 286-4200 for a free property management quote with one free month of services.