5 Reasons Why Managing Your Own Rental Is A Nightmare
- Do you have the right skills to pick a tenant?
Picking a tenant is a skill that you develop over time with experience. Sure, there are people that will get lucky on their first try but there really is a lot that goes into picking the right tenant. I can tell you of horror stories of people that looked great on paper, but only turned out to be bad tenants. They either damaged the property or knew a lot of the legal loopholes that tenants have. They use these legal loopholes to not pay rent on time, string the owner along or even play games when it gets to court. There are people that can take advantage of you and you need to look for the red flags.
When you are showing the property to potential prospects and reviewing the application, there are certain red flags you have to identify and analyze. In addition to the application, you have to analyze their credit report, criminal background report and their debt-to-income ratios. For example, is there revolving debt or financial accounts, what are the total estimated monthly payments, are there collections, what is the amount due in collections? There are many things you have to analyze in order to understand if these renters will be financially good tenants for your property.
2. Do you have the proper screening abilities?
I can’t tell you the number of property owners that will get stuck after receiving an application because they do not have the ability to run a credit or background check. Most simply do not know how to obtain a credit or background check. Because of this, many owners will skip out on getting the reports and if the application looks ok… then it’s ok with them.
This is not the proper way to do it! You need to do a credit check, criminal background check and should do what’s called a Rent Bureau check. Most of us know what a credit and criminal background check is, but many are not aware of the Rent Bureau check. If a tenant has rented a property through a management company like mine, we report their monthly rent history to the Rent Bureau. The Rent Bureau is owned and operated by Experian, collecting payment history data on millions of renters.
3. A Property Manager provides a protective veil!
A property manager represents you as the owner and adds an extra layer of protection. Property managers carry Errors and Omissions insurance and general liability insurance that covers them in case of mistakes. For example, a tenant decides to sue you for a certain law you did not comply with but you had hired a property management company to manage your rental. If the property manager were responsible for that mistake in noncompliance with the law, then their insurance policy kicks in depending on damages. However most insurance policies will not cover intentional acts on behalf of the property owner.
4. Can you manage your property like a Business?
This is one of the biggest reasons why property owners will hire a property manager. Most property owners cannot operate their rental property like a business because they let their emotions get involved. Some tenants will take advantage of that making all types of demands and even being late on paying rent. Many times for owners it is tough to tell tenants they have to pay rent on time, that they are being given a 3-day notice, that they are being evicted, or getting their rent increased. When property owners develop an emotional attachment, taking care of business can be extremely stressful and draining.
5. Can you handle repairs in a timely manner?
If the repairs needed affect the use of the property it is extremely important to handle those repairs as quickly as possible. Delaying repairs past a “reasonable amount of time” can be cause for tenants to file complaints with the City or not pay rent. As a landlord, you need to be prepared with a list of vendors you can send out at anytime in case of needed repairs. Be prepared ahead of time and make a list of vendors you can contact, along with backup vendors. To give you an idea, my company has over 60 approved vendors ready for any type of repair job that may come up. If you’re a handy property owner you can save money by doing repairs yourself but then again, what is your time worth?
Questions for Marc? Email them to MarcGuzman9@gmail.com