What Do Property Management Companies Do

Summary

In this video, Kris Krohn explains what a property management company does and how it plays a key role in real estate investing. He covers the responsibilities of property managers, such as finding tenants, collecting rent, enforcing contracts, handling evictions, and managing repairs. While they charge around 10% of rental income, their value shines when tenant issues arise. Krohn also touches on lease options as an alternative, highlighting how it offers hands-free property management and increased cash flow. He emphasizes the importance of making informed choices in property management.

Takeaways

• 🏡 Property management is essential in real estate, helping to find tenants, collect rent, and manage the property.
• 👥 Property managers handle tenant placement, including replacing tenants when necessary.
• 💰 They manage rent collection and enforce contract terms, ensuring tenants pay on time and adhere to the agreement.
• 🚫 Property managers handle evictions if tenants default, which is crucial for maintaining the property’s value.
• 🔍 Thorough tenant screening, including background and reference checks, helps avoid bad tenants.
• 🔨 Property managers coordinate property repairs, sometimes using third-party contractors, but landlords should be cautious of potential overcharging.
• 💸 They typically charge around 10% of the monthly rental income for their services.
• 🤔 While property management can be expensive, it's worth it when issues arise with tenants or repairs.
• 📝 Lease options are presented as a way to avoid property management fees while maximizing cash flow.
• 🌐 The speaker promotes an alternative approach, lease options, that can offer hands-free real estate investment.

Q & A

What is the main role of a property management company?

The main role of a property management company is to find tenants, manage rent collection, enforce the lease contract, and handle evictions and repairs for the property owner.

Why might someone consider hiring a property management company?

Someone might hire a property management company to avoid the complexities of dealing with tenants, late payments, enforcing contracts, handling evictions, and organizing property repairs.

What are the financial expectations when working with a property management company?

Property management companies typically charge around 10% of the gross rent as their fee. This fee can vary between 8% and 12%, depending on the company.

What is one common challenge property management companies help landlords avoid?

Property management companies help landlords avoid the challenge of dealing with difficult tenants, especially those who may try to exploit leniency, which could lead to late payments or other issues.

How do property managers ensure the quality of tenants?

Property managers conduct background checks, verify references, and follow standards for selecting good tenants based on their income and ability to pay rent.

What should a property owner be cautious about when it comes to repairs managed by property management companies?

Owners should be cautious about repair costs, as property management companies may use contractors who charge more, potentially leading to higher repair expenses.

How do property managers handle repairs, and when do they need approval from the property owner?

Property managers will handle basic repairs but will typically seek approval from the property owner for repairs over a certain amount, usually via email.

What happens if a tenant needs to be evicted?

If a tenant needs to be evicted, the property management company handles the eviction process, including enforcing the lease terms and taking legal action if necessary.

Why do novices often end up with difficult tenants, according to the script?

Novices often place the wrong tenants in their properties because they lack the experience and standards that professional property managers use to assess tenants' ability to pay rent.

What is one advantage of using the lease option strategy compared to hiring a property management company?

The lease option strategy allows properties to manage themselves, providing higher cash flow without the need to pay property management fees, which can be a hands-off approach to real estate.