When it comes to the day-to-day management of your rental property there are a few options open to you. You can take on the responsibility yourself or you can outsource it to a Property Management Company. There are pro’s and con’s for each and depending on your situation, one option may suit you better.
Managing the Property Yourself
Managing a rental property involves sourcing tenants and conducting the relevant background checks, doing a pre-inspection of the property before tenants move in to note any damage/faults that are already in place. Once tenants move in you have the responsibility of checking that rent is paid on a regular basis and conducting scheduled inspections to ensure that the tenants are looking after the property sufficiently (some insurance companies state that this must be done at set intervals for their cover to be effective). You will also be the first point of call should anything go wrong with the house, i.e. if a water cylinder bursts in the night! All this can be very easy provided you have good tenants, but should you encounter difficulties then the stress involved can put a lot of people off having rentals in the future. As a result, many people choose to outsource the above tasks to a third party.
Property Management Company
If you want the benefits of having a rental investment, but are not the type of person that handles confrontation well, then going with a Property Management Company may be for you. These companies take care of everything outlined above from finding tenants, to doing inspections and collecting rent. They can also take care of any maintenance that needs doing without bothering you at all hours of the night. All these services cost money though. Standard rates vary from between 7.5%- 8.5% of rent collected each week. They generally take the first weeks to rent from your tenant as a finder’s fee, whether they charge this to you as the owner or to the new tenant depends on the company. 7.5% is a reasonable amount on a weekly basis and as such will eat into the budget you would have prepared as detailed in Point 1) above.
In some countries, it is possible to rent your home to a State housing Agency who will then guarantee you rent for a set period of time. Ten-year leases are not uncommon. They source the tenant and cover basic maintenance costs; you do not need to have any involvement what so ever. The drawback to this is, of course, the standard of the tenant in your property will be outside of your control. This may have an impact on the value of your home and area going forward. The guarantee of income for a set period of time is a big incentive. Most organizations like this have a strict location and housing conditions so it is best to talk to your local organization before purchasing a home if this is an avenue you wish to pursue.
Whilst there are many other factors to consider when purchasing your first investment property, the points mentioned here give you a place to start.