As property managers here in Connecticut, we thought we'd share some insight regarding the process of Property Management. As with most questions, the short answer is rarely a complete answer. If you are interested in more detail regarding your obligations, our responsibilities, possible applications of Landlord/Tenant Law or any of the processes that are mentioned in this document, please feel free to Contact Christopher Bjorklund. We would be happy to discuss any concerns in detail.
Q: What can a Property Management company do for me?
A: A Property Management Company manages (investment) property. Owning an investment property is very much like owning a small business. You have income and expenses, products and services, contracts and legal requirements and so on. Depending on the property and the kind of rental you have, this can be an extremely time consuming process. Not only must you handle financial, maintenance and tenant issues, but you should stay informed of all landlord/tenant and other legal requirements relating to rental properties.
A property manager can take care of all of these issues for you. In many cases, the owner will receive monthly reports, perhaps talk with a property manager a few times a year and can rest assured that their property is being monitored and handled.
Q: How can I be sure I get GOOD RENTERS in our investment?
A: Tenant Screening is the process that both insures a new tenant has theCapability to pay the rent required, and that they have a History of stability and good tenancy. Bjorklund Properties will screen every application it receives to insure that they meet with our approved rental criteria. Remember, nobody can guarantee that a tenant will perform on the terms of the rental agreement or lease.
It is also important to remember all of the factors that attract good tenants. A clean, nice, updated home will attract more applicants than one that unkempt or in various stages of disrepair. Lower rates attract more people, higher rates tend to attract persons in a higher income bracket. Allowing pets and/or smokers will also attract more potential applicants. Longer leases typically attract fewer people, and shorter leases (1 year or less), or month-to-month tenancies, are typically more attractive. The more restrictive the rental criteria are, the fewer people will be attracted to rent your property
Q: How will I know that my investment is not being “trashed” by tenants?
A: Bjorklund Properties will screen potential tenants, we will drive by the property monthly and we will do interior inspections annually. Further, if there is any cause to believe that a serious contract violation is occurring (such as drug issues, unauthorized residents, unauthorized pets or so on) we will arrange for more frequent inspections. Typically these measures are included in your management fee and do not cost extra.
There is no guarantee that tenants will abide by the rental agreement, or that a property manager will detect problems in time to prevent damages or problems. However, we have found that the above measures often prevent serious problems and minimize potential physical and financial damages from inappropriate behavior.
Q: When I hire a Property Manager, will they do everything to take care of the investment?
A: The short answer is “they can”. The scope of the Property Manager’s authority is usually negotiated between the Owner and the Management Company, and is reduced to writing in the Property Management Agreement. This is the basis from which all future actions are based and is a very important document. Typically an Owner will authorize most actions, sometimes with spending limits, that are required for the successful operation of an investment property.
Q: How long do I have to provide funds if the Management Company asks for them?
A: That depends on the Management Agreement, but usually they are required on demand, with a reasonable amount of lead time. So, if your Property Manager needs an additional $250 to pay for a repair bill, an owner might have 3 days from the date of notification to deliver the funds to the management company.
It is important to remember that additional funds are usually required only when the property is in need of something. You are typically not paying the management company more- you are simply repairing or improving your investment property.
Q: Do I give up my authority when I sign a management agreement?
A: Typically you do not “give up” your authority, you confer the authority to the Property Manager to make decisions and act in the best interests of you and the property. Your Property Management Agreement is the basis for the PM’s authority, so you should read it carefully.
Most of the time you can be as involved with, or as distant from, the investment as you want to be. However, the ultimate responsibility for dealing with the investment property is always squarely on the owners shoulders. Some management companies will require that an owner handle making units ready to rent, while others can provide that service for the owners. Often a Property Management Agreement will state spending limits that the PM will use as a guide for getting the Owner involved.
Q: Is the Property Manager financially responsible for making the home or apartment ready to rent, and for all advertising costs?
A: These questions should be answered in the Property Management Agreement, but usually the answer is No. The PM is responsible for making sure the home is rentable (maintenance, cleaning, safety and habitability problems and so on), for insuring that the bills are paid and that the rent is collected. They are NOT typically responsible for the financial requirements to make these things happen. In short, the PM will do the footwork and make sure the issues are resolved, but the Owner is responsible for the financial burden.
Q: Is the Property Manager responsible if they don’t collect the rent, or if the tenant damages my property?
A: Your property manager has no control over what a tenant does or does not do. A PM is responsible for insuring that a tenant knows what is required, and for assisting the tenant in the performance of those requirements, but the PM cannot MAKE the tenant do anything. A Property Manager can negotiate with tenants, remind them of legal obligations, file on them with the courts and take other measures to pressure them into conforming to the terms of their agreement.
Further, remember that the short and long term benefits of investment property ownership are the Owners, not the PM’s. The tax benefits, cash flow, appreciation and equity enjoyed by the owner are completely unavailable to the PM. They are paid only based on the terms of the management agreement, and are basically hired by the Owner to do the day-to-day work of managing the property. Because an Owner stands to make a considerable sum from an investment property over time, it only makes sense that the Owner is the one who should financially maintain the investment.
Q: If a tenant does not pay on time, what will the Property Manager do?
A: Every management company has different procedures, but most follow these general steps. First, the tenant is informed that payment was not received and that the rent is late. Usually this is in the form of an eviction notice for non-payment (which gives the tenant some time to correct the problem). If the tenant responds and has a reasonable problem, the PM may negotiate a payment schedule and continued tenancy. If the problem is not reasonable, or if the tenant does not respond, the PM will file with the court system to start eviction proceedings.
Q: How does maintenance get done, and who pays for it?
A: Typically maintenance is either reported by the tenant or is discovered during an inspection. Bjorklund Properties will assess the problem then determine how best to approach it. In many cases a maintenance resource will be scheduled to repair the issue. Sometimes outside vendors will be hired if it is determined they can do the job better or faster. On larger projects (usually if estimated over $1,500) Bjorklund Properties will solicit bids. We will usually choose the bid that offers the best value, not necessarily the lowest bid.
Many factors go into these decisions. Can our maintenance resources complete the job more efficiently, faster or work within our preferred time frame? Is the vendor or contractor licensed, bonded and insured? Do we have any reason to believe the estimate or bid is too low, or that they will attempt to renegotiate once the job is started? Will the vendor or contractor still be around in a year or two if the project fails at a later date. All of these factors and more are an important but indirect part of the decision making process.
Emergency Maintenance- Bjorklund Properties is authorized by the management agreement to spend any amount of money required to stop a problem from getting worse or resolve a serious safety issue. Typically these kinds of issues revolve around roof or water leaks, electrical issues or other safety issues.
The cost of all repairs, from mowing the lawn or fixing the door knob to replacing tub surrounds, remodeling kitchens and installing new roofs, is the owners responsibility. Bjorklund Properties will make spending decisions as closely in line with the owners objectives as possible, but in signing the management agreement you are authorizing Bjorklund Properties to make those decisions within the spending limits described in that agreement.
Q: What is this “Property Management Agreement”? Is it really important?
A: The Property Management Agreement is the document that authorizes your agent (the property management company) to work on your behalf. This is the document that describes what they can do for you, what decisions they are authorized to make, how much they can charge you and what your obligations are. This is a very important and legally binding document. Read it carefully and understand the terms and conditions of this employment agreement.
Q: How long will it take to rent out any vacant space? How much rent can I charge?
A: There is no guarantee that a home or apartment will be rented in any time frame. Rent rates effect the time it takes to rent, as to the amounts of Security Deposits and other fees. Bjorklund Properties performs a "Market Study" and determines a recommended starting point for the rent rate that is likely to promote finding a new tenant in the first 2-4 weeks the unit is vacant.
When possible Bjorklund Properties likes to Pre-Rent vacancies (meaning rent the space before it becomes vacant). We will sometimes leave 1-2 weeks for cleaning, painting, repairs and upgrades between tenants. When pre-renting is not possible we begin advertising as soon as we know when the space can be made ready. We screen applications on a first come, first serve basis.
Rent rates may be determined by the owner or the property manager. Typically we will advise an owner regarding our opinion of what rates are reasonable for a given space. As with any product, it will often sell faster at a lower price, so if the space does not rent fairly soon it may be cost effective to lower the rate and have it rented for more weeks out of the year.
An owner's goals are an important part of any renting strategy. Some owners prefer keeping the rate low and the units rented. Others prefer pushing the market to get the highest possible rate. Make sure to explain your needs to your property manager.
Bjorklund Properties will research the specific neighborhood or area for comparable rental units and will base rates on what the competition is asking or achieving. This is an effective means of determining market value.
Q: What happens if the tenant is evicted? Will I ever see the money they owe me?
A: Though any number of things might occur during the eviction process, typically the tenant moves out or is locked out by the sheriff. In many cases the unit or home will require a considerable amount of work including trash hauling, painting and cleaning, often some minor or major maintenance. Typically it takes 3-5 weeks to evict a tenant, then plan on some additional time to make the unit rentable again.
There is usually plenty of documentation supporting the claim of the landlord against the tenant. Some companies will pursue tenants for a short while, then transfer the account to a collection agency. Or, an Owner may take the file to small claims court (or civil court). However, the sad truth is that Owners rarely see payments from past tenants, and it is usually a small enough amount that owners often decide not to pursue legal action.
Q: Can I instruct the Property Manager to do or not do specific things with my property or the tenants?
A: Yes. Your PM is your agent, and they have an obligation to assist you in meeting your needs. However, keep in mind that they are also required to follow the law, that they are regulated and overseen in ways an Owner is not, and that they have a reputation of their own to maintain. If you insist that they do something that is against the law or is detrimental to their own business, they will most likely refuse or even terminate the Management Agreement.
Q: I am VERY pleased with the performance of my management company. What should I do?
A: Tell all your friends and business associates!!! WE believe, like most companies, that word of mouth is the best advertising. If you are pleased with your property manager, help them out by telling others about your experience.
Any questions, please don't hesitate!
The Bjorklund Properties team.