To wrap up this series on investment properties, let’s take a look at some final pieces to keep your investment an investment. If you haven’t read previous articles, start here for some worth while information on how to look at investing.
Investment-Income Producing Properties are a wonderful thing to have. While everyone else is waiting for the market to change, this is the ideal time to negotiate some fabulous deals. But it takes more than just purchasing a property to make it worth your while.
Having started and recently sold a successful property management company, I’m speaking from experience. A good property manager is hard to find, so take some precautions and do your homework.
First, your investment property is a business, not charity. Treat it like one.
There are countless legal issues around the Landlord-Tenant Laws. Being a landlord is not only stressful, but it creates a whole new world of legal liability. By hiring a good property manager, not only are you saving yourself the stress and time it takes to manage a property, but you have also relieved your liability and spread it out among other insured parties.
If you have never dealt in these issues before, allow me to give you a brief eye opener of how our system works in Washington. For example, say the tenants are late on payment and you give a notice to pay or vacate. If you forget the words “and all other occupants” after the tenant’s names, a judge might throw it out and you will have to start your notices and timelines over again from day one. Don’t get me wrong. I completely stand behind protecting tenant’s rights and privacy. However, at times it seems that our system leans heavily in their favor. As a landlord, you need to be aware of the laws and follow the rules precisely for how you conduct your business. The best way to address this issue is to hire a company who is experienced.
When interviewing your property manager, here are some items you will want to discuss with them.
Screening. Tenant screening is key. Even if you are desperate to get a tenant in the home, don’t take the first Joe that walks in off the street (no offense to the Joe’s out there. I know some great ones!). Be picky about who you allow and take the time to do a background and credit check. Does their check cover just your state or is it nation wide? Do they do a background a credit check? Do they actually talk to previous landlords? Would they rent again to this person? These are huge indicators. You should know who is going to be living in your home.
Inspections. Make sure your property manager does a thorough inspection of your property. This means more than a walk through before the moving truck comes. What about before, after and DURING occupancy. They should document everything with photos, video, notes, etc. Then the tenants need to sign off on the inspections saying they are accurate. At the end, when the house is empty and there is a new hole in the ceiling, you should be able to prove that it was not there before and the tenants should pay.
How about quarterly or monthly inspections? Does your property manager write into your contract that they continually inspect the premise (inside & out!) for you? They should have a schedule for maintaining their units. Ask to see the notes they have taken regarding your property and how frequently they visit. After all, what else are you paying them for then to watch your investment.
Details. Read over the contract with your property manager carefully. Who is responsible for what? Do you have any rights to store something on the property? Who is providing the lawnmower? What happens if the lawnmower breaks? Is it ok if the tenant’s paint the walls? What about nail holes or window treatments? What if you need to visit the home? How far in advance do you have to give notice and who do you give it to? Are they going to keep a copy of your key in the office so they can access the home if there is an emergency or abandonment? Who else has access to your house?
The list of questions could go on and on. Talk these things over before the issue comes up, so you know how to handle it.
Payments. Think about the money going out and your money coming in.
Who is responsible for the payments for the mortgage? Personally, I would recommend you maintain all the payments regarding your property taxes and mortgage. Don’t leave those important pieces to chance with someone else.
Will you or the tenant pay utilities? I found that some water and gas companies will not bill tenants directly. If the tenant’s don’t pay, they can put a lien on the house and that creates an ugly mess about who is responsible. So, are you going to have the property manager billed and forward those expenses to the tenant or are you going to pay those expenses yourself and increase the rent to cover the additional costs?
What about payments to you? When and how should you expect to receive them each month? What happens if the tenant’s don’t pay? Who gets the late fees? What incentive does the property management company have to collect rent in a timely fashion?
Reserves. Lastly, make sure you have reserves in case your investment property has vacancies or needs repairs. Sometimes things break and eventually tenants move out. If you are living month-to-month, then investment properties are not for you. At times, this property will cost you money.
Remember, investment properties are long term investments and aren’t meant for a quick profit. Take the time to make sure you have something that will last.
If you are thinking about investment properties in Northern Snohomish County or Camano Island, give me a call. I’d love to help you down the road to building your wealth.
Jen Hudson, GRI (360) 652-1200 or email@example.com