Over the last couple of posts we’ve taken a broad look at rental property management fees and more specifically on property leasing fees. Today we drill down once more and focus our attention on Rental Property Maintenance Fees.

What is the Typical Charge for Rental Property Maintenance

Estimating an exact annual or monthly cost for maintenance can be difficult and is one of the areas landlords tend to under-estimate. A good rule of thumb is to budget approximately 1% of the property's value. So if your property is worth $240,000 then you would want to budget $2,400, or $200 per month.

The longer you own a property the better you will get at forecasting the maintenance fees that are appropriate.

What Items Have An Impact on Maintenance Fees

The same things that would be causes of increased maintenance on your own home will be present on a rental property. these items include the age of the property, its size, the original condition, the climate, the type of property, and the quality of tenant. Plus keep in mind that if there are any HOA maintenance fees, that these should be factored in.

There will also be an increased cost when your property turns over, as you'll want to freshen things up to attract the next tenant. You might keep a separate fund that you contribute to monthly to provide funds to handle costs of maintenance and repair when going back into the rental phase.

Who Handles the Actual Property Maintenance Work

If you are managing the property yourself then you have the option of doing the maintenance yourself. If you lack the time or know-how, then you will want to have a reliable maintenance contractor you trust. Ideally you've worked with them before.

If you're working with a property management company they will either have a maintenance person or team on staff, or relationships with maintenance contractors. Be sure to spell out the details of maintenance in your contract to include how much per hour they charge for on-staff maintenance, at what dollar of cost do they need to notify you before moving forward with a fix, if there is a mark-up on the charges for outside contractors they use, etc. You're paying a maintenance fee so you should expect that the property management company can handle the maintenance at least at the same price you could, and hopefully less expensive.

Remember that forecasting Rental Property Maintenance Fees is part of your due diligence to determine if a property is financially a good investment. You need to take into consideration all of the factors that affect on-going maintenance and then determine your forecasted budget. If you're working with a property manager, they will be able to assist you with coming up with an appropriate annual and monthly amount to budget.

GSPM assists property owners and investors in maximizing revenue potential while minimizing the hassles in marketing and managing their properties. We recognize that there are a lot of factors that go into making a property a successful investment and put our experience and knowledge to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services.

Rental property maintenance is something you will deal with if you own rental property. If you own your own home then you really should be used to performing maintenance, as you should be doing so on your personal residence. The difference is you can perform maintenance on your own residence to your satisfaction and timelines, but with a rental property there is a second party to consider. And how does the cost of the maintenance affect your investment profitability?

While the hope is that most rental relationships are honest and mutually beneficial, it is still a relationship where each side has their own wants and needs. You want to receive payment on time and spend as little as possible on the home (less expenses = more profit). The tenant wants everything in the property work and perform as expected for the rent paid. When it doesn’t, they they won't care what it costs to "make things right.” Thus, property maintenance can be the key to a good rental relationship.

Rental Property Maintenance tips

  1. Plan Out Maintenance Over The Year

    Scheduling maintenance throughout the year helps you balance the expenses with incoming rental payments to keep a positive cash flow. By understanding the impending costs, you can set aside a certain amount from each month’s rental payment to cover them. It also allows you to inform the tenant about maintenance crews being at the property.

  2. Set A Maintenance Reserve

    While having a solid maintenance plan is a great first step, your property will require maintenance that is unexpected. In these cases, you will need to come up with the cash to cover the charges. It's not a matter of if this will happen, but rather when it will happen. Typically you would want to set aside 1 - 3% of the property value for maintenance. So setting aside an additional 1% will help with unexpected costs. Over time you will have a better understanding of what needs to be set aside.

  3. Implement a Maintenance Request Process

    While much of the property maintenance will be planned, you need to implement a process for your tenant to request maintenance. This will ensure your tenant knows what to do if maintenance is required, allows you to record maintenance items outside of the norm, and track where you are in resolving the issue. The historical information recorded will help you budget for maintenance and repairs down the road. It also will provide a level of comfort to your tenant.

  4. Handle Maintenance Request Promptly

    There are two huge reasons why you should resolve maintenance and repair issues immediately. First, you owe a duty to your tenant to provide a safe and comfortable place to live. Secondly, you want to prevent any further damage by resolving the issue ASAP. There is also a psychological effect. If your tenant sees that you care about the property, they will be more likely to treat the property well.

    When an issue is reported do your best to resolve it within 24 hours. If it will take longer, be sure to communicate to your tenant what you have done and why it will take a little longer to fix the issue.

Wrap Up

Handling rental property maintenance issues can be one of the most challenging aspects of being a property investor and landlord. As in most cases, communication is the key to keeping maintenance issues as a minor issue rather than escalating to a larger one. Having a plan and process in place will ensure that when something does go wrong, there is a path to get things back on track.

GSR Property Manager assists property owners in maximizing revenue potential while minimizing the hassles in managing their properties. There are a lot of factors that go into making a property a successful investment and we put our experience to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services.

Todays post offers some residential real estate investing advice. Before purchasing any property you need to educate yourself about the real estate market you will be competing in. And you need to do your due diligence to understand what home rent for in the area and what fees and expenses will be. During your initial analysis you’re just trying to narrow down you investment options so its ok to guesstimate your numbers. But after you’ve whittled down your options and are ready to make a final decision you need to be extremely accurate on your projected rental price and property expenses.

When you’re evaluating properties its easy to get caught up in the monthly rental numbers, and you should to some degree. But equally important is to pay attention to the property and the long terms property appreciation opportunity. Also let's remember the 1% rule where any property that we invest in must be able to support a rent that is at least 1% of the purchase price.

So getting back to comparing our two residential real estate investment properties, here are the details. Property #1 costs $100,000 and you can rent it out for $1,300 per month. That means that your rent is 1.3% of our mortgage which exceeds the minimum accepted amount of 1% by 30%. Property #2 costs $200,000 and you can rent it our for $2,000 per month. That means your rental amount is 1% of the purchase price… the minimum amount you should consider.

Now lets project out into the future. Property #1 is located in a declining neighborhood. Over time housing prices will continue to drop or at a minimum remain level. In 10 years property #1 is expected to have decreased or at a minimum remained level and only be worth $100,000. Property #2 is in an area where home prices are appreciating. In 10 years the home is expected to increase in value to be worth approximately $250,000… an appreciation of $50,000.

So how do these two investments project out in earnings when looking at the short and long-term opportunities? (we’ve had to make some estimate based on insurance and tax rates in Georgia. But we’ve adjusted those based on the value of the two properties)

Comparing Two Residential Real Estate Investing Options

Property #1
Mortgage Rate: 3.85%
Price: $100,000
Down Payment: 25% ($25,000)
Loan Amount: $75,000

Monthly Cost: $840 (Mortgage, Property Tax, Insurance, Maintenance/Repairs, Property Management Fees,Vacancy)
Rent: $1,300

Monthly Net: $460
Yearly Net: $5,520

10 year cash rents: $55,200

Property #2
Mortgage Rate: 3.85%
Price: $200,000
Down Payment: 25% ($50,000)
Loan Amount: $150,000

Monthly Cost: $1,666 (Mortgage, Property Tax, Insurance, Maintenance/Repairs, Property Management Fees,Vacancy)
Rent: $2,000

Monthly Net: $334
Yearly Net: $4,008

10 Year Cash Rents: $40,080

Short term you can see that property #1 generates $1,500 more per year and $15,000 total dollars more over the 10 years in terms of rental revenue. But if you factor in potential sales profits, then property #2 winds up generating $35,000 more over the 10 years. A lot depends upon your short and long-term goals. You plan may be to hold the property as long as possible and use the rental incomes as a recurring revenue stream. In that case property #1 may be your best option.

Also consider that property #2 was twice as expensive as property #1, so if holding the properties for recurring rental incomes was your goal, you could have purchased two homes valued at $100,000 and realized double the amount of rental income.

All of the above is just speculation to make you think about your options. In the end the perfect home for you depends upon a number of variables including your available capital to invest, the properties available to purchase, your ability to analyze the market, the rent prices the market will sustain, and the list goes on and on. The key is to do your homework and take out as many of the variables as possible so that you are better able to control your residential real estate investing strategy.

Whether you've purchased rental investment property before or this is your first investment property, our investment property service can help you by helping your evaluate and analyze investment propertiesWe recognize that there are a lot of factors that go into making a property a successful investment and put our experience and knowledge to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services.

If you're a landlord or property investor one of the most important things to understand is how to pre-screen tenants. While having a tenant in your property might seem like one of the most important pieces of the puzzle, that’s not quite true. Having the right tenant, or a good tenant is more important than having just any tenant. In fact a bad tenant can wind up costing you a lot of money.

There are really three phases to the screening process:

  1. The initial call or contact
  2. The In-Person showing meeting
  3. The Due Diligence phase where you review the application, call references, confirm financials, etc.

Each of these are important and can confirm a good tenant or raise red flags of a potential problem tenant. In this post we’re going to focus on how to pre-screen tenants. After all, if the tenant isn’t a good fit for your property, discovering this in the initial phases will save you time. There no point in showing the property or doing all of the paperwork and background checks if they are not a qualified tenant.

Tips on How to Pre-Screen Tenants

  1. Understand Their Moving Motive
    The simplest way to get to this is to simply ask, “why are you moving?” You’re looking for a well reasoned explanation that is based on positives rather than negatives. For example if the response is “I do not like my landlord or get along with them” then you better follow up and get specific details of what they dislike. Is the reason based on landlord actions or is the tenant more to blame? On the flip side some positive reasons might be that “we need more space”, “want to move closer to work”, “want to get into a better school district”. You’re more likely to have a positive outcome if the reasons for moving result from a positive reason.
  2. Understand Their Moving Time Frame
    Given the option of selecting a tenant that takes time and plans their move verses one that makes impulsive or unplanned decisions, you want the planner. A good time frame is one where the tenant is looking to move 30-45 days out. This person has taken the time to think about the decision and is getting their ducks in a row. If it's closer to a week or two then you have to wonder how well the renter has thought out the decision. Will they be just as quick to decide to move out of your property in the future? There could be legitimate reasons for the quick move, just make sure to dig deeper to find out more about their decision. On the flip side someone that is planning on moving 3 - 6 months down the road, might be a planner, but can you wait that long to get someone into your property? Likely they are just starting to research options and likely are not at a point to make a decision.
  3. Understand Their Financial Means
    Can the tenant comfortably afford to live in your unit for an extended time? During the Due Diligence phase you’re going to confirm their income and employment, but if the answer is no its better to discover that sooner rather than later. You want to make sure that the renter’s income is 2.5 to 3 times more than your rental price. Don’t be afraid to ask how much the total after-tax income is for the persons that will be on the contract. You also want to make sure that they will have no issue paying the first months rent and security deposit up front before moving in. If they ask to pay the security deposit over several monthly installments this should raise a red flag.
  4. Understand Their Rental History
    During the screening process you’re going to want to get personal references, business references and previous landlord references. During due diligence you’ll make sure to investigate each. In this pre-screening phase you simply want to know if they will be able to provide these references and if they have any problem with you contacting each. If they cannot provide references are are not comfortable with you contacting them, you’ve raised another red flag.
  5. Understand Their Willingness To Play By Your Rules
    Get confirmation that they will not have an issue with completing your rental application and authorization to do a credit and background check. If they are unwilling to consent to any of these then it doesn’t make sense to go any further in the process.
  6. Understand Who Will Be Living In Your Property
    Its important to know how many people will be living in your property. Its a simple fact that the more people that are in the property the more wear and tear that will occur. Also will they have any pets? If you do not allow pets, then this is sign to move on. You also want to know what types of pets and their sizes to help determine if this is a good fit for your property.
  7. Understand The Law
    Make sure that when you are pre-screening tenants that you don't violate the Federal Fair Housing Act.  There are seven classes of people that you can't discriminate against by asking questions about a person’s race, skin color, sex, national origin, religion, disability or familial status. Stay clear of questions that involve these. And be sure you are up-to-date on Georgia Lease and Rental Laws

Up to this point you’re simply asking questions to weed out potential tenants. While its understandable that you need to keep tenants in your property, neglecting to address any of the above means you’ll be wasting time on tenants you should have walked away from much sooner. Once you learn how to pre-screen tenants your screening process will be much more effective.

If how to pre-screen tenants seems confusing or time consuming, maybe you should consider hiring an Atlanta property manager. GSPM assists property owners and investors in maximizing revenue potential while minimizing the hassles in marketing and managing their properties. We recognize that there are a lot of factors that go into making a property a successful investment and put our experience and knowledge to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services

If you are a landlord or plan on becoming one, why use a property manager?  Why not save the money and do it yourself?

Most people that rent out properties do so as a way of making additional income in addition to their “real jobs”. The additional income can make a significant difference in your personal finances but it doesn’t come without costs. These costs include:

The list above and individual items are only some of what you will deal with. So the question you have to answer is why use a property manager? Or why not?

If you’re looking for a hands of experience a property manager can make your life as a landlord as easy as it can be. Here are some specific items a property manager can help you with:

Getting Ready to List

Signing a Tenant

The above reasons paint a compelling portrait and answer to the question of why use a property manager? So on the opposite side why would you choose to not use one? Primarily the choice revolves around money. There is a cost to use a property manager, so if you want to retain 100% of the rental revenue then you have to do it by yourself. There is a time/money trade-off.

So why use a property manager? The final decision often comes down to peace-of-mind. It’s simply easier to be a landlord when someone else is managing the day-to-day, week-to-week and month-to-month details. And it becomes more important to rely on help as you move from a single unit to multiple units.

Interested in hiring an Atlanta Property Manager? GSPM assists property owners and investors in maximizing revenue potential while minimizing the hassles in marketing and managing their properties. We recognize that there are a lot of factors that go into making a property a successful investment and put our experience and knowledge to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services.