Property Management
Property Management Information for Cleveland Investors
For residential real estate investors, choosing an approach for property management is a major decision, and is one of the biggest determiners of how successful an investment will be at delivering the desired or projected returns.
Those local to the Cleveland area may choose to self-manage their properties or hire a professional property manager, but for those not local to the Cleveland area it is effectively necessary to employ the services of a professional property manager.
The wrong property management approach can easily turn your investment property into a huge money sink, open you to liability, turn into a mental/psychological burden, or a combination of those! However with the right property and the right property management approach, real estate investing in the Cleveland market can be quite lucrative and pay off well over time.
Self-management
Self-management of residential real estate is feasible for many people, provided they are local to the area and have educated themselves on the associated laws and practices. It’s particularly manageable when investors are first starting out and have not scaled their portfolios.
Self-managing a duplex or two on the side (i.e. while maintaining a full-time regular job) is much more realistic than self-managing a portfolio of a dozen or more properties. However, even managing a small portfolio requires a landlord to ensure there are policies and procedures in place to handle anything that arises, whether expected or not, and to comply with all laws and ordinances.
Professional Property Management
Professional property management is a good solution for many Cleveland area real estate investors, whether local or not. Not all property managers are created equal though, so it is important to do your due diligence and ask a number of key questions when selecting a property manager.
With the right property manager in place, however, you can rest assured that the legal checkboxes are being handled, and also off-load the ongoing operational aspects to professionals so you can focus your time and energy on the strategic side of investing. Is your time better spent seeking out your next investment market/opportunity, or showing vacant units and coordinating gutter cleaning? If it’s the former, then professional property management is the route that will help you reach your goals the fastest.
The typical costs associated with residential property management in the Cleveland area are 8-12% of gross rent, and 50-100% of the first month’s rent when placing a new tenant. These costs do not include maintenance, utilities, etc., which must also be planned for, and which can be typically handled by whatever property manager is selected (though often at an additional fee, above and beyond the actual costs that would be incurred if these things were not handled by the property manager).
Some of the key questions to ask when considering a property manager include the following:
- Who would be my point of contact with the firm, and how would I reach them (email,
phone call, etc.)? - Is there an online owner portal where I can view statements, receivables, bills, work
orders, etc.? - Are you a Certified Property Manager and a member of NARPM?
- Do you have a setup fee?
- What is the range of areas (e.g. specific cities, neighborhoods, zip codes) you manage?
- What is the minimum reserves amount, and do security deposits count toward this
amount? - What is your operating fee structure? (Be sure to fully understand every fee that they
would charge you for!) - When and how do you make owner payments?
- How many properties are currently in your management portfolio?
- What is your average days on market for vacant homes?
- How do you screen your tenants, and does the owner have the opportunity to approve a new
tenant before approval? - What is the range of monthly rent amounts across all properties managed, and what is the
average or median? - Do you manage properties using subsidy/voucher programs (e.g. Section 8/CMHA)?
- What is your average total tenancy length?
- What is your average rent-ready cost for the owner at tenant turnover?
- What is the average time from tenant move-out to new tenant move-in?
- How do you advertise your vacant units?
- Do you have in-house maintenance staff?
- Do you up-charge on maintenance or repairs?
- How do you document conditions of the property prior to tenant move-in and after tenant move-out?
- Do you provide owners with reports at regular intervals when the property is vacant to relay how
much interest there is in the property and what prospective tenants are saying about the property? - Do you provide monthly statements or newsletters to your tenants?
- Do you provide any educational tools for investors to help them advance in their investment
journeys? - How many properties do the firm owners actually own themselves?
- How familiar are you with local regulations, such as processes related to evictions, rental
registrations, inspections, etc.?