My husband and I have happily become landlords of an apartment. Although we would like to take a breather, we are faced with the task of completing various procedures related to management.
In this article, we will tell you the important points to keep in mind when searching for a management company before and after purchasing a property. It is no exaggeration to say that the success of your apartment management depends on how you manage your property and which company you entrust the management to.
The quality of the management company has a big impact on apartment management. We also share our own experiences, so please use them as a reference.
What you should do before purchasing a property: Finding a management company
Start looking for a management company as soon as you pass the preliminary screening
Once the contract procedures for purchasing an apartment are completed, the property will be transferred to your name immediately. Of course, it will become your property from that point on, so you will need to maintain it in good condition.
We have to make various changes to the contracts to ensure that no problems arise in our tenants' lives.
The most important thing is "how to manage the apartment," that is, selecting the management method. For those who are new to real estate investment, it's been a difficult process to purchase a property, so you may want to take a break, but this is where the real work begins.
If your tenants can live in peace, you will receive income (rent). Therefore, after passing the preliminary screening, we recommend that you seriously consider how you will manage the property until the final screening is completed.
There are three ways to manage rental properties
There are three main methods for managing income-generating properties.
Enter into a management contract with a management company
Enter into a sublease agreement with the management company
self-management
Enter into a management contract with a management company
The management company is entrusted with management by the landlord. Since it is an "entrustment" from the landlord, the final risk and cost burden lies with the landlord.
If a tenant has problems such as "the water heater is broken" or "the door won't open" or has a complaint such as "the neighbors are noisy" or "the trash isn't being sorted," the management company will intervene, but the landlord will have to pay for repairs and other related costs.
Please note that this is not an "all-inclusive" solution.
The general guideline for management fees is 3% to 5% of the rent (including common area fees).
Enter into a sublease agreement with the management company
This is a method in which a management company rents the entire building from the landlord, handles rental contracts, complaints, maintenance of the building, etc. The management company then subleases the property to tenants.
When a sublease agreement is signed, a fixed rent is paid to the landlord by the management company regardless of whether there is a tenant in the property or not.
The management company takes on the risk of complaints and other problems from tenants, which significantly reduces the landlord's risk. However, the management fee is higher (10% to 15% of the rent including maintenance fees), and the deposit, key money, and renewal fees collected from tenants become income for the management company.
Although much of the responsibility lies with the management company, it is not all of it. It is important to remember that renovation costs, utility fees for common areas, and cleaning fees are all borne by the landlord.
The previous owner of our property was recommended by the construction company to enter into a sublease agreement. Personally, I don't recommend it because the management fees are high. If you are concerned about the risk of vacancy, a sublease agreement is a safe option.
self-management
You will handle everything related to managing the property yourself. The biggest advantage is that you can keep costs down by not going through a management company.
However, it is very difficult to deal with tenant troubles and complaints 24 hours a day. This is for people who are comfortable with emergency response, who live near a property they manage, or who really don't want to pay the management fees. Since it is necessary to respond flexibly to various problems, it will be difficult unless you are familiar with the landlord business.
We chose to enter into a management contract with a management company, paid a management fee of 3.8% and asked them to manage the property.
"Are you good at management and finding customers?" and "Are you willing to communicate with the landlord?"
The important point when choosing a management company is whether they are good at management and attracting customers. In fact, each real estate company has their own area of expertise.
Specializing in real estate sales and purchase intermediation
Specializing in rental intermediation
Specializing in rental property management
In many cases, real estate companies that introduce profitable properties are entrusted with the management of the property, but it is not always clear whether the company is good at rental intermediation or management. If the commission for sales intermediation is a major source of income, it is possible that the company will not put effort into rental management.
What is the main business of a real estate company?
Is the property well-maintained?
Are there sufficient measures in place to prevent vacancies?
Taking these points into consideration, you should determine whether they will properly manage your valuable property and whether they are likely to proactively find tenants when vacancies occur.
We decided to ask a large company with strong brokerage and management experience in the Tokai region to manage the property. There was one vacant room when we purchased the property, so we thought it would be reassuring to have someone who is good at finding tenants. We thought that a large company would have a higher number of people wanting to view the property and coming to the store to inquire about renting, making it easier to find a tenant.
The atmosphere in the store and the friendly attitude of the employees were also deciding factors. When we ask for management, we, the landlords, do not communicate directly with the tenants. The management company acts as an intermediary between the tenants and us. It is important to choose a reliable company that keeps in contact frequently.
It is important to find a company that you can trust will "take care of their tenants while also working hard to maximize the landlord's profits."
Get an estimate of how much your monthly management fees will be after purchasing the property.
There are various expenses that will be incurred even after purchasing a property, so we recommend that you make a budget before purchasing. As soon as we have completed the preliminary inspection for the property, we look for a management company and get management fee quotes from several companies.
The rent when the property was fully occupied was approximately 600,000 yen, so the monthly management fee was estimated to be around 22,000 yen.
If you don't have an idea of the costs involved after purchasing the property, you may be under the mistaken impression that all rental income is profit. Make sure you have a concrete idea of how much each month will cost before purchasing the property.
By signing the management contract one week before the property purchase procedure, we were able to start management smoothly.
We wanted to ensure smooth property management after purchasing the property, so we signed a management contract one week before purchasing the property.
Specifically, I took over apartment management according to the following schedule:
9/23 Management contract signed
9/27 Loan execution, ownership transfer, apartment becomes our property
10/1 Management company relocation. The entrusted company will start management.
After we started management, the management company immediately notified the tenants, so we were able to start managing the apartment complex without any troubles related to the change of ownership.
summary
Choosing the right management company is key to successful apartment management. It is important to find a management company before purchasing the property and decide on the management method (contract, sublease, self-management). When choosing a management company, check their areas of expertise in attracting customers and management, and choose a reliable company.
It is important to estimate the management fees before purchasing and understand the specific costs. Don't neglect your preparations and aim for a smooth start to management.
Next time, we will tell you the key points regarding the various procedures that were carried out after purchasing the property (contracts for fire insurance, utilities, communications, etc.).
Please look forward to it!!