Property management lease only service?

Question

I'm 25 and just closed on my 2nd property that I will be owner occupying / house hacking and moving out of my current house hack to rent out to a family/tenant. It's a 4 bed 2 bath house. I found a local property management company that offers a "lease only service" meaning that they will take pics, market/list the property for rent, handle showings, screenings, and paperwork to onboard the tenant and then hand it over to me to manage. I've decided that I want to manage it myself for at least a year to not only save costs but because the property is local to my next one, I've lived in it for over a year so I know the maintenance of the home, and I'm a PM for a home builder so I have all the handyman/tradesmen relationships that I can use for any repairs. The PM company charges a fee equal to first months rent for this lease only service. I would rent the property for $2000. Do you think it's worth $2000 to have a company handle the full tenant onboarding process?

Since I'm young and haven't done this leasing/renting out process before (my house hack roomates have been friends), I'm afraid of onboarding the wrong tenant or drafting up paperwork/leases that doesn't fully protect me as a landlord. Plus doing a bunch of showings and processing applications doesn't sound too fun either. Is the tenant onboarding process really that difficult or strenuous to where it's worth utilizing this lease only service despite the fairly hefty fee for a process that will probably take the PM company roughly 2-3 weeks to do?

Since I'm young and haven't done this leasing/renting out process before (my house hack roomates have been friends), I'm afraid of onboarding the wrong tenant or drafting up paperwork/leases that doesn't fully protect me as a landlord. Plus doing a bunch of showings and processing applications doesn't sound too fun either. Is the tenant onboarding process really that difficult or strenuous to where it's worth utilizing this lease only service despite the fairly hefty fee for a process that will probably take the PM company roughly 2-3 weeks to do?

Angie Russell · Answer

Ryan, Screening is not that difficult. You just need to make sure you take your time and cover all of your basis. The basics are income which is typically 3 times the monthly rent. Do an employment check. That means collecting the last three pay stubs then calling to verify that they do actually work there (stubs are forged so much these days). If they look questionable, add a few numbers up (it's crazy how often they are wrong). You can also request their last bank statement and see if the deposits match up to the stubs. If they use tax returns, it is almost the end of the year don't just accept 2022's. They could have quit or gotten fired months ago. If they are a new business, ask for a letter from a CPA (make sure they are legit). Then look them up on your state website to make sure their a real business. Of course run their credit. I personally do not go by a credit score. I have approved people in the 500's because it's student loans that has brought their score down (I ignore medical and student loans). Do a rental verification. If they have a mortgage, I just use what it states on their credit report on if it's good or bad (do they have late payments). Take initiative and call previous landlords. If they don't answer, call back. Many credit checks come back with previous addresses. Google the addresses and make sure they aren't lying about where they lived.

I think those are the basics. And please don't do crappy things like go through their bank statements and deny because you don't like how they spend their money. That is not your business. I know a lot of people look at Debt to Income too, I also think that's crappy. I have been over extended many times in my past but never have I not paid a bill (well except some student loans back in the day :)).

Good luck and reach out if you need help. 847-275-3327

Angie Russell · Answer

It is a shame that you feel this way and it's an even bigger shame if the PM/realtor really didn't care. I have been doing property management for 10 years and take pride in my work and having as close to a zero delinquency as possible. Good luck in the future.

Laura Stayton · Answer

Yes it's worth it if you have a reputable management company.  We market the home, handle the showings, application, credit and background checks, verify income etc and then submit to the owner for approval.  Once approved, we offer a lease to the tenants, collect first months rent (which we retain) and security deposit (payable to owner)  We also make sure they have utilities transferred and renter insurance in place before obtaining keys for move in.  We then turn everything over to the owner.

If you don't know what you're doing, there are so many missteps you can make along the way and believe me there are some sophisticated scammers out there these days.  Protect yourself.  You also need a binding lease that abides by the landlord tenant code of your state so it's enforceable.

Totally worth it and why we have the same owners come back to us time and time again as needed when the tenants we place move and they need us again.

Good luck

William Gerald · Answer

I used a PM for that once, never again. In my opinion, you either hire a PM or you don't. Maybe I used the wrong PM, but I had a bad experience doing that.

Angie Russell · Answer

Oh and OF COURSE a background check (which automatically comes with my rental check so I forgot to mention).

Ben Scott · Answer

If you allow the PM to find and vet the tenant, I'd want a qualified reasons and/or background reports as to why the PM thinks this is your best tenant option. Largely to avoid the PM from throwing the first warm body in that fills out an app and you're stuff with a bozo. I'd see if the PM would accept 75% of first month's rent as a lease fee. I've done that for other clients who want to self manage but don't want the headache of taking calls, scheduling showings, etc

Harita Konjeti · Answer

I did 3 evictions this year as tenants were non paying. The PM or realtor does not really care how good the tenant is. They will place them with minimal screening and they cause lots of maintenance issues and do not pay rent in time. I have started screening after the realtor screens them and tell the rules, setting expectations upfront.

Michael Smythe · Answer

Why don't you compare your lease to their lease to see how/if it's better?

Property management lease only service?

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