By Shia Getter
Using a management company is like taking insurance. You pay several hundred dollars a year, hoping never to need it. But if a problem does arise, the small annual fees you paid easily pale in comparison to the costs your insurance saves you. As soon as you have one bad tenant who doesn’t pay, a manager who takes initiative quickly and is already connected with lawyers saves you months of lost rent.
Buying an apartment is one of the biggest investments you will ever make. You want a professional company, with in-house staff and repairmen on call, to take proper care of your investment. While many kollel yungeleit see part-time property management as a good supplementary income, it’s important to understand that although such a person may manage your property to the best of his individual ability, it will be without the support of experience and connections.
Professionalism means both a business-like organization and connections. The following mistake made by an amateur manager illustrates these points.
One Friday, I received an emergency phone call from an unprofessional manager who had accidentally double-booked an apartment for that Shabbos. He had new tenants coming in for Shabbos, but the current tenants had been planning to stay. In a professional company–well, this wouldn’t have happened. But if somehow such a mistake did occur, a professional company has a range of apartments and in most cases would be able to give the new tenants something else. This is one reason renters feel more secure when dealing with a larger company–they know that if anything were to happen, the manager would have the wherewithal to sort things out.
Keeping an eye on the apartment. Some people will take advantage of an unmanaged short-term by simply staying extra days. I was recently asked to visit an apartment to evaluate its potential for joining the Getter Group’s short-term rental program. Entering the apartment, I found the air conditioner on full blast–as it had been for a week since the last person left.
Rental payments. A management company monitors the rents and will call the tenant if the rent is not received within two or three days–maximum–of the due date, to ensure that it doesn’t get further delayed. If you let the delay in rent go on, the tenant will have to come up with a larger payment, which is more difficult to put together. A manager who is on top of things will save you from gaps of several months’ rent.
With short-term apartments, it’s even more critical that you receive payment promptly–as soon as the renters come. These tenants, whether tourists or visitors, are much harder to run after. Also, by taking the rental fee up front, you avoid the tenant’s “reasons” to request reductions in the rent. This is something that we have, unfortunately, seen during our years of managing apartments.
Repairs. Tenants are much more willing to call the management company when there is a small problem, rather than bothering the owner. It is in your best interest to have repairs dealt with promptly, even though your ongoing maintenance might be somewhat higher, because this way the apartment is kept in much better shape. Small issues are fixed before they grow larger and more expensive to deal with or even require the tenant to vacate.
Professional distance. You want to keep a healthy distance from your tenants. When you manage your own apartment, you may feel uncomfortable to say no when a tenant calls and asks for a new couch or a second air conditioner–even though the purchase will eat up the profit for the year. When a management company sits in the middle, tenants are much more understanding of the need to negotiate properly.
A feel for the market. In today’s credit crunch, you want to get the maximum return on your investment. Your manager can help you. I recently met with an investor who owns four apartments in Yerushalayim. One of the first things I told him was how much market rates had risen–he was undercharging each tenant by $300 a month!
Price depends on location, view, layout, design, and accouterments. If you know the market, you know what is reasonable to provide for the tenant and what you may need to invest in order to get the price you want. Sometimes we can tell a tenant that the price is reasonable for what he will get and that if he doesn’t take it, someone else will. Other times we will advise the owner that for the price he wants, he will have to invest in furniture or appliances.
Some management companies also have a brokerage division, which is advantageous because they should have a flow of potential tenants calling to inquire about apartments.
The good advice, experience, connections, and professionalism that come with using a management company are the best insurance on your worthy investment in Eretz Yisrael. Let the managers keep everything running smoothly while you enjoy the monthly check. v
Shia Getter is the CEO of the Getter Group, a full-range real estate services firm in Jerusalem catering to the Anglo investor. He is a noted expert, columnist, and author of Everything You Need to Know About Buying Real Estate in Israel. He and his professional team manage many upscale Jerusalem properties and have helped countless people buy, sell, and renovate property in Israel.
By Shia Getter