Condos and Townhomes
What to Look for in a Property Manager When You Want to Rent Out Your Condo or Townhome in Memphis
There are several ways that people find themselves to be the landlords of a condo or townhome. Many people have outgrown their first home with shared walls, and have since moved into a single-family home. However, the time may not be right for them to sell their condo or townhome, or they may be reluctant to part with the property for personal reasons. They may also be seeking additional income on a property that they bought years ago for a good price. Renting out your condo or townhome can be a great way to earn extra income if you find yourself in any of the situations mentioned above. Condos and townhomes typically sell for less than single-family homes, so investors looking for their first rental property may find a condo or townhome to be easier to get into.
Once someone has decided to rent out their condo or townhome, they will need to decide if they want to work with a property management company or take on the responsibility themselves. As with any financial decision, there are pros and cons to both, but each investor will have a different schedule, location, and ability level that dictates if they hire a firm to manage their property.
What is the Difference between a Condo and a Townhome?
Condos and townhomes have many similarities, including often having homeowners associations (HOA) that can dictate how a property is used. But while condos are usually found in a large building and may have upstairs and downstairs neighbors as well as on each side, townhomes share only one or two walls. Owners of townhomes own the interior and exterior of the home, as well as the land that the home sits on. Owners of townhomes have more freedom but also more responsibility than a condo and are often responsible for exterior maintenance.
Both condos and townhomes often offer extensive amenities, but at a cost; the HOA fee is usually due each month just like the mortgage is, and this can influence how much rent is required to break even.
Unlike single-family homes, condos and townhomes also share walls with neighbors, so prospective investors must search for responsible tenants who will not disturb their close neighbors. Frequent complaints from other owners can result in the HOA requiring the property owner to evict their tenants, thereby foregoing rent.
How Should You Invest in a Condo or Townhome in Memphis?
All investment properties offer the benefits of additional, passive income; equity growth for future borrowing or a higher sales price; and significant tax deductions. But in order to take advantage of these appealing benefits, it’s important that you find a suitable property that will attract renters willing to pay the rent you’re requesting.
With this in mind, location is critically important to where you choose to invest. High-end neighborhoods, downtown locations close to work and entertainment venues, and luxury buildings with plentiful amenities will all attract better-quality tenants.
But one major difference between a typical single-family home rental, and a condo or townhome rental, is the HOA governance around rentals. HOAs can prohibit or limit your ability to rent; some HOAs require that you inhabit the property for one year prior to turning it into a rental. Other HOAs have minimum rental terms to keep vacation renters out of a building, and many have a maximum number of units that can be used as rentals at a time. HOAs can also request to screen your tenants independently and determine if they are suitable for the building.
As with any other rental property, be sure to contact your insurance company and increase coverage on the property in case of damage caused by tenants. It is a well-known fact that renters do not care for a property as well as an owner occupying the premises, and your insurance coverage needs to reflect that discrepancy.
As the landlord, you will be responsible for all maintenance on the property, and the HOA may be very particular about upkeep. This fact may influence your decision of whether to invest in a condo or a townhome since you are not responsible for the exterior maintenance of a condo. With a townhome, you will need to take care of any issues with paint or landscaping.
How Much Does Property Management Cost for Condos or Townhomes in Memphis?
A reasonable expectation for property management cost on a condo or townhome would be 8-10% of the monthly rent, plus an additional fee when new tenants move in. This covers listing and marketing your property to prospective renters; collecting and screening rental applications; selecting a suitable tenant and executing a lease agreement; collecting rent on a monthly basis; scheduling repairs and maintenance as needed; and handling all tenant, neighbor, or HOA complaints.
Some property managers charge a flat fee each month and may have several other fee schedules, such as for when the property is vacant. It’s important that you know and understand all of the fees that your property management firm uses and when you’ll be responsible for them.
Who Should Consider Property Management for Condos or Townhomes in Memphis?
If your condo or townhome is your first investment property, and you have little to no experience in renting or being a landlord, you may feel more comfortable working with a property management company. If you work a full-time job and don’t have time to handle the day-to-day calls and problems with your property, you’re also a good candidate for hiring a property management firm. Other reasons to hire someone for the job, rather than take it on yourself, include if your unit is in an old building with a lot of maintenance issues, or if you don’t live nearby, or if you aren’t handy and can’t personally resolve any maintenance issues.
There are plenty of people who choose to manage their own properties, especially if your margins are very tight and the 10% fee would cause you to not turn a profit on the property. If you live close by, are an experienced landlord, and feel comfortable with handling any tenant concerns, chances are that you will manage your condo or townhome yourself.
If you are constantly looking for your next investment property, you may find that your time is better spent researching sites and securing financing. In this case, contracting with a property management group will free up your time for more profitable undertakings.
What Should An Investor Look For in Property Management For Condos or Townhomes In Memphis?
Property management companies come in all sizes and have varied reputations. As an investor in a condo or townhome, keep in mind that you’ll have to work with this company frequently, as will your tenants and possibly your HOA. In addition to being available and proactive about issues, you’ll want everyone at the company to be pleasant and easy to work with.
It’s a good idea to get references from your property management company, both from current clients and from tenants. This way you can ensure that everyone working with the company is satisfied with the experience.
Memphis and Cordova, TN are wonderful areas to be renting out a condo or townhome right now. With a growing economy and job openings for those looking to relocate, Memphis is attracting new inhabitants who will likely rent upon arrival. A highly recommended property management company in the area is Advantage Property Management, a family-owned and operated company. In business since 2008 and flush with positive reviews, Advantage Property Management focuses on the management of single-family homes and small multiplex units within a 50-mile radius of Memphis, including Cordova, Bartlett, Germantown, Collierville, Shelby County, Lakeland, and Eads.
If you’re looking to rent out your condo or townhome in any of these areas, you can contact Advantage Property Management to discuss how they can handle your property for you.