One of the most rewarding things you can do abroad is to own a rental property.
I find it enjoyable to get to know an area, pick a property, and outfit it for the rental market.
And managing a rental is also a good source of income… in the currency of the country where it is located… meaning a rental property can be a source of currency diversification.
Aside from being a landlord, I’m also a fan of renting a furnished apartment for any extended stay in a foreign country, as it’s the best way to get to know a place.
So I’ve got experience as both a landlord and a frequent tenant, allowing me to see both sides of the coin.
Being a landlord is not always fun. But having a good property manager can make your life a lot easier… and having a good contract with your property manager makes your chances for success far more likely.
The property manager is your representative when dealing with your renters… but he is also their representative in dealing with you, so expect to address rights and protections for them, as well.
While the points below apply to any rental, most of my focus is on short-term or vacation rentals; that is, furnished properties that rent for recurring terms of a month or less.
For long-term contracts, remember that there are usually governing laws about tenants’ and landlord’s rights to take into account, in addition to the tips below.
In general, when investing in a rental property, you have two contracts to consider—the contract between you (the owner) and the property manager… and the contract between the property manager and your tenant.
The Difference Between Property Management And Rental Management
Rental management and property management are two different things.
That is, a rental agent is different from a property manager.
A rental agent is responsible for keeping your property occupied. They market the property’s availability, find you a renter, do any required screening or qualification, supervise check-in and checkout, and verify that nothing’s missing when each tenant leaves.
A property manager takes care of running the property. This typically includes things like paying the utility bills, paying the taxes, and performing any required maintenance.
Many property management companies offer both services. And, when they do, ideally, they’ll have a separate fee structure for each service.
This can be a real advantage in cases when you are able to find renters yourself, for example, and need only property management… or when you can easily take care of the property yourself and only need someone to find and manage renters.
For our purposes here, I’ll use “property manager” in its generic form, to cover both rental and property management services.
Points For The Contract Between You (The Landlord) And The Property Manager
The contract between you and the property manager should address the following topics:
- Fees and commissions for the property manager’s services, as well as any potential add-ons…
- Whether the property manager is going to collect and then process rent on your behalf. If available, I’ve found this to be an important and valuable service…
- Greeting, check-in, and orientation of your tenants. Years ago in Medellín, I was dropped at a property by a property manager and left on my own… to find that I didn’t have access. Only after hours of phone calls in the hot sun did I make it inside. This approach is not good if you expect repeat business…
- Review of the rental’s inventory at both check-in and checkout. It may seem like the checkout inventory would serve for the next check-in, but if service providers and maids have access to the property, things can disappear in between…
- Collection of security deposits and refunding of these deposits at checkout time (if the inventory checks out and there is no property damage)…
- The contracting of and payment for maintenance services when required…
- Payment of taxes and utilities. Here I’d recommend that you arrange to pay online, if possible, whether the property manager offers the service or not…
- The contracting of and payment for cleaning services when required…
- Specification for how your funds will be delivered to you. Review the property manager’s methods of payment, both how he processes payments from the tenant and how he will get the money back to you. Be aware of any fees charged or any unfavorable games being played with the exchange rates (if you’re not renting in dollars). If possible, it’s a good idea to have the property manager simply deposit your funds into a local bank account…
- Eviction of tenants who are not in compliance with their rental contract, including payment…
- The provision of periodic statements showing the income and expenses for your property…
- The retention of records for any maintenance performed, items replaced, and/or bills and taxes paid…
- Provision of assistance to your tenant. A good property manager is readily available and responsive when your tenant has a problem or emergency.
Of course not every property manager will offer all of these services, and you may not even want all of them. But this is a comprehensive checklist of things to consider and keep in mind when interviewing and choosing a property manager.
Also Pay Attention To The Contract Between Your Property Manager And Your Tenant
You should be familiar with the terms and conditions that the property manager imposes on your tenants, to make sure all the bases are covered.
The following topics should be addressed:
- How much the rent will be, when it’s due, and how it can be paid. Make sure you’re not stuck with any unexpected costs, such as wire-transfer charges or PayPal fees…
- How to determine exchange rates, if applicable. As a renter on several occasions, I was given exchange rate terms and conditions that worked to the property manager’s favor, causing me to pay more than the advertised rental price. Again, this is not a good way to earn repeat bookings…
- The amount and terms of the security deposit, including how soon it will be refunded. These deposits can be a tricky item. If you charge too much, people will bypass your property… but if you charge too little, then you’re not covered for damage to major items. I charge moderate fees and assume the associated risk…
- Any cleaning fees, if you’re charging them…
- How missing or damaged items will be handled…
- The “rules of the house,” including things like parties, noise, smoking, pets, children, etc…
- What happens when rules are broken or payments are delinquent? If you want to evict a tenant for non-payment or for violation of the rules, then you’d better be clear on when and why this will happen.
Again, not every property manager will offer all of these services, and you may not want all of these services if they are available.
The Property Manager Is Key To Your Success As A Landlord
If you’re relatively new at managing a rental, one thing you’ll learn quickly is that the property manager is critical to your success. A good one will manage the property and funnel the money through to you for a reasonable fee… while a bad one can turn your experience into an ongoing stressful affair.
And your experience with the property manager will be better if you have clear and detailed terms in your contract.
Lee Harrison
