How to Hire an HOA Manager

Hiring an HOA Manager for Your Home Owners Association:  What to Consider

By: G. M. Filisko

Published: March 26, 2010

Home Owners Association SignWhen your homeowners association has more to do than its volunteers can handle, it’s time to call in a professional manager. Here are 10 tips for picking the right one.

1. Know what you need. Start your search by making a list of what you’d like the management company to do. You can put anything on the list, as long as the HOA board keeps the responsibility to oversee the management company’s actions. Knowing what your HOA needs will help you focus your search.

2. Choose a person or committee to do the preliminary search. Expect to devote about 20 hours to choosing a company, says Elizabeth White, an attorney at LeClairRyan in Williamsburg, Va., who represents community associations.

3. Ask if your state requires some level of manager licensing. If so, seek out companies and candidates with the proper credentials. “We’re finding a lot of management companies in states that require licensing (that) haven’t gotten the license,” White says. States that require licenses or registration include Alaska, Connecticut, the District of Columbia, Florida, Georgia, Nevada, and Virginia. Starting in 2011, Illinois will require licenses.

4. Consider a company certified by the Community Associations Institute. This Alexandria, Va.-based organization has a range of certifications for companies and individual managers.

5. Be sure the company performs criminal background checks on its employees, especially its managers. Do your own background checks, too. Check references and do an onsite visit. “Speak to board members of associations managed by that company,” suggests David Regenbaum, CEO of Association Management Inc. in Houston. “Visit the company’s office and get a sense of its business philosophy. Some are merely bookkeeping and secretarial services. Others are fully committed and involved in the community. Make sure you select the company that’s appropriate to your needs.”

6. Investigate the firm’s bonding and insurance. Your state law and governing documents may spell out minimum standards for both, Taylor says. But a management company should also have liability insurance and workers’ compensation insurance covering its employees. Ask for a copy of the company’s insurance certificate, recommends Robert White, managing director of KW Property Management & Consulting in Miami. His firm carries a $2 million liability policy, plus a $10 million umbrella policy.

7. Read the fine print. It’s the rare management company that works without a signed contract. “It goes without saying,” Elizabeth White says, “that you should never sign the management company’s form contract.” Have your association lawyer suggest changes.

8. Try to negotiate for a one-year contract rather than the three-year contracts many companies seek. Why commit to a three-year contract if you can negotiate a one-year contract with the option to renew at one-year intervals for two years at the same price?

9. Scrutinize termination provisions. “As a manager, I don’t mind receiving 30 days’ notice of termination,” Regenbaum says. “But you shouldn’t allow the management company to give you 30 days’ notice because it’s difficult to scramble to find another manager in that time.” You need 60 to 90 days to repeat the search process if things don’t work out with your current management company.

10. Ask for a complete fee schedule, so you can compare competing contracts. Big costs may be buried in extra fees. For example, a company may provide for a manager to attend one meeting every six months and charge $100 per hour after that. It may also charge separately for postage and to manage a vote on and payment collection for special assessments. The lesson, according to Elizabeth White: Bids that come in significantly lower than others should be red flags.

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The Costs of Renting Out Your Winston-Salem House

You have a single-family house and you are considering renting out your home. Perhaps you’re temporarily relocating for work, or maybe you inherited your childhood home from your parents, and you’re not quite ready to part with it yet.

Renting can be a profitable choice, but it requires an investment of time, money, and organization to make it work. Here’s how to determine whether renting out your house is worth the cost.

for rent sign rental house property

Calculate your monthly expenses

You want to charge at least enough to cover your monthly outlay. So the first step is to use our free downloadable worksheet to calculate your costs. Start with regular expenses like mortgage, maintenance, and homeowners association dues.

You may also need to upgrade your insurance coverage. Your agent can advise you about adding landlord insurance, a special type of policy that covers rental properties. As a rule, landlord insurance costs about 25% more than standard homeowners insurance.

If you’re renting the house furnished, make sure you’re covered for the personal possessions you leave behind. Jane Cline, the insurance commissioner of West Virginia, tells owners to prepare a detailed inventory of household items. If you’re renting the house unfurnished, figure in the costs of moving and storing your items.

Check out prospective tenants

As a practical matter, you’ll have to formally check out your prospective renters., an information and service site for landlords, suggests a variety of background checks: credit reports, eviction reports, and criminal background reports. None of these is expensive, but you must get your prospects’ permission. charges $8.95 for an eviction report. A combined credit and eviction report is $14.95. If you want to be especially careful, a countywide criminal report costs $29.95.

Account for maintenance and upgrades

Even with the most scrupulous checks, you can’t be completely sure renters will take good care of your home. Eva Rosenberg, an enrolled agent in Northridge, Calif., advises that if you’re not within easy driving distance of your rental property, you’ll need to arrange for someone else to keep an eye on the place, even if it’s just to make sure the lawn is mowed. If the tenants are neglecting upkeep, you’ll want to know about it sooner rather than later, since it could be a warning sign of trouble down the line.

Of course, even if the renters are conscientious, problems can crop up: boilers will fail; roofs may leak; washing machine hoses can burst. If household systems or appliances need repair or replacement, you’re better off spending the money up front, before the fix becomes an expensive emergency.

You may also want to invest in some of the “extras” that Sue Peters, a broker in Wellfleet, Mass., recommends adding to attract a tenant willing to pay a higher fee. She suggests spending money on air conditioning, expanded-channel cable TV, and a Wi-Fi network.

Don’t want the headaches? Hire a property manager

You can save yourself a lot of time and effort if you engage a management company to oversee the property and take care of the details. Some firms charge a percentage of the rental fee, others a flat monthly fee, based on the extent of services. Joe Aimone of GoRenter in Phoenix, Ariz., says his firm offers a variety of services, starting at as little as $50 a month, including general maintenance, rent collection, and—if necessary—eviction.

A management company can help you figure out how much to charge, find and vet tenants, and prepare a lease. It will also pay the real estate taxes on your behalf and present you with an annual 1099 form. Many management companies maintain 24-hour emergency lines and a roster of approved service people, so they can take care of plumbing or electrical problems and bill you later. A property manager will also see that driveways and sidewalks are shoveled, so you don’t find yourself with an unpleasant claim against your liability insurance.

Expect to pay a management company 8% to 10% of the annual gross rent, on average, with a $50 to $85 monthly minimum.

Keep scrupulous records

Whether or not you use a management company, you’ll have to keep extensive business records. DeDe Jones, CFP, CPA, in Lakewood, Colo., advises owners to save receipts for any expenses and to file them carefully.

The IRS treats maintenance expenditures, like a new hot-water heater, differently from capital improvements, such as a new deck or patio, so you’ll want to consult a tax professional. Meanwhile, keep the two types of receipts separate to make tax prep easier. You’ll have to file Schedule E on Form 1040, which can also serve as a template for the kinds of records you’ll need.

Finally, because of the complex tax and liability issues involved, many financial experts suggest forming a corporation when you become a landlord. An attorney can advise you about whether incorporating makes sense in your situation.

Richard KoretoRichard J. Koreto is a freelance writer. He’s been editor of many financial magazines and is the author of “Run It Like a Business,” a practice management book for financial planners. He and his wife own a pre-Civil War house in New York.

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