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Rental property management: Yes or no?

As more people invest in rental real estate, they're discovering how much time and effort is involved in screening applicants and doing upkeep on the property, not to mention the process of cleaning up after a tenant moves out or handling an eviction. As a result, they often turn to property management companies. It's not always a pleasant experience.

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Rob and Amber Hill hired a property manager to oversee a rental house they owned after they moved from Atlanta to Savannah, Ga. When their tenant moved out, they paid the property manager one fee to screen applicants and another to place a new tenant in the house.

What the Hills didn't know until later was that the "new tenant" was, in fact, already living there. She was their tenant's live-in girlfriend. When the relationship ended, he moved out and she stayed. The property management company simply had her fill out an application and sign a new lease.

"Her credit was total crap," says Robert Hill, the author of "What No One Ever Tells You about Investing in Real Estate: Real Life Advice from 101 Successful Investors." "She lied about her employment. She told them she had three kids; she had four. She lied about having pets; they tore up the property. They didn't screen her at all."

So, how do you find a good property management company? Maybe the question to ask is: Do you really need one?

Going solo
"It's not as much work as you think it would be," says Christine Karpinski, author of "Profit From Your Vacation Home Dream" and the owner of several vacation rental properties. "What is that management company doing when there's a repair to be made? They're not going to the property. They're hiring someone to do it. I can do that, too. I can use a telephone. I just had a well go out in my property in Tennessee. I picked up the phone and called the well-drilling company."

Jeffrey Taylor, author of "The Landlord's Kit" and founder of the online landlord community, MrLandlord.com, is another advocate of doing the work yourself. One reason is the expense. It's common for property managers to charge a flat fee of 6 percent to 12 percent of rental income per month. Tenant screening and placement is extra. For a small investor with one or two properties, that could pretty much wipe out any profits.

That doesn't mean, however, that you should be doing everything yourself. Both the Hills and Taylor highly recommend attending a meeting of a local chapter of the National Real Estate Investors Association to ask other local investors for referrals on service providers.

Next: "a management company won't take over your liability ..."
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