I am signing an agreement with a property manager for a property. I am new to this. There is an optional $20/mo optional eviction coverage, stating that in the case of an eviction, the PM will pay all associated lawyer and court costs. Is this worthwhile?
If the PM is screening correctly an eviction should be a fairly rare occurrence. In my SFRs I had only two in 10 years. The biggest cost from an eviction will likely be loss of rents and turn costs. I expect the legal costs in tenant-friendly states might be significant, but I would be surprised if your costs in Montana would be more than $1000.
Ask your PM what it normally cost them to evict a tentant
I would say it depends on the area and how strict your tenant background checks are, in other words, how likely it'll be that an eviction will happen. Our property management company charges a $400 all inclusive fee for evictions (Texas), so that monthly payment would only make sense if you expect an eviction every two years or if eviction costs are much higher in your state. However, we've never had an eviction for a tenant we've put in. It may be worthwhile if its an inherited tenant with a high probably of eviction.
One of the most important jobs of a property manger is tenant screening (getting a good quality tenant that can pay on time...)
I owned a property management company that managed hundreds of rentals and we only had to go to court 1 time, and I filed paperwork maybe 6 times over a few year period of time. I agree with @Greg Scott that your PM should screen the bad tenants out (for the most part). Filing fee's in AK were very cheap, I am not sure what they are here in MT.
As long as the PM has crossed all the T's and dotted all the I's an eviction should go pretty smoothly (assuming a landlord friendly state).
I would ask the PM how often they have to go through the eviction process (if it seems like a lot then it may be best to find a different PM) and how much it tends to cost.
In Butte Montana,, probably not,, although you may have some ski bums..
Either way not something I'd pre pay for.. like others said they should screen, just make sure you stick to the criteria you want.. and don't permit them to pressure you into accepting someone not up to the level YOU<<<< set.
@Jen Stevane - I didn't know you were on BP! Lets talk REI sometime soon.
If the PM is doing their job, this shouldn't be an issue. It seems like cheap insurance, but if that $20/month significantly cuts into your ROI or it pushes the PM expense >8-10% of rents, its' probably not worth it.