- Hiring a property manager will save rental property owners time, headache and money.
- Property managers are in charge of managing the properties of several different rental property owners, while landlords own their own properties and manage those properties themselves.
- Most property managers will charge either a flat rate or a percentage of your unit’s rent price for their services.
Deciding whether or not you should hire a property manager for your passive income property is a decision that should be given much thought. You’ll need to identify your budget as well as outline your goals to help you determine if a property management company is right for you. We’ve assessed the pros and cons to help you come to an easy conclusion.
Why Hire A Property Manager?
There are a number of reasons why rental property owners should hire a property manager. Property management companies save investors time, help them them deal with tedious maintenance issues, handle bookkeeping, screen for tenants, hold showings, are up to date on state rules and regulations as well as local ordinances, and so much more.
If you have say, one or two rental properties and you are a hands-on individual who likes to be involved in every aspect of your property, landlording might be the right option for you. However, if you own multiple properties, or you’re the type of person who would prefer not to be woken up at 2 o’clock in the morning because one of your tenants got locked out of their property, there’s no reason to avoid hiring a property management company.
Take the time to review different property management companies in the area before deciding which one is right for you and your business. For example, some companies specialize in apartment buildings while others prefer to manage single family properties. Determining your budget, your property type, and your specific needs will help you decide what type of management style will benefit your properties most.
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Property Manager Vs Landlord
It’s easy to sum up the difference between a property manager vs landlord in a simple sentence: Property managers are in charge of managing the properties of several different rental property owners, while landlords own their own properties and manage those properties themselves.
If you are a tenant renting from a landlord, you are in direct contact with the property owner. Landlords create their own leases, determine rent and security deposit amounts, and handle the maintenance requests and other management business all on their own. A property manager, on the other hand, typically works as the middleman between renters and an individual landlord. Often times, property management companies are in charge of managing multiple properties owned by different individuals. If you are a rental property owner who chooses to hire a property management company, it is the property management company that acts as the point of contact for all tenant concerns and maintenance issues.
Secondly, property managers and landlords follow different rules when it comes to policies, rent, and regulations. Property management companies typically have universal lease policies that are the same for every property they manage. For example, a “no pet” policy or a flat rate application fee. Landlords on the other hand have the option to customize their lease and policies for each individual renter.
4 Benefits Of Using A Property Manager To Maintain My Investment Property
Cost: Many investors avoid working with property managers because they fear the expense. However, property management companies are generally cheaper than most assume. When you factor in all the time they save you dealing with tedious daily tasks, their worth becomes apparent. Unless you are ready to handle the in’s and out’s of “landlording,” outsourcing the job is a must. Typically, residential property management firms charge anywhere between eight and 12 percent of the monthly rental value of the property plus expenses while other charge a flat fee of, say, $100 per month.
Maintenance: As investors, time is our most valuable asset. What investor wants to waste his or her time dealing with clogged toilets or faucet leaks at 9:00 PM? The beauty of a property management company is that they act as an on-call service taking care of issues like heating, plumbing and electrical problems 24 hours per day. Rental property owners can most definitely use their own hired contractors if they prefer; however, they always have the option to lean on their property management service. In addition to maintenance services, property managers are excellent at keeping great records. The last thing an investor needs is another spreadsheet. Just leave it to your property management company to keep track of everything from rents and repairs to expenses, utilities, and contractors.
Compliance: Property management companies are great for investors who need to learn how to delegate — and let’s face it, all real estate entrepreneurs can always afford to take something off their plates. However, just because “property management” has the word “manager” in the phrase doesn’t mean the rental property owner isn’t still the one in charge. On the contrary, property managers are incredibly compliant. They are incredibly meticulous when it comes to drawing up leases and screening tenants for things like credit history, criminal background, evictions, and even Meghan’s Law. In addition, property managers are known for being up to date on licensing requirements, local ordinances, and state laws and regulations.
Service: When it comes to service, there’s not much the best property managers won’t do. Firstly, property managers are in charge of handling all showings. This means, as rental property owner, you don’t have to take time out of your day to show properties to prospective renters. Secondly, property managers will represent you, the rental property owner, in court — depending on the company and the contract you signed. Property managers also act as the point of contact for all tenant concerns, which is especially ideal for those who own multiple rental properties. If something breaks down, if rent isn’t paid on time, if lease policies need to be enforced, or if a tenant complains about absolutely anything at all, it is the property management company’s job to fix the issue. Lastly, property managers will help keep your vacancy rates low and decrease tenant turnover. The best companies know how to keep their renters happy. Equally, they know how to aggressively attract new tenants come time for a tenant to move.
Hiring a property manager will save rental property owners time, headache and money — in the long run. While there is the added cost that comes with hiring a property manager (the only “disadvantage” I can honestly think of), the amount of time you’ll save on a daily basis should make the expense worth it. This expense will surely cut into your monthly cash flow; however, it is rare that an investor is able to effectively manage their own property (or properties) at the same expert level of an experienced property manager.
Hiring A Property Manager Questions
Now that you’ve settled on hiring a property manager, it is crucial you find a company that best meets the needs of your rental property business. Ask the following questions to weed out companies that don’t fit with your core values:
What do you offer? The best property management companies will market, lease, manage, and sell (if necessary) your property. You also want to make sure that the company will take care of any and all maintenance issues.
How many units do you manage? You want a property management company with just the right amount of units. Too few units might might the company is inexperienced while too many units might mean the company won’t be able to provide you the best service. Anywhere between 200 and 600 units is typically ideal.
Do you determine rent price? As rental property owner, you may want to determine the rent price of your unit on your own, which most property management companies allowed. However, if this is not a task you wish to undertake, your property management company should willingly conduct a comparable market analysis to ensure they charge a competitive rent price.
Are you a real estate investor? The most successful property management companies have individuals in their company who are active real estate investors. If there is no one actively investing in real estate, it is unlikely that the company will have the level of understanding they need to help you succeed.
How much do you charge? Some company management companies charge a flat monthly fee, while others will charge a percentage of your unit’s rent price. Figure out these logistics before settling on a specific company. Secondly, are there any other miscellaneous fees that they charge? For example, a fee if the property has no tenants.
How do you collect rent from tenants? If you’re property management company doesn’t allow tenants to submit their rent online, they need to get with the times. There is far too much room for error when it comes to sending checks through the mail; so be sure the company you choose has an effective method for handling rent.
Do you market your properties effectively? The best property managers are those who actively market your unit. They should be advertising your property on a variety of channels to ensure your vacancy rates stay low.
What are your vacancy rates? Speaking of vacancy rates, the most successful property management companies should boast relatively low rates. Be sure this percentage is discussed before signing any contracts.
How will I fit in? Ask your potential property management company how “hands on” they expect you to be. If you’re an investor who wants to be a part of a passive deal, you’ll want an all inclusive style company. If, on the other hand, you prefer being actively involved in every aspect of your property, you’ll want a company who allows you to do so.
Have we helped you decide whether or not you should hire a property manager for your passive income investment? Let us know your decision in the comments below.