What Does A Property Management Company Really Do?

Key Takeaways

  • Property management companies are the foundation of a strong rental portfolio, as they allow you to grow your bottomline without adding additional work to your own schedule.
  • What does a property management company do? The answer is simple: more than most people realize.
  • The average property management fees are well worth what investors get in return.

The choice of whether or not to use a property management company is a tough one for many real estate investors. Some wouldn’t dream of investing in real estate without a property management firm in place before closing on a respective deal. Others, however. struggle to break free of the DIY mindset that prevents them from accomplishing more. As it turns out, only one thing is certain: using a property management company isn’t as obvious as I would have liked to assume. If for nothing else, I am convinced the benefits of using a property management company far outweigh the negatives.

It is fair to say the argument stems from the cost one must absorb in order to work with a property manager, but I digress. The cost isn’t so much a negative, but rather an investment. While it does, in fact, cost money to hire a third party manager, I can assure you it’s well worth it. What’s more, their involvement could very easily increase your chances of growing your bottomline. If that’s not enough, here are some of the important tasks a good property management company will contribute to your rental portfolio.


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Cost of property management

What Do Property Managers Do?

The cost of property management is a valid argument, especially when you consider detracting from your bottomline, but I can assure you it’s doing anything but. Yes, it’s true a property management company will cost additional money to hire, but I like to think of it as an investment, as apposed to a cost. You see, a good property manager can very easily return more than their own initial cost. After all, the average property management feels will typically come with the following benefits:

1. Rent Collection

Collecting the rent is one of the most obvious tasks of a property manager. If that’s all property managers did, however, it would certainly be harder to justify hiring one – especially with online payment capabilities. Of course, that doesn’t mean collecting rent is easy by any means. If all of your tenants are paying their leases up font in full and you don’t mind paying a great law firm when things don’t go right, you might wait to evaluate all of the services. Yet, most real estate investors are not in that situation. Some operate in markets where it is a battle to reel in the rent every month.

2. Regular Property Maintenance

Dealing with tenant maintenance calls is perhaps the biggest driver for real estate investors to enlist the help of a property manager. It isn’t just about the maintenance, however: dealing with the tenants can often be the biggest challenge. Sometimes their needs aren’t big or expensive, but the timing and urgency is. It may be blocked and back flowing pipes on the weekend, or being locked out in the middle of the night. A lot of these calls can be irritating to a landlord, but if they are always treated that way, bigger issues with renters and rental property performance are sure to arise. Rapid and responsive customer service is needed to optimize income properties.

Property managers will deal with these requests, alleviating you from the burden. If it is small, the requests may be handled internally. Larger and more complex issues may be delegated to outside specialists. Sophisticated property investors normally have a property management agreement which authorizes the company to handle up to a certain dollar amount of repairs without needing express permission first. This just streamlines the process, and ensures issues don’t get worse if you can’t be reached.

Property management companies can call for regular inspections and routine maintenance such as:

  • Lawn Care
  • Pressure Washing
  • Preventative Maintenance
  • Plumbing Issues
  • Fixing Appliances
  • Drywall Patching
  • Anything Else A Tenant Might Need

The property management company will essentially act as the “middle-man” and connect tenants with the necessary services.

3. Dealing with Defaulters

This goes beyond slow payers to those seriously in breach of their leases. They could be more than a month past due, or be risking the condition of your asset, or the police could be involved in a criminal issue. Sometimes these things can be worked out directly with renters. In other cases, it may require lawyers, or even going to court. A property management firm can handle this for you, and save you a ton of time and stress in these situations. Having a professional third party in between can often speed up better solutions compared to a DIY landlord that may appear an easier target for malicious tenants.

4. Sourcing Tenants

This is a lot more work than some understand at first. A good management company is taking on the cost of marketing for tenants, showing units, and screening prospective renters. There is a lot of expertise brought to the table here. It may be the most valuable thing property management companies offer. Then there is supervising move-in and move-out activity.

5. Bookkeeping

Bookkeeping is probably the least fun part of real estate for most investors. At the same time, great bookkeeping and invoice handling is critical for minimizing taxes, keeping the best vendors, and generally keeping the cash flowing. If your property manager throws this service in for free, you had better take advantage of it. If not, there’s no reason you can’t hire someone to manage your books. Rental properties are best left as a passive investment, after all. Conduct the appropriate research to uncover a good bookkeeper in your area, and determine whether or not their services will bring a value to your own business.

6. Buffer From Liability

One of the little understood perks of having a third party property management firm is the buffer from liability. Despite all of the best screening and learning the best practices, it is easy to mess up when it comes to property management. That’s on top of those problem renters that are out to take landlords for whatever they can get. It’s too easy for opportunistic tenants to make false accusations about your rent collection tactics, illegal eviction practices, and negligent maintenance if you aren’t covered. A third party manager can deflect most of that instantly, like a shield.

What does a property management company do?

Other Things To Consider

I maintain that hiring a property management company is a great investment, but like everything else, be sure to mind due diligence and know everything you stand to gain by enlisting the services of a third party property manager. As I already alluded to, property managers have a tendency to bring more to the table than people realize. Having said that, here are a few more things you need to pay special considerations to before you make the commitment:

The Cost Of Property Management

The cost of property management remains the primary concern for those sitting on the fence. If for nothing else, average property management fees can run investors somewhere in the neighborhood of eight to 12 percent of the monthly rent value. Some property managers will also charge a flat fee, in addition to the monthly percent. As it stands, eight percent represents a pretty good value, whereas 12 percent may seem a little on the high end to some. It is worth noting however, that not all property managers are created equal. It is entirely reasonable for a great manager to ask for 12 percent if their services justify their own cost.

Hiring A Property Manager

Hiring a property manager is a task that mustn’t be taken lightly. At the very least, you get what you pay for. As I already mentioned, property managers will request anywhere from eight to 12 percent of the rental cost, but their fee may not be representative of how good they are. It’s entirely possible for an inadequate property manager to overcharge and for a great one to undercharge. That said, the only way to know if you are hiring the right one for your business is to mind due diligence. Don’t simply base your decision on the average property management fees; dig a little deeper and find one that meets your specific criteria.

First and foremost, identify what it is you want the most out of a property manager. What is it you need your manager to do? Compile a list of needs and wants, and use them to pick the right company to represent your property. Next, vet them accordingly. Can they do what they promise? Get testimonials and talk to current clients of theirs to get a better idea with their satisfaction.

Summary

Property management companies – specifically good ones – are worth their weight in gold. It is entirely possible for a truly great management company to save/make investors more money than their initial fees. That said, the cost of property management is more of an investment than an expense.

Have you ever thought about working with a property management company? Please let us know your thoughts on the idea in the comments below.

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Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies