Should You Hire A Property Manager?
Does property management have you overwhelmed?
If you've been managing your own properties for a while now, then you know all too well how much work it is.
If you have just a few properties and you think you've got this handled fine, this one definitely isn't for you.
Once you get a dozen or so properties under your belt– the exact number all depending on how effective your system for managing them is– property management starts to become a full-time job.
That's when reaching out to a property manager might be the way to go, if your profit margin permits and you're willing to pay.
But hiring a property manager doesn't mean you have to give up all control and become a recluse, surviving on a diet of Netflix and DoorDash (assuming you have nothing else better to do).
You can still be involved in the management of your rental property while taking advantage of the many benefits a property manager has to offer. Or not, if you prefer it that way.
Below, we'll dive into the pros and cons of hiring a property manager for your rental portfolio.
Then, we'll talk about important things to consider when deciding if you should hire a property manager yourself.
Lastly, we'll talk about how to go about hiring one the right way if you've decided that property management is right for you.
What is a Property Manager?
A property manager is a professional who is responsible for overseeing and managing rental properties on behalf of the property owner.
Property managers may be self-employed working on their own, though more commonly work as a team for a property management company.
The duties of a property manager can vary, but generally include:
- Advertising and filling vacancies
- Screening tenants and processing rental applications
- Handling maintenance and repair issues
- Collecting rent payments and enforcing lease agreements
- Dealing with tenant issues and inquiries
Property managers are often experts in landlord-tenant laws and can help protect the property owner from legal issues.
They can also handle the day-to-day tasks of managing a rental property, which can save the property owner time and a ton of hassle.
A good property manager can be a valuable asset for any rental property owner as they allow you to step away from the day-to-day management, giving you time back (and, likely, a little less stress).
Pros and Cons of Hiring a Property Manager
Now, let's jump into the meat of things: what you need to know to decide if hiring a property manager is right for you.
To start, let's talk about the pros and cons of hiring a property manager:
Pros of Hiring a Property Manager
Pro: Saves you time
One of the biggest advantages of hiring a property manager is the time it can save for the property owner.
A property manager can handle tasks like advertising vacancies, screening tenants, and handling maintenance and repair issues, freeing up the property owner's time to focus on other things.
This can be especially beneficial for property owners who have full-time jobs or other commitments that prevent them from being available to handle these tasks.
Pro: Expertise in landlord-tenant laws
Property managers are experts in landlord-tenant laws and can help protect rental property owners from legal issues.
These laws vary by state and can be complex, so it's important to have a good understanding of them.
A property manager can handle legal issues on behalf of the property owner and ensure that they are in compliance with all relevant laws.
Pro: Can handle maintenance and repair issues
Another benefit of hiring a property manager is the ability to handle maintenance and repair issues.
Property managers can take care of these tasks, freeing up the property owner's time and ensuring that any issues are dealt with promptly.
This can be especially important for property owners who live far from their rental property or who don't have the knowledge or skills to handle these tasks themselves.
Pro: Can handle tenant issues and inquiries
Property managers can also handle tenant issues and inquiries, taking the burden off the property owner.
This can be especially beneficial for property owners who have difficult or demanding tenants, as the property manager can handle any conflicts or issues that may arise.
Pro: Can help with advertising and filling vacancies
A property manager can also help with advertising and filling vacancies, which can save the property owner time and money.
A property manager can create listings and advertise the rental property, as well as screen potential tenants to ensure that the best candidates are selected.
Cons of Hiring a Property Manager
Con: Costs money in the form of property management fees
One of the main drawbacks of hiring a property manager is the cost.
Property management companies can charge a variety of fees and they can add up quickly. The cost may not be feasible for all property owners, especially if your profit margin is narrow.
It's important to carefully consider the property management costs and determine if the benefits of hiring a property manager are worth the investment.
Con: Property owner gives up some control over the rental property
Another potential disadvantage of hiring a property manager is that the property owner gives up some control over the rental property.
While a property manager can handle many tasks on behalf of the property owner, the property owner may not have as much control over things like the rental property as they would if they were handling them themselves.
Con: Property owner may not have as much personal interaction with tenants
Finally, the property owner may not have as much personal interaction with tenants when hiring a property manager.
This can be a drawback for some property owners who enjoy a more personal connection with their tenants or who want to be more involved in the management of their rental property.
Should you hire a property manager? 4 Things to consider
Now that you know the positives and negatives of working with a property manager, let's move on to some things you should consider to help you decide if hiring a property manager is right for you.
The last section should have gotten your gears working and given you a clearer picture of whether a property manager could be helpful to you.
Now, let's get down to the details of your situation.
Here are some tips to help you decide if you should hire a property manager:
1. Time commitment
As a rental property owner, it's important to consider the amount of time you have to devote to property management.
If you have a full-time job or other commitments that prevent you from being available to handle maintenance issues, showings, and tenant inquiries, it may be worth hiring a property manager.
A property manager can take on these tasks and free up your time to focus on other things.
However, if you have the time and are willing to handle these responsibilities, managing your own rental property can be a rewarding experience.
It's important to weigh the time commitment against the potential benefits of hiring a property manager before making a decision.
2. Size of the rental property
Another factor to consider when deciding whether to hire a property manager is the size of your rental properties.
If you own multiple apartment complexes or another type of commercial property, it may be more cost-effective to hire a property management company to handle the day-to-day tasks.
That's because a property management company typically takes a percentage of rental income as opposed to a set amount per unit.
If you net an 18% return on a single-family residential property, you may be taking home anywhere from $200-400 per month in rental income.
Now, sure, the total rental income for a large apartment complex with a similar spread on each unit will be significantly higher, it's the margin that makes it a cost-effective investment.
If you have the margin to pay a property management company 8% to manage your entire complex, taking virtually everything off of your plate and giving you:
- Tens of hours of your life back every week
- While still netting 10%
... then that's a pretty good deal.
It won't be if your margins aren't large enough, however.
And, back to the point: it's much less worth it if you only have a few properties.
3. Knowledge of landlord-tenant laws
As a rental property owner, it's important to have a good understanding of landlord-tenant laws.
These laws vary by state and can be complex, so it's essential to familiarize yourself with the specific laws that apply to your property.
Property managers are experts in these laws and can help protect you from legal issues.
If you're unsure about your knowledge of landlord-tenant laws or don't have the time to keep up with changes and updates, hiring a property manager may be a good idea.
A property manager can handle legal issues on your behalf and ensure that you're in compliance with all relevant laws.
4. Cost of property management
When considering whether to hire a property manager, it's important to consider the cost of property management.
Property management fees vary, typically between 8-10% of your total rental income.
It's a lot to give up, but you save a lot in return from time to peace of mind. A good property management company will generally be worth the investment if your portfolio is large enough and you have the profit margin to pay it.
A property manager can handle tasks like advertising vacancies, screening tenants, and handling maintenance and repair issues, which can save you both time and money in the long run.
It's important to do your research and choose a property management company that is transparent about their fees and has a good reputation, though.
Look for a company that has experience managing rental properties similar to yours and ask for references from other property owners.
When choosing a property management company, it's important to do your research and choose one that has a good reputation.
Look for a company that is transparent about its fees and has experience managing rental properties similar to yours.
How to hire a property management company
If you’ve gotten this far, chances are you’re considering hiring a property management company.
Now, all that’s left to do is to take the first step: start looking for a company that fits your needs.
Property management companies aren’t created equal, not only in terms of the quality of their service but also their services themselves.
Before I get ahead of myself, let’s start from the top:
Step 1: Research and compare different property management companies
When it comes to hiring a property management company, it's important to do your research and compare different options.
There are many property management companies out there, and they are not all created equal.
Look for companies with a good reputation, positive customer reviews, and a track record of success in managing rental properties.
Don't just go with the first company you find – take the time to compare multiple options and choose the best one for your needs.
To research property management companies, you can start by asking for recommendations from friends, family, or other real estate professionals.
You can also search online and read reviews from previous clients.
Consider the size of the company and the type of properties they specialize in.
For example, if you have a small rental property, you may not need the services of a large, full-service property management company.
Step 2: Consider the services offered
When evaluating property management companies, consider the services they offer.
Some companies may offer a full range of services, including advertising and filling vacancies, tenant screening, rent collection, and maintenance.
Others may specialize in certain areas, such as commercial properties or vacation rentals. Determine your needs and choose a company that can meet them.
For example, if you don't have the time or expertise to handle marketing and filling vacancies, you'll want to choose a company that offers these services.
On the other hand, if you have a reliable team of contractors and don't mind handling maintenance and repairs yourself, you may not need a company that offers these services.
3. Determine the property management company's fees
One important factor to consider when hiring a property management company is the cost.
The property management fee a company charges is typically a percentage of the monthly rental income.
However, it can vary widely, so it's important to get quotes from multiple companies and compare them. Don't just go with the lowest price, as you get what you pay for.
There are several different pricing models that property management companies may use. These include:
1. Flat fee per month or per unit
This is a set fee that the property management company charges for their services, regardless of the amount of rent collected.
2. Percentage of rent collected
With this pricing model, the property management company charges a percentage of the rent collected as their fee. This percentage can vary, but it is typically between 8-12%.
3. Tiered pricing
Some property management companies offer tiered pricing, where the fee is based on the monthly rent of the property.
For example, a company may charge a lower percentage for properties with a monthly rent of $1,000 or less, and a higher percentage for properties with a monthly rent of $1,001 or more.
4. A la carte pricing
Some property management companies offer a la carte pricing, where you can choose which services you want and pay for them individually.
This can be a good option for property owners who only need certain services, such as advertising or tenant screening.
It's also perfect if you don't have an interest in giving up so much control over your property and you just want help with an aspect of the property management that is sucking up your time.
It's important to find a company that can meet your specific needs and budget, but don't sacrifice quality for cost.
Step 4: Understand the terms of your contract with them
Before signing a contract with a property management company, it's important to fully understand the terms of the agreement.
This includes the duration of the contract, any cancellation fees, and the services that are included.
Make sure you read the contract carefully and ask any questions you may have.
If there are any terms that you don't understand or that you don't agree with, don't be afraid to negotiate or to consider finding a different property management company.
It's also a good idea to have an attorney review the contract before you sign it.
This can help you understand the legal implications of the agreement and ensure that your interests are protected.
Step 5: Review the property management company's policies
Before hiring a property management company, it's important to review their policies on things like maintenance, repairs, tenant screening, and rent collection.
These policies will outline how the company will handle these tasks on your behalf, and it's important to make sure they align with your own expectations and goals.
For example, if you have specific requirements for maintenance or repairs, make sure the company has a process in place to handle these tasks in a timely and efficient manner.
If you have strict standards for tenant screening, make sure the company's policies are in line with those standards.
Step 6: Meet with the property management company
One of the final steps in the process of hiring a property management company is to meet with the team that will be managing your rental property.
This meeting is an important opportunity to get to know the company and its employees and to determine if they are the right fit for you.
There are several things you should consider when meeting with a property management company:
- Professionalism: Is the company and its employees professional in their appearance and behavior? Do they seem organized and competent?
- Knowledge and experience: Do they have a good understanding of landlord-tenant laws and the local rental market? Do they have experience managing properties similar to yours?
- Communication: Is the company open and transparent about its policies and procedures? Do they seem willing to listen to your concerns and answer your questions?
- Customer service: How does the company handle customer service? Do they have a system in place for addressing tenant complaints or maintenance issues?
- Compatibility: It's important to find a property management company that you feel comfortable working with. Do you have a good rapport with the team? Do you feel that your values and goals align?
Meeting with the property management company is a crucial step in the process of hiring a property manager.
By taking the time to get to know the company and its employees, you can ensure that you are making an informed decision and choosing a team that is a good fit for your rental property.
Should you hire a property manager?
In conclusion, hiring a property manager or a property management company can be a valuable investment for rental property owners.
While there are costs to consider, a good property manager can save you time and protect you from potential legal issues.
Factors to consider when deciding whether to hire a property manager include the amount of time you have to devote to property management, the size of your rental property, your knowledge of landlord-tenant laws, and the cost of property management.
Ultimately, the decision to hire a property manager will depend on your specific circumstances and needs.
It's important to weigh the pros and cons and do your research to find a reputable property management company that can meet your needs.