As a landlord, you have two options: hire property management or manage your rentals yourself. As a new investor, you may think you understand the ins and outs of running a rental property, but an experienced property manager can give you time-tested insight on topics you might not even know about. So, if you’re considering outsourcing your property management or want to be a better property manager, read on!
What is Property Management?
Property management is the process of managing rental properties. Property managers are responsible for the day-to-day management of rental properties, which means they’re responsible for finding and screening tenants, collecting rent, and evictions. They also work with contractors when repairs need to be made on the property.
The Benefits of Property Management
Property management is an excellent way to save time. When you hire a professional property manager, they will take care of all the tasks that come with owning a rental unit. This means you don’t have to worry about finding tenants or dealing with legal issues such as evictions or disputes between tenants and landlords.
If you choose not to hire a property manager, your time will be spent on these tasks instead of focusing on growing your business or enjoying life in general. Whether finding new tenants or dealing with tenant issues like late rent payments or noise complaints from neighbors (which can lead to court cases), there are many things involved with being an individual landlord–and most people just don’t have time for them!
Property managers can also get you significantly higher rent payments with professional marketing, staging, and photography of your unit when it’s time for a new tenant. Most property managers also have numerous servicing contacts, from plumbers to electricians, handymen, and painters. If you’re buying rental property out of state, a property manager could have all the contacts you need!
The Drawbacks of Property Management
Although property managers solve numerous problems, they also can be another source of headaches. First, their rates tend to take 8% to 12% of your rental income right off the top. This isn’t even including the standard half-month to full month-fee that property managers charge when getting a new tenant in the unit.
Second, property managers are easy to find. But GOOD property managers are almost impossible to pinpoint. Most property managers serve only as a game of telephone from your renter’s mouth to your ears. The phrase “managing the managers” is ubiquitous in real estate since so many property managers push the responsibilities they take on onto the landlord.
Lastly, it isn’t uncommon for property managers to get a kickback from the service providers they recommend. Unfortunately, this means that their plumbers, electricians, and handymen may come at a higher cost than you finding a local contractor to get the job done.
One thing is for sure: if you’re going to find a property manager, make sure they’re a good one!
Property Management Main Responsibilities
As you can see, property management is a complex and multifaceted job. To do it well, property managers need to be well-versed in the legal, financial, and practical aspects of real estate. Here are some of the most common responsibilities property managers hold:
- Marketing properties for new tenants
- Screening potential tenants
- Drafting, signing, and renewing leases on your behalf
- Collecting rent and late fees
- Scheduling maintenance and repairs
- Sending rent increase letters and notifications
- Turning over units after a tenant’s lease ends
- Filing eviction notices and subsequent attending court hearings
Types of Property Management
You might think that property managers take care of just one thing: rental properties. But you’d be wrong! There’s a laundry list of properties that a property manager can help on.
Residential
Residential properties are anywhere someone is residing. These include:
- Single-Family Homes
- Multifamily Homes
- Vacation Rentals
- Townhomes
- Condos
- Apartments
- Medium-Term Rentals
- Sober Living Houses
- Senior Care Homes
Commercial
Commercial property managers are in an entirely different league and are trained to deal with these specific asset classes:
- Large Multifamily Buildings and Apartment Complexes
- Self Storage
- Retail Shopping Centers
- Office Buildings
- Restaurant Rentals
- Strip Malls
Industrial
Industrial is the most uncommon of these types, but it’s not unusual to find property managers that manage these specific assets:
- Industrial Warehouses
- Distribution Centers
- Cold Storage
- Manufacturing and production facilities
What to Look for in a Property Management Company
When looking for a property manager, there are some key things to consider. First of all, the company should have a proven track record of managing similar properties in the area that you’re interested in. Next, ask them about their experience with your specific type of investment: commercial, residential, or industrial. It’s also vital that they have experience handling properties like yours and know how to deal with any issues that may arise.
Ask for their property management fees and ensure you’re looking at their entire pricing schedule, not just the percentage of rent. Many property managers charge a hefty fee for tenant turnover, cleanings, and listing a property.
Finally, ask around and see what other local landlords think. Ask them about their go-to property managers in the area and which property managers they’d avoid at all costs. Referrals can guide you to the perfect property manager quite quickly!
When Is It the Right Time to Hire Property Management?
If you’ve been considering a property manager and are getting eaten alive taking care of small tenant tasks, it may be an excellent time to hire some help. But, if you’re a small-time landlord who can comfortably manage your units without much headache, self-managing could still be the best move. The most important question is, could you grow your real estate portfolio faster if you WEREN’T managing your own units? If yes, it’s a good time to outsource!
Property Management FAQs
In a perfect world, you would want a property manager who is very familiar with your area and can quickly spot good deals. In addition, they should be able to help you find reliable tenants and make sure they pay their rent on time. Ideally, they will also handle maintenance issues on schedule, so you don’t have to worry about them.
It depends. Hiring a property manager is definitely worth it if you are a busy real estate investor with no time to manage your own units. However, if you have the time and patience to handle all aspects of managing your properties, it might not be worth it!
Property management companies generally charge a flat fee or a percentage of the rent collected. On average, property managers will take between 8% and 12% of your rent as compensation for their services. They may also charge fees for tenant turnover and marketing your property.
