Property managers are one of the most important people in your rental business. They’re there to help you when you need it, and they can also be a HUGE pain if they aren’t doing their job correctly. So what is a property manager? What does one do? How do you hire one? Where should you look for them?
In this article, we’ll answer all these questions and more—because as much as we love our rentals, they’re not always easy to deal with, but property managers can make things a little easier.
What is a Property Manager?
A property manager is an individual, but can also be multiple individuals from one company hired by a property owner (landlord) to oversee the daily tasks of running a rental property. They take care of everything from finding tenants, fixing up properties, and collecting rent, so you don’t have to.
What Does a Property Manager Do?
A property manager is someone who manages the day-to-day operations of a rental property. A property manager will:
Conduct Inspections
A property manager is responsible for conducting inspections of the rental unit before and after a tenant moves in. This can include checking all the appliances, locks, and other features to ensure they are in good working order. It’s their job to ensure everything works properly so you don’t have to worry about it.
Market Your Property
A property manager will advertise and market your rental unit to prospective tenants. This includes writing up a property description, posting it on rental sites like Apartments.com, Zillow, or HotPads, and showing it to tenants interested in renting it. They’ll handle applications and screening too!
Process Screenings
A property manager will handle all the screening and paperwork associated with a rental application. This can include running credit checks, verifying income and employment status through pay stubs or W-2 forms, and running a criminal background check. They’ll also ensure applicants meet any requirements you outlined in your lease agreement.
Schedule Maintenance and Repairs
A property manager will handle all maintenance and repairs on your rental property. This can include calling in plumbers, electricians, and other contractors when necessary. They’ll also ensure that any work performed on the home is up to code with local building standards.
Ensure Legal Compliance
A property manager will ensure your rental property complies with local and state laws. They’ll make sure that any necessary permit fees are paid and notify you if there are any code violations or other problems with the home. This can help keep you from getting fined by the city for not following regulations.
Track Financials
A property manager will also be responsible for keeping track of your rental income and expenses. This can include paying the bills on time and collecting rent from tenants. If a tenant has a problem paying rent, they’ll work with them to find a solution that works for everyone involved.
Need a FULL list of services? Check out our property management services article!
Pros and Cons of Hiring a Property Manager
Property managers can shave a TON of time off a busy landlord’s schedule, but they also come at a cost. So before you hire one, make sure you understand this financial trade-off.
Pros of Using a Property Manager
- Increased Occupancy Rates: Property managers tend to lock in far higher occupancy rates than casual self-managing landlords, thanks to professional marketing.
- Fewer Maintenance and Repairs Jobs: Many landlords don’t fix what’s broken. But it’s a property manager’s job to handle anything causing tenant (or landlord) headaches. This means more proactive maintenance and fewer “the toilet overflowed again?” phone calls.
- Less Stress: This is the BIGGEST benefit of a property manager. They do all the things that you, the landlord, don’t want to, letting you focus on building your portfolio, not managing tenants.
Cons of Using a Property Manager
- Lower ROI: Property managers take (on average) 10% of your rent, so you can expect your ROI (return on investment) to be lower when using one.
- Less Control: Property managers will manage your property THEIR way, not yours, so you’ll have to be SURE you’ve picked the right one for your property and tenant.
- Managing the Manager: Often, property managers need to be managed, meaning you’re managing the manager instead of letting them take care of things. MANY property managers require management, but the best ones ONLY need you on rare occasions.
The Costs of Hiring a Property Manager
Property managers come with their own special sets of fees and monthly prices. Here are some common costs you can expect:
- Management Fee: This is the standard fee for property management and usually hovers around 8%-12% per month. This usually covers collecting rent, tracking expenses, handling tenant phone calls, conducting inspections, and most basic property management services.
- Maintenance Fee: If you have rehabs, renovations, or large-scale repairs, property managers may charge you a maintenance fee for their extra time on the property.
- Lease Rental Fee: Some property managers charge a lease rental fee every time a new renter moves in. This fee is to cover the costs of marketing, screening, and leasing a new tenant. This fee is usually half a month to a full month’s rent.
And that’s not all! You can read the FULL list of property management fees in our “How Much Do Property Managers Charge?” article.
Top Factors That Impact Cost
Not all rentals are the same, and these factors could cause a higher (or lower) property management fee.
- Size of Property: A five-unit multifamily property has more tenants, space, and a LOT more that can go wrong than a small single-family house. For this reason, the larger a property, the more a property manager may charge.
- Location: If your rental is in an A-class neighborhood, it’s probably easy to manage. But a D-class neighborhood with nightly drive-bys and neighborhood drug deals will make your property manager charge much more due to their safety and headache factor of dealing with your property.
- Services Offered: A short-term rental property manager may charge you 30% of your monthly rent. Why? They come every few days to fully clean, swap out supplies, check in guests, etc. A long-term rental property manager offers FAR fewer services but at a cheaper price!
How to Tell If It’s Time to Get a Property Manager
Most landlords who hire property managers wait until they have so many units they can’t handle running their portfolio. This is a HUGE mistake because they then hire the first property manager they can find, which becomes an even bigger headache than having no property manager at all.
Here’s my advice: Once you know you will buy more than one property in an area, hire a property manager. Why? You’ll have time to find and hire a great one when managing only one or two properties. A good property manager will give you the confidence to grow your portfolio instead of you fearing another property purchase.
But maybe you want to self-manage? If so, check out our top rental property apps for landlords or our ranking of the best rental property management software of 2023 (MUCH cheaper than hiring a property manager).
How to Hire a Property Manager
So, you’ve decided it’s time to hire a property manager. Good choice; here are the next steps you should take.
Ask Around
First and foremost, ask around. You may know a rental-owning relative or investor-friend who has a great manager in their Rolodex. If not, join your local real estate investing association, attend a meetup and get other investors’ recommendations, or join online forums like BiggerPockets and ask investors in your area. If you’ve done any of those steps, you’re bound to get a good recommendation.
Know What You Need
Do you need a property manager who handles everything, from finding tenants to running the numbers and collecting rent? Or are you looking for someone who will just collect the rent checks, reduce vacancies and make sure your units are kept in good condition? If you’re looking for an all-inclusive manager, ensure they can do what you want before hiring them.
Compare Prices
You’ll want to compare prices. Talk with a few property managers and get quotes. Ask them how they charge, what they include in the price (or don’t), what services they provide, and how often they provide those services. You may find one that charges more but provides incredible value through their service offerings, or you may find one that charges less but still has all the features you need to manage your properties.
Feeling stuck? Don’t worry! We’ve compiled a list of the best property management companies of 2023!
What to Avoid When Hiring Property Management
Once you’ve hired a property manager, do yourself a favor by making their life and yours easier. DON’T make these mistakes:
Mistake 1: Over-Managing the Manager
A property manager is meant to manage your property, not be your close companion and soulmate. Let them do their jobs, and only get on them if they’re dropping the ball. Calling them every day to get an update is NOT the way to manage a manager. Set boundaries, stay in touch, but let them do their job.
Mistake 2: Not Setting Pre-Approved Repairs
If your property manager needs to call you EVERY time a $50 repair takes place, you may want to set up a “pre-approved repair” threshold. This lets the property manager make repairs under a certain dollar limit without your approval, so your property can run smoothly without you being around every second.
Mistake 3: Letting a Bad One Stick Around
If your property manager is doing a lousy job, fire them. If they’re unresponsive, fire them. If they’re getting your tax documents wrong, fire them. DON’T keep a bad manager around for long because if anything goes wrong, you will be held liable for the rental property, NOT your manager. It may sound harsh, but a bad property manager is a larger liability than most investors understand.
Property Managers Can Make (or Break) Your Rental
If you want to build a solid, profitable rental portfolio that you can enjoy for years to come, you must choose the right property manager. Without proper management, your tenants will be unhappy, and the property might become unrentable. On the other hand, with a strong team of professionals by your side, your rental properties will be safe and secure while still generating plenty of income.
Calculate the costs, screen your managers, and when you find a good one, let them take care of the rest. Your rental property portfolio is for passive income, so let your property management make things a little more passive!
