It’s one of the most asked questions when considering owning investment property: Should I use a property management company to oversee my investment? The short answer is yes, if you really don’t want to deal with some of the hassles that come with owning property. The long answer is maybe.
There are a few factors to consider when deciding on whether to hire a property manager. For instance, the size and condition of your property, the amount of money you have to shell out, and your own capabilities. Maybe managing your own property is in the cards. Let’s look at this issue and find out!
Consider the Condition
So, you bought a rental property – great! First, really assess the condition of your property. Older properties may need more attention than something built within the last decade or so. However, a property built in 1930 might not need a manager if it has been maintained properly throughout the years. You’ll likely have an idea of what will need attention from the assessment done on the property in the purchasing phase, but unknowns will pop up. Pipes burst, toilets get clogged, appliances conk out. Are these things you really want to be dealing with? Moreover, can you deal with these kinds of issues? And that brings us to…
Can you Do the Work? (And do you Want To?)
All people have strengths and weaknesses and some of us are just handier than others. If your job requires you to do maintenance or repair, or if you grew up in a home where your role models were fixing things themselves, then you’re probably equipped to handle the everyday issues that pop up when owning a rental property. It won’t be fun to fix someone’s water heater at an inconvenient time (which will happen), but the plus is that you will be saving money.
How Big is the Property?
How many units and/or the size of your property should be a factor in your decision to hire a property manager. If you have four units or less, you may be able to manage that potential volume of tenant requests and level of maintenance. A property with a lot of units and square footages is an entirely different story. As your building’s property manager, people will call you day and night. You have to ask yourself if you’re willing to deal with that kind of 24/7 always-on lifestyle.
What Does a Property Manager Do?
It’s up to you how much control you want to relinquish to your property manager, but they do more than just maintenance. For instance, they’ll take calls from your tenants, so you don’t have to. They’ll routinely inspect the property to make sure it’s in good shape. They’ll take care of landscaping, scheduling regular bug exterminations, changing air filters, all of the things that have to do with taking care of the property.
A property manager will also take care of occupying units quickly when a tenant moves out. They’ll clean and fix up the unit, put it on the market, interview prospective renters, conduct credit checks and handle all of the paperwork involved with the new tenant signing a lease. If all goes well, you shouldn’t miss very much income from this transition process.
How Much Does a Property Manager Cost?
The million-dollar question is how much does a property manager cost? The answer is that most property management companies charge between 8 -12% of the gross scheduled income. This may seem like quite a hit on the income that you’re earning from monthly rent. However, if you have the right property manager, your units should be well-maintained and occupied with solid tenants paying fair-market rents.
What are the Benefits to Having a Property Manager?
A good property manager will ensure your cash flow continues for the long run. Rather than seeing a property manager as another service you have to pay for, it may help to reframe it as a tool that will help keep your investment valuable for many years to come. Finally, factor in the cost of professional management services and balance those outgoing dollars against how much time and energy you anticipate overseeing the dreaded “three Ts”: tenants, trash and toilets.
Property management can be stressful and may not be what you want to be doing with your free time. However, if you think you can swing it, give it a try. You can always opt out and hire a property manager if you become frustrated or overwhelmed. You may find that a good property manager is worth every penny.
Want to learn more about buying rental properties? Download the first chapter of Destination Perpetuity for free!