- Property management companies enable aspiring and seasoned investors to build larger portfolios.
- A good property management company is one of the best assets today’s investors have at their disposal.
- Real estate management companies aren’t necessary, but they help facilitate a better experience.
Choosing whether or not to use property management companiescan be tough for many real estate investors. We would say most start out investing in real estate without a property management firm, People struggle with that Do-it-Yourself mentality which can really be overwhelming once your portfolio gets large. We believe the benefits of using a property management company far outweigh the negatives.
Most investors argument is that it’s going to cost too much to hire a property management company, but 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 the price. What’s more, their involvement could very easily increase the chances of growing your bottom-line. If that’s not enough, here are some awesome benefits to hiring a property manager.
What Is Property Management?
Property management is a third-party company that take a percentage for maintaining a residence’s retention and appeasing its occupants. Property managers are, are hired by rental property owners to oversee the daily operations of their real estate assets, such as maintenance, collecting rents, and deal with any questions or concerns the tenants may have. If there is vacancy on the property it is there job to market this property available and find tenants. Few strategies, for that matter, are more beneficial for a rental portfolio than hiring a third-party property manager, which begs a simple question: How do property management companies work?
Do I Need A Property Management Firm?
Plenty of investors fully support the need for a management company. But, there is no rule stating that anyone needs a property manager. Here are some good things to consider when deciding if you need one:
- You plan on acquiring multiple rental properties. The more rental properties one has in a portfolio, the more necessary property management firms become.
- You are not within close proximity of your asset. If the rental property is far from where you live, it’s a good idea to hire a manager who can keep better tabs on it.
- You don’t want to actively manage the property. If you view the property as a source of passive income, you’ll need a property manager to take care of routine maintenance and daily operations.
- You can afford the added cost. Property managers will charge a percentage of the rental fee, which is well worth it. The same fee can rid landlords of a lot of headaches and free up a lot of their time to invest in other places.
What Does A Property Manager Do?
The cost of property management is a valid argument, especially when you consider detracting from your bottom-line, 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 its better 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 company benefit investors with the following:
- Property managers will collect rent from tenants
- Property managers will listen to maintenance requests and address the problem
- Property managers can deal with defaulting tenants that are months behind in rent
- Property managers will market a subject property to limit vacancies
- Property managers will keep detailed records of everything happening at the property
Collecting the rent is one of the biggest tasks of a property management company. That is not all property managers do, however. Collecting rent is not easy and can be a trying task when you have hard to deal with tenants. This can really take the stress off of the landlords and help you to focus on more volume.
Regular Property Maintenance
Dealing with tenant maintenance is by far one of the main reasons you would hire a property management company. It isn’t just about the maintenance, Its about dealing with the tenants! 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. These callas can me super time consuming and overwhelming to a landlord, So to have a management company assist with that and have a set budget for them, you can make this so much more simple. Good resident retention is so important to your overall occupancy and turnover rates.
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. 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.
Dealing with Defaulters
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. If you can work these things out with the tenants directly that of course is more desirable. 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 management company can be a great in between that can often speed up better solutions compared to a DIY landlord that may appear an easier target for malicious tenants. They are tend to me more knowledgeable with strategies to fix the problem.
It’s the most important part of Management. If you have no tenants, you have no income! 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! They need to be good at sales and present a good marketing plan to you and make sure that they are achieving monthly occupancy goals. This also means that they are managing the move-in and move-out process for each tenant.
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.
5 Benefits Of Having A Property Management Company
The single greatest benefit investor’s are made privy to by working with property management companies is time. By enlisting the services of a good property management company, investors won’t be forced to manage the property themselves; they’ll be free to take on other responsibilities. For most investors, the added time will help them find and acquire more rental properties to add to their portfolio. For others, not having to manage a property simply rids their lives of unnecessary stress. It is worth noting, however, that time isn’t the only reason someone may want to hire a property management company. There are actually several benefits to hiring a manager, not the least of which include:
- Mitigate Liability: One of the little understood perks of having a third party property management firm is the buffer from liability a good property manager adds to an inexperienced investor’s portfolio. If for nothing else, it can be easy for opportunistic tenants to make false accusations about rent collection tactics, illegal eviction practices, and negligent maintenance. A third party manager can deflect many of the false claims levied in an investor’s direction.
- Quality Tenants: Property management companies manage properties for a living; it’s what they are good at. As a result, the best of them have grown to know what to look for in a good tenant. It is, therefore, safe to assume hiring a property manager will result in better tenants for a property, which is great news for landlords. The better the tenant, the better the experience will be for owners.
- Shorter Vacancies: Not only will a property management company advertise to fill vacancies, but it will also do so with a sense of urgency and efficiency. Again, since this is their job, real estate management companies are most likely better at filling vacancies than traditional landlords, which drastically shortens the length of vacancies. Meanwhile, landlords are able to increase profits throughout the year by keeping the asset in service.
- Lower Maintenance Costs: Property management can also open up doors for you and get you contact to contractors and things you need to source out. The contacts the property manager already has in place will work to your favor and save on maintenance costs. It will also be contractors that are recommended and know provide a good service.
- Better Reviews: When tenants work with property managers the process for all of it just goes smoother. As a result the experience is typically better than dealing directly with landlords. They are also more likely to leave a good review. Those reviews will drive more traffic to your properties, resulting in higher occupancy.
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 8 to 12 percent of the monthly rent value. Some will also charge a flat fee along with the rent percentage. Eight percent represents a pretty good value, getting up to around 12 percent is pretty high.
Just sit down and identifiy what is most important to you when it comes to finding a property manager. What is it you need your manager to do? Get a list together and have that ready to present and go over with the companies you are looking at. What can you expect from them? What do you get for that Percentage and maybe flat rate?
Property management companies—specifically good ones—are worth their weight in gold. Just remember that the cost of a management company is more of an investment than it is an expense.
Considering a property management company? What questions or concerns do you have?