Are you getting all you can out of your rentals with as little effort as possible? Property managers not only help reduce your workload, but they also help keep your property performing at its best. Understanding what they do and how they work will help you determine if you need one for your rental properties or when to hire one.
What Is A Property Manager?
A property manager is commonly a company or team of people who take on your rental property’s responsibilities. They create a barrier between you and the day-to-day activities of owning rentals.
Understanding What A Property Manager Does
Think about all the horror stories you hear about being a landlord: the late-night phone calls, the clogged toilets, and the evictions. Property managers cannot make the tenant pay or make your mortgage payment, but they will do the heavy lifting, making owning real estate a lot more fun.
Roles & Responsibilities
So what exactly can you count on from a good property manager?
Setting & Collecting Rent
Managers are very familiar with rental rates and have the tools to determine what a unit should rent for if they do not know. They will help guide you in what you should charge. They also are very good at keeping rents at market rates. Maintaining market-rate rent alone makes property managers worth considering. Many times, I have let tenants live in my units without raising rents for years. By the time I come around to raising the rent, there is no way I can raise it enough to get it back to market rates. As a result, I have to continue to rent under market, leaving a ton of money on the table. If you are not good at keeping rents competitive, you might benefit significantly from a manager. Merely keeping your rents competitive can end up paying for their fees.
Collecting rent might be the least fun part of real estate. Cashing checks is fun, but not when you have to chase it down or, worse, evict. Property managers will do the dirty work for you. They have experience in rent collection, making it easier to work something out with the tenant to avoid eviction.
Screening Tenants
Most landlords will tell you this is the most crucial piece to their success. Trust me, having no tenant is better than having a bad one. Property managers have the tools and know the tricks to select high-quality tenants. They cannot get it right every time, but being right most of the time puts more money in your pocket.
Maintenance Of The Property
The maintenance calls are a landlord’s biggest fear. I just got a call yesterday from a tenant that her fence blew down. That kind of call will stress out any owner. Most landlords take that call, and then they have to search for someone to do the repairs. They need to schedule it, inspect it, and then pay the invoice. Property managers take all this off your plate.
The downside here is that most managers markup repairs. If something costs $300, you might see an invoice for $350. They also pick higher-priced subcontractors in many cases because it helps them move quickly, and the cost is being paid by someone else. That someone else is you. This drawback is one of the main reasons I like to manage my own property. I have contractors on speed dial for just about any issue that may arise. One call gets it done, and it saves me a ton of money.
Marketing The Property
Not only do property managers market your property, but they also market a lot of other properties, which is a big advantage since they know of tenants looking for rentals. If a unit goes vacant, your manager may already know someone who will move in.
Turnovers are also the most time-consuming aspect of property management. The time it takes to market the property and show the property can be massive. Although I manage my own properties, I hire property managers to market and show my properties for a fee. Some management companies will offer this service without a full-blown management agreement.
Compliance
With rules and regulations changing constantly, it is hard to keep up. Is it a three-day demand notice or a ten-day? What about an eviction moratorium or dealing with cannabis and security deposits? All of these areas of management can get you into trouble. If you don’t understand the current rules and regulations or don’t want to learn, a management company can keep you safe.
Which Landlords Need A Property Manager?
I always recommend that new landlords manage their own properties, at least for a while. Even if you end up with a property manager, you will need to oversee the manager. Some managers are better than others, and it is wise for you to understand their role. Although I recommend you manage your own for a while, there will come a time when you will want to consider a manager.
Abundance Of Properties
Once you build your portfolio and have many properties, it becomes harder to maintain your management quality. Each property takes a certain amount of time, and the more you add, the more time it will take. Eventually, you will run out of time to do the job effectively.
With Properties Far Away
I own a handful of properties in other states and can say with certainty: I don’t see how someone can do a quality job managing property in other markets. First, I encourage any reader to stay focused geographically close to their home. But if you find yourself chasing returns and looking out of the area, finding a property manager will be a big piece of your success.
No Time To Manage Properties
As mentioned, time is finite, and managing property does take time. I have been lucky enough to discover ways to reduce the amount of time it takes drastically, but it still takes my time. If time is limited or you put a high value on your time, a property manager is probably the way to go.
Prepared With A Budget
Anytime you are looking at hiring a property manager, first be aware of the costs. Work those fees into your analysis and make sure that it makes sense to move forward. Many investors do not consider professional management when running numbers on a new purchase. I think that is a mistake. Buy a property with the idea of hiring a manager, and then if you don’t hire them, you will make more money.
When running your numbers, costs to consider include the monthly management fee, the maintenance markups, the fee they collect from tenants and retain, and the leasing fees.
Property Managers: After Thoughts
Property managers play a critical role in your real estate investing career. Although managing your own property often makes sense, almost every landlord I know eventually hires a property manager. There are huge upsides like keeping your rent high and vacancies low, handling the rent collecting, turnovers, and maintenance request. When used correctly, property managers will help you make more money with a lot less work.