You’ve probably considered managing your own rental property. And who wouldn’t? Passing on management fees saves you money up front. But property managers do much more than collect rent checks, and it’s up to you to decide if those are tasks you can—and want to—handle.
Reasons to Hire a Property Manager
Do you own multiple properties? If so, you should consider hiring a property manager. Running a large portfolio is time-consuming and stressful, but management companies have the staff and resources to juggle a portfolio that will make your life easier.
Living far away from your rental is another reason to hire a local manager. Who wants to drive long distance or fly to meet with contractors, do inspections or collect back rent? Let a management company handle it.
Hiring a property manager also has lifestyle benefits. A landlord’s job is a 24/7 and property issues will inevitably interfere with holidays, weekends and family time. If you prefer not to spend your time on late night calls, screening applicants, or collecting rent, considering hiring a property manager to handle those tasks for you.
Lastly, hire a manager for their knowledge. Work with a professional if you don’t know federal housing laws or how to handle escrow and trust accounts. A simple error like mishandling a security deposit can have dire financial ramifications
What Does a Property Management Company Do for You?
Managing a property takes time – lots of time. If you’re managing your own property, you’ll deal with everything from repairs to contracts. It’s about knowing not just what to do, but also how to do it. With only one house, you won’t get back much return on the time you invest. It’s simply not worth the learning curve of figuring out the legal and business standards for effectively managing a property.
Advise About the Market
The rental market is extremely localized. Home prices and rental rates differ drastically depending on your property’s location and specs. Only real estate agents have the software with the most reliable information on the market. So, if your manager is a real estate agent, they can access the information needed to market your property at the right price.
Sites like Zillow, Trulia, and Movato allow free submission from the public. This skews rates and distorts the information. MLS, however, keeps the public at bay and real estate agents in business.
Offer Legal Knowledge
After you find the right tenant, you need a proven lease. Otherwise, you can spend weeks deciding what to include and how to address certain issues. In Texas, you’ll want to use the Texas Real Estate Commission Resident (TREC) lease – a contract only licensed managers can use. Use this reliable document, crafted to protect the owner while following the law.
Establish Business Relationships With Tenants
One of the most underappreciated benefits of property managers is the business relationship they maintain with tenants. Managers are used to enforcing contracts and having necessary conversations with tenants. Plus, they understand the lease, so they feel confident handling breaches of contract.
Sometimes owners don’t know how to handle difficult situations. If they’re unsure of their legal rights or the contract specifics, they’re likely to let the tenant get away with offenses.
It can also be difficult for owners to collect fees for late payment or early termination if they become emotionally invested in a tenant. Stories of family illness or hardship often persuade the owner to forgive the debts owed.
A property manager knows what’s fair and legal, and has experience enforcing the policies established in the lease. It’s not a matter of insensitivity. It’s a matter of upholding the agreement.
Provide Proven Systems
How does property management work to everyone’s best interest? Successful management groups have processes in place that make the rental situation better for the owner and for the tenant.
When a tenant is late for rent, breaks lease, houses unauthorized guests, or damages the property, managers have the systems in place to respond appropriately. They know what to enforce, how to collect, and what legal steps they can take to resolve problems.
Reasons Not to Hire a Property Manager
Property management is unnecessary if you like to be a part of every aspect of managing, from listening in on tenant calls to picking contractors. If you plan to oversee the entire process, you may as well save yourself some money.
The time commitment is often a major reason property investors seek help. Managers are available at night and on the weekend when residents have free time to put in service requests. If you happen to be free at these times and you’re willing to put in the work, it makes sense to manage on your own.
For some landlords, running a rental property is a hobby. There’s no need to hire help if you enjoy DIY home repair projects and chit-chatting with residents especially if you don’t plan to expand your portfolio in the future.
Finally, having an attorney or housing law background is the last reason to pass on property management. You already have an understanding of the law and know how to draft a binding lease – just make sure you also have time to appear in court to represent yourself.
In some situations, it may not make sense to hire a property manager. If you have experience managing properties and your schedule will permit the flexibility needed to be responsive, you can take the DIY approach. Just make sure you’re willing to handle emergency calls late at night, on weekends or on holidays.
Are Property Management Companies Worth It?
A management company is worth your money, unless you’re knowledgeable about marketing a property, vetting the tenants, making repairs (during and after hours), handling security deposits in escrow accounts, returning a security deposit legally, and filing for eviction.
Also, property managers keep you from undervaluing your house. A good property manager finds out how much the market will pay. Recently, we had a client in Denton who was leasing his property for $600/month. He had priced his property based on the college demographics, but he underestimated the market. After our market research, we upped his rate to $1,300/month. In cases like these, a minimal management fee (typical property management fees can range anywhere from 6-12% of monthly rent) is well worth the monthly increase that follows!
Should You Hire a Property Manager?
It’s the million dollar question! Ultimately, whether or not you decide to hire a property manager is up to you. Even if you have experience you should weigh both options. Are you interested in saving money or saving time? You may find it’s worth the investment to pass the responsibility on to another person.
A great benefit to hiring a property manager is reducing the risk of management oversight that can jeopardize your cash flow. Remember that security deposit code we discussed earlier? Depending on where you live, if a security deposit isn’t returned within a certain time frame to the right person, you may be held liable for three times the deposit amount. It’s small details like this you may be unaware of or don’t have the time to coordinate that a property manager will take care of.
Still trying to decide if a property management company is right for you?
If you’re still unsure which option is best for you, hopefully this infographic will help you decide if hiring a property manager is the right choice.
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How Do I Find a Good Property Manager?
If you’re hiring a property manager, look for experience and certifications.
How many years has the business been in operation?
Are they certified as a residential management company by the National Association of Residential Property Managers (NARPM)?
Property managers undergo extensive reviews of procedure, customer service, and experience before earning this certification. NARPM requires certified residential management companies to:
- Have a Master Property Manager designee on staff.
- Provide verification of 500 unit years of management experience. (One unit year equals management of one residential unit for one year.)
- Successfully complete an on-site visit from an NARPM auditor selected by the certification committee.
- Complete the audit process within three years of making the application.
Do they specialize in property management? Or do they work primarily in residential sales?
For more details, check out our Property Management ebook in the right-hand column.