The Pros & Cons of Hiring Property Management Professionals
One of the fastest ways to secure a passive income stream is through a rental property. While this is a lucrative way to maximize assets, it can be challenging to find suitable tenants, keep overhead costs down, and ensure that you’re staying within the law.
The easiest way to overcome these obstacles is to hire a property manager. However, several property management pros and cons need to be weighed in order to determine whether hiring a property manager is a good fit for you.
To help you decide if renting a house through a property management company is the best course of action, we’ve created this guide. We’ll cover how to hire a property manager and whether the benefits outweigh the costs.
What is a Property Manager?
Before we begin, let’s take a closer look at the duties and functions of a rental property manager.
If you own a secondary dwelling, you’re already aware that many items need to be maintained to ensure everything is in proper working condition.
Couple those tasks with finding the right tenant that’s willing to commit to turning the place into their own home and not treating it as a disposable rental property.
For these reasons, using a property management company comes in handy. By hiring property management pros, they take on the burden of daily operations for you.
It will be left to the rental home management company to ensure the property is taken care of, including:
- Keeping the property listed on the market and advertising it properly
- Screening potential tenants
- Handling any paperwork regarding the lease agreement
- Collecting rent for the homeowner
- Managing and ensuring the execution of repairs and maintenance
These aren’t the only duties of a rental property manager, as the services provided will be dependent on what the individual company offers. However, they should serve as a baseline for offerings.
These factors should also be considered when weighing property management career pros and cons.
Why Consider Hiring a Property Manager?
There are a multitude of reasons why a property owner would choose a management company for rental properties. Here are some of the more frequent reasons why a property owner may consider hiring a property manager.
Multiple Rental Units
If the landlord owns multiple rental units, it can be a full-time job to maintain their portfolio. If this is the case, rental properties no longer act as passive income. As a result, you need someone working full-time to ensure your properties are being managed efficiently.
Location of the Rental Unit
Another reason could be the fact that the property isn’t in the owner’s state of residency. If a long drive or, potentially, even a flight is necessary to maintain a rental unit, it can be significantly less costly to hire a property manager.
Skills Required to Maintain a Rental Unit
There may also be duties of maintaining a property that isn’t within the owner’s wheelhouse. Tasks such as screening clients and negotiating rates may seem scary to some. Or, they may have issues with handling conflict if something on the property that the owner is liable for breaks and needs to be repaired.
If you find yourself dealing with any of these issues, it may be time to weigh the property management pros and cons.
Property Management Pros
There are several benefits to hiring a property manager.
In-Depth Knowledge of the Local Regulations and Rules
The rules surrounding leasing a rental unit can be cumbersome. Some procedures need to be adhered to, and regulations need to be maintained. Thankfully, securing a rental property manager who is well-versed and experienced means you can rest easy.
Unless you’ve researched the legal limitations on renting a property, you may not know how to handle tenants who are late delivering their rent, have willfully destroyed a part of the property, or need to be evicted.
By retaining a property management company, you will have everything on hand to deal with these situations and more.
Trained at Screening Potential Tenants
If you’re a new landlord, you may be tempted to accept the first offer to rent your secondary apartment or house. This is where an experienced rental home management company can shine.
A property management company sees hundreds of applications, and as they gain experience, they can pinpoint which tenants will be a good fit and which should be avoided.
While it’s obvious that a good tenant pays their rent in a timely manner, an experienced rental property manager can identify other characteristics that make for a quality tenant.
Renting out units and houses is a business endeavor, and it can take years to master the various aspects of it. One of the most critical aspects of renting a property is getting enough eyes on it to secure a good renter.
This task involves creating compelling ads, taking professional-level photos, and hosting open houses. All of these tasks need to be done while understanding the local market in order to set a competitive rental rate.
Certified Staff Available 24/7
You never know when an A/C unit will break or a pipe might burst. Without a rental property manager, you’ll need to field these calls regardless of the hour of the day. If you want to avoid hiring a plumber at 3 A.M., having a rental management company with a list of certified staff trained to deal with these emergencies may be your best bet.
Provides a Passive Income
You may have one property acting as a revenue stream, but it may not be enough to allow you to retire in style. Working with a professional property management company to take care of your rental unit will allow you the flexibility to go about your daily life without worrying about maintaining the property. An experienced property management company lets you turn an active income into a passive one.
Property Management Cons
For all of the benefits of hiring a property manager, some potential cons also need to be factored in before making your decision.
Managing the Rental Property Manager
While hiring a property manager may be a turn-key solution to handling tenants, allowing you to avoid the minutiae of managing a rental, there will still be some tasks that only you can do.
You may find that a tenant wants to repaint the walls themselves, increasing the property’s resale value, and in exchange, they request a decrease in rent for one month. This isn’t a decision that can be left to the property manager. The property manager will be the point of contact, but you have to give the go-ahead or decline the offer.
There won’t be many of these choices, but an owner can’t be 100 percent hands-off.
Renting a house or apartment is an investment, and some owners want total control over how things are executed. While hiring a property manager will streamline many of these tasks, no one else will ever do it exactly the same way you would.
Property Management Fees
As with any investment, there are options to hedge your risks. For real estate, this can include hiring a property manager. While they can turn your rental unit into a passive income, their services come with a cost that needs to be factored into your bottom line.
The standard costs associated with a rental home management company include the entirety of the first month’s rent and around 10% of the rental income thereafter.
How to Hire the Right Property Manager
Not all property management companies are made equal. If this is your first time looking for a rental home management company, here are some tips to help determine if a company will be able to deliver what you need.
You can use various platforms to contact other real estate investors who use professional property managers to ensure their units’ smooth operations. Find out which company they use and if they’ve had any issues with them. Some sort of situation inevitably occurs with a rental unit. Ask the other investors and landlords how their property management company was able to handle any such issues.
Ask the Company About Its Process
Speaking with a company doesn’t mean you’re contractually obligated to work with them. So, take the time to question a few companies before settling on one. You’ll want to know how large its operation is, how it markets properties, if it has access to 24/7 emergency services, and its fee structure. This will give you an idea of whether you want to work with the company or not.
Speak to Your Tenants
If you already work with a property management company, perhaps you’re thinking of switching. Or, perhaps you are wondering if they’re executing their duties thoroughly. One way to find out is to speak with your tenants. By talking directly to the tenants, you can see if they’re satisfied with the manager’s services.
Discover What AAOA Can Do for You
If you would like to learn more about rental property management pros and cons, contact the American Apartment Owners Association. We’re a team of professional property managers who aim to provide an online network of resources for real estate investors.