Many property owners, especially if they’re new to the industry, ask themselves whether or not they need a property manager. There’s no straightforward answer to this question — it depends on various things. To help you make the right decision, here are 8 things to consider:
1. YOUR RENTAL PROPERTY’S LOCATION
If your investment property is located far away from where you live, then self-managing it will undoubtedly be more work.
For example, imagine you live in Illinois and your investment property is located in Florida. How will you manage to find and screen tenants, handle tenant issues, respond to maintenance calls in the middle of the night, or make sure that your tenants are abiding by the terms of the lease?
Operating at longer distances will also certainly have an impact on your finances. It could result in greater costs. In this kind of situation, hiring a property manager absolutely makes sense.
2. THE NUMBER OF UNITS YOU OWN
Your responsibilities as a property owner are directly proportional to the number of units you own. The responsibilities for someone who only owns one unit are far fewer than those for someone that owns 10 units.
The more tenants you have, the more vacancies, complaints, and maintenance issues you have to deal with. What’s more, you’ll even need more time and more money to manage all the units that are spread across multiple properties. This is another situation where having a property manager makes sense.
3. YOUR LEVEL OF EXPERIENCE
Property ownership and property management are two different things. While anyone can own property, not anyone can manage it. Technically it may be possible, but the outcome may not be so favorable.
If you lack property management experience, your best bet is hiring a qualified and experienced property manager. They will know how to find and screen tenants, maintain your property, collect rent, and abide by the relevant landlord-tenant laws. This will make owning a rental property far easier for you.
If you choose to learn as you go, the outcome may end up being costly. For example:
- You may not have access to market data to price your rental property correctly.
- You may indirectly violate a landlord tenant law due to lack of knowlege
- You may be accused of discrimination due to poor policies or accidental fair housing violations.
- You may not know important terms to include in your lease agreement and that might end up proving costly for you.
- You may also end up hiring the wrong handymen and contractors.
It goes without saying that hiring the wrong property manager can also yield similar results. That’s why it’s important to do your research before hiring one to ensure you find a professional company that can meet the needs of your investment.
4. COSTS OF HIRING A PROPERTY MANAGER
As you probably know, property managers don’t provide their services for free. Therefore, if you decide to hire one, it’s best to understand how that might impact your finances.
On average, property managers charge between 4-10% of your projected gross monthly income. For example, if your property has a potential gross monthly income of $1,000 a month, it means that you should expect to pay anywhere between $40 and $100 in property management costs.
It’s worth noting that there may be other fees as well. A good example of this is tenant placement fees. This is the fee some property managers charge for filling a vacancy. The fee can vary from a couple of hundred dollars to as much as the entire rent of one month.
5. TIME FACTOR
Property management is time-intensive. If you already have a full-time job, finding time to manage your property may prove difficult. In this scenario, hiring a property management company is definitely the right thing to do.
Even without a full-time job, you need to sit down and figure out what’s important for you in regards to time investment. If the day-to-day obligations of managing a property are taking valuable time away from you, hiring a manager could be the right option for you.
6. HANDLING ISSUES
One of your primary responsibilities as a property owner is handling tenant issues. If you are not well equipped and prepared to handle those issues, they will quickly take a toll on you. Qualified and competent property managers have the skills to deal with things like tenant complaints, maintenance issues, and evictions.
Professional property managers also have a solid understanding of the tenancy laws you need to be following. They can serve as a buffer for you when problems arise. Further, tenants may act more professionally if they know they are dealing with a third party as opposed to you.
7. GIVING UP CONTROL
If you decide to work with a property manager, it means that you’ll be giving up crucial control of your property. You may no longer have full control over rent collection matters, filing property taxes, and more.
While your property manager may have the skills necessary to manage your property, will they have the same passion to see your investment succeed? You’ll want to find one who does, or else you may end up disappointed with their services.
8. PROPERTY MANAGEMENT LIABILITY
You’ll also need to ask yourself whether you are willing to take on the liability that comes with hiring a property manager. Just as a property manager has the ability to make decisions on behalf of the owner, they can also make mistakes on their behalf as well.
Most property management companies include a clause that exempts them from any liabilities. The clause is meant to shield them from liability arising from any instances of gross negligence.
Suppose your property manager breaches anti-discriminatory laws when screening prospective tenants, and the tenant ends up suing them in court. In such a case, even though you didn’t commit the violation yourself, you could still be held liable. For this reason, hiring a property management company that understands the rules of the industry and abides by those rules is crucial.
Hiring a professional property manager, like Alltrade Property Management, is often a good investment for a rental property owner. However, there are some things you need to know before hiring a property manager. When hiring, make sure to do your research, as no two property management companies are created equal. If you take into consideration the eight points mentioned above, you’re sure to pick the right option for you.