If managing your rental is starting to feel like another full-time job, then it might be time to look for a professional to help. But before you do, you’ll want to read on to carefully weigh the pros and cons of hiring a property manager.
Running rental homes can be a rewarding way to invest or generate an income. But it can also take a lot of time and effort. Managing rental properties, whether traditional rentals, vacation rentals, or rentals through Airbnb or HomeAway, takes a lot of effort. You have to be available to answer renters’ questions, check up on your properties, and take care of property maintenance.
You can do all of this on your own, especially if you live nearby to your rental(s) and have time in your schedule. But even if running rentals is a full-time business for you, the middle-of-the-night phone calls with clogged pipes or leaky water heaters can get really old, really quickly.
This is why many landlords end up hiring property managers. Professional property managers–either individuals or companies–can take care of many of the messy details of owning and renting property. Of course, they’ll also cut into the profits you make from your property. So this is something you’ll want to balance carefully when deciding if you should hire a property manager.
Pros and Cons of Hiring a Property Manager
Like most big financial decisions, this one can be broken down easily into pros and cons. This approach can help you see more easily whether hiring a property manager is best for you. Here are some of the top pros and cons to consider when making this particular decision.
Pros of Hiring a Property Manager
- They can keep your properties in compliance. Keeping up with local and national regulations and laws for the rental process can be difficult. A good property manager stays on top of compliance with everything from tenant screening to contracts to the state of the property itself. This can be a huge weight off of your mind if you aren’t willing to keeping up with all of these particular issues.
- They can represent you in court if necessary. What happens if you’re out of compliance unknowingly? Or if a tenant sues you for whatever reason? Larger property management firms have lawyers on hand to represent you in court. And even smaller operations can talk you through this process.
- They’ll maintain the records for you. How long do you need to keep contracts and receipts? Where do you keep them, and how do you organize them? If you use a property manager, you won’t have to worry about all of this stuff because they’ll take care of recordkeeping for you.
- They understand the rental market in your area. Property managers are typically paid by percentage of your income on the property. So it’s in their best interest to see your property rented as much as possible for the best possible rate. So they’ll stay on top of market trends to ensure you’re always getting the best possible market rate for your property.
- They will handle communication, especially in the middle of the night. Getting a call at 3 A.M. from a tenant isn’t fun for anyone. But property managers are used to these calls and are set up to handle them well.
- They can help find the best tenants and keep the property rented. Again, it’s in the property managers’ best interests to keep your property rented and the cashflow coming with good, reliable tenants. Good property management companies follow best practices for marketing to and vetting tenants so that you get the best ones.
- They can take care of maintenance or even get you discounted maintenance. Some property management companies will do certain minor maintenance–especially cleaning between tenants–as part of their package. Others will contract with other local companies to do things like cleaning gutters, painting, and other routine maintenance. Chances are they can get you discounts with their preferred providers, which can be a nice perk.
Cons of Hiring a Property Manager
- They add to your overall costs up front. Of course, hiring a property manager will eat into the funds you stand to make on your rental property up front. Typically, they’ll charge a percentage of your rental income on the regular, as well as additional fees if the property is vacant or there are other problems. Over time, though, the right property manager could save you money by keeping your property compliant and fully rented.
- You lose some of the control over decisions. Depending on the contract you negotiate, you may get little to no direct say over who rents your property or other major decisions like setting rental rates. You can negotiate contracts differently depending on your preferences, of course. But you’ll always give up some control over your property when you hire a property manager.
- Your property may not get as much individual attention as you’d prefer. If the property management company you hire is managing hundreds of units, they may not give your property special attention. If you’d prefer this, then it might be best to work with a smaller operation or do it yourself.
- Things might go wrong. Any time you hire out a service, you could choose wrong. And that could lead to additional headache and costs. That’s why it’s important to put a lot of time and effort into hiring the right property manager if you do decide to hire one.
Is a Property Manager Right for You?
These are just the basic pros and cons. But determining if hiring a property manager is the right option for you is a bit tougher. It’s really a decision that’s down to a variety of factors, including how many properties you have, how far away from them you are, and how much time you have available.
Here are some situations where you might not need a property manager, as well as a few where you might:
You’re renting out just part of your own home on a regular basis.
My family runs a regular Airbnb guest room. We rent almost every night. And although Airbnb has the option to let someone else help or completely run the rental, it doesn’t make sense for us. Sure, it’s sometimes frustrating to have to rush home from work to flip the room between guests mid-week. But it’s well worth raking in all the profits for ourselves. And when we’re on vacation and need someone else to manage guests, we can just pay for one-off services from a neighbor to get it done.
You only have a couple of properties, and you live nearby.
Unless you’re super busy, you can probably handle one or two properties that you live close to. Sure, you’ll get the occasional inconvenient call in the middle of the night. But typically you can field these things, and keep more of your rental property’s profits for yourself. In fact, you might do better as long as you can get to know the rental market in your area and come up with some solid best practices for screening tenants.
Rental properties are your full-time business.
If you’ve built up a portfolio of local rental properties to run as a business, you probably want to be your own property manager. You can save money by handling the overarching management–paperwork, marketing, etc.–by yourself. You can always keep a part-time handyman on call to handle more of the maintenance work that goes with managing multiple properties.
You’re renting properties from a distance.
If you live more than an hour from your rental properties, managing them can be tough. You’re not part of the local market, and you’ll have a harder time answering emergency calls and managing things like tenant transitions. In this case, it’s typically best to work with a local property manager who really knows their stuff.
You have a really demanding schedule.
Running a single rental property shouldn’t take all that much time most months if you’re doing it right. But if you have a very demanding job or hectic schedule, hiring a property management company can make sense. You can keep some of the income coming your way without adding to your already full plate.
You’re not much of a detail person.
Managing properties, especially more than one at a time, requires paying attention to a lot of details. You need to know about compliance and contracts, understand when to begin marketing properties, and keep track of a lot of receipts and paperwork. And you have to coordinate with contractors to get work done in a timely fashion. If all of this seems totally overwhelming to you, hiring a property manager can be helpful.
You’re just starting out.
Hiring a local property manager when you’re running your first rental property may not seem to make sense. Why give up so much of your profit when you’ve only got one property? But if you can find the right person or company, this can be a great move. An experienced property manager can teach you the ropes so that you can eventually take over more of the pieces of running your rental properties, and do it successfully.
Hiring a property manager is a big decision. So if you decide to do it, go slowly and carefully. Talk to others in town about the property management companies they use, and interview a lot of candidates. This is very similar to hiring an employee, and you want to take your time and make the best possible decision. And, of course, you want to negotiate on rates and be sure you understand exactly what you’re contracting this person or company for so that you can hold them accountable.Topics: Real Estate Investing