If you are a property owner, at some point you may consider hiring a property manager (PM). This person or company can take some of the day-to-day tasks off of your plate, but is that something you really want to do? Do you want someone to look after your investment property for you or are you a more hands-on investor?
Read on to find out more about the pros and cons of using a property manager, and if it’s the right decision for you and your investment.
One of the largest pros of hiring a property manager is that they are in charge of the screening process and finding appropriate renters for your property. What this means is that the PM will be responsible for avoiding any discrimination issues during the screening process; they should be knowledgeable about the Fair Housing laws, ADA requirements, and so on. This frees you up to acquire more properties or perform other high-level tasks as an owner while someone else meets the daily needs of the tenants and tends to the maintenance requirements of the property itself.
Eventually you may be faced with eviction or liability issues as a property owner. Another advantage of hiring a PM is that this person or company will help you through these legal issues and will know how to best address them. If you don’t feel confident in yourself or have the resources available to help you through these issues, then hiring a PM is definitely the way to go.
One of the biggest advantages of hiring a PM is that property management companies tend to have a much wider reach into the market for finding potential renters. They have a bigger marketing budget and more resources to find and screen potential tenants. You as an individual may only be able to use word of mouth, post ads in newspapers and blogs, and throw a sign up in the yard. The economies of scale that professional companies have may be a better investment because your property will not sit vacant for very long.
Property management companies are only a good investment if you can spare the expense of hiring one. Good property management companies will charge anywhere from 8% to 12% to manage a property for you, plus any expenses involved with maintenance and such. If this frees you up to make more money doing other tasks, then it’s a worthy investment. If you are relying on that rental income as part of your personal salary, then you absolutely must be prepared to do the learning necessary to become a professional PM yourself.
Whereas a PM can be advantageous where tenant screening is concerned, be especially wary of discrimination issues if you are the one conducting the screening process yourself. If you don’t use a PM, this can be the biggest tripwire if you turn someone down after the screening, don’t understand ADA requirements and Fair Housing laws, and all regulations that pertain. And remember there is federal law, state law and local codes that can apply.
If you don’t want to hire a PM, ask yourself if you are willing to invest the time needed to become a great landlord yourself. This means reading books, listening to real estate podcasts, asking for help on forums, addressing maintenance issues efficiently, and talking to other local landlords to glean as much information as you can about your role. These things must be done in order to manage your investment wisely and to stay abreast of current real estate and renter information and trends.
More Things to Consider:
- Definitely read both sides of the reviews for any PM that you are considering – from landlords and from tenants. This will give you a better idea of the company and how they handle their clients. It makes no sense to employ a PM that tenants hate or that abuses the tenants. That’s just asking for trouble.
- Always remember that this is YOUR investment. It behooves you to take care of it, to stay on top of any issues, and to know what your potential liabilities and obligations are. It’s always your responsibility to make sure that anyone you hire is doing an adequate job of property management.
- The best PM to hire is one that will continuously educate you on best practices. Even if you hire a PM, you need to stay proactive and learn as much as you can about property management yourself. Never hire people to do things you can’t evaluate performance on.
Knowledge is power, so fortify yourself with as much information as you can before – or after -you decide to hire anyone. Educate yourself about your options, ask for personal referrals to PM companies if you go this route, and you should ultimately make the right decision for you and your investment property.