Some investors think that managing a rental property is like a walk in the park. However when they finally acquire that building, it turns out that managing it can produce more headaches than the whole acquisition process ever did.
If you’ve read any of my real estate posts, you know that there is nothing easy peasy lemon squeezy about real estate!
For those who either don’t have the time, the skill, or the passion to supervise rental properties, an easy solution would be to hire a rental property manager.
However, is it really time to do so?
Below are some factors to consider when thinking about hiring a rental property manager.
- Experience – Is this your first time? Or have you done this before? First time investors can rack up costs because of inexperience. Although rental property managers may have a high professional fee, it may be well worth the money when you compare it to the cost of trial and error.
- Number of Units – The more units you have for rent, the more responsibility you need to take on as a landlord. Different tenants can have various complaints and more units can also translate to more vacancies. Instead of doing this all up on your own, you can hire a rental property manager to address these issues, and you can concentrate on maximizing cash flow or acquiring new units.
- Property Location – Is your rental property far from your primary residence? If the answer is yes, then it would be more practical to hire a rental property manager than to spend a large amount of time just traveling in between cities or even states. Hiring a rental property manager can ensure the timely collection of rent, decreased response time to complaints, and general upkeep of the property.
- Cash Flow and Vacancy Problems – Some owners may feel that their property is no good just because their cash flow is not covering the amortization because of high vacancy problems and other issues. Sometimes these issues can be resolved by marketing and management strategies that can be handled by a rental property manager. Most rental property managers have a large network that allows them to easily find tenants. They also have contacts when it comes to finding able repairmen that can help put your property back together.
- Affordability – On average, rental property managers may charge somewhere between 4-10% of the gross monthly income of your rental property. For a single family residence, the fee could be at 10%, while 10 units or more can cost 4-7%. Knowing these figures can give you an idea whether or not you can afford to hire a rental property manager.
Some will also charge for tenant placement fees, meaning they will get a commission or bonus if they find a tenant for your property. The usual rate is one month’s rent for every year of the contract. If you’re tight on the budget, consider negotiating with the rental property manager by waiving certain fees or getting a discount.
- Time – No matter how capable you are when it comes to managing a rental property, this will all go to waste if you don’t have the time to give your property the attention it needs. Also remember that time is money, and if you’ve got more profitable things to do then it’s better to leave the property management to someone else.
- Taking the Blame – When you hire a rental property manager, you can expect that you are responsible for the rental property manager’s actions. When mistakes are made, the blame can be transferred to the owner even if you didn’t do anything wrong. Most of the time property management contracts include a clause that holds the managers harmless unless the issue is gross negligence.
- Dealing with Tenants – Some property owners just don’t have the patience to deal with tenants, especially those who pay late or have a load of complaints. Tenants who aren’t in good terms with the landlords may cause even more trouble or may choose to just move out.Rental Property managers can serve as the middle-men and can even handle evictions when necessary. They are often knowledgeable with the landlord-tenant laws, keeping you safe from lawsuits.
If you are currently facing these issues then getting a rental property manager may prove to be the best solution. Despite the cost, it can be all worth it to have all of your properties run smoothly, with the rent collected on time, and with positive cash flow coming in every month.
Are you a landlord? Do you manage your own properties or do you work with a rental property manager? Why?