Is A Property Manager Worth It?

As a real estate investor, it is your dream to find the perfect tenant and maintain occupancy for as long as possible. Unfortunately, in such a competitive sector like the rental sector, tenants often shop rental prices and move from home to home based on price and amenities offered. Every time you have a vacancy, you must deal with marketing to tenants, qualifying tenants and screening tenants to fill that vacancy. The first time you receive notice from a tenant, you may question whether or not you should pay a property manager to take on the responsibility. While property management services are right for some property owners, you need to consider how much you will take in versus how much you will pay for the services. Here is your guide to determining whether property management services should be seen as an unnecessary expense or a much needed investment.

Determining the Rental Range Versus the Charge for Commissions

The first factor to consider when you are debating whether or not to hire a property manager is how much you will be spending out-of-pocket and whether or not the money you spend will take away from your profits. When you choose a property management firm, the firm will either charge a fixed rate for their services or a percentage of the rental rate. While fixed rate commission scales are ideal for high-priced properties, owners who own properties in a lower rental range can benefit from hiring a firm that charges between 6% and 10% to market and manage the property.

You will need to determine just how much you will be giving up to pass the burden of managing a rental property on to a professional team. If you have a mortgage on the property, you should keep this expense and maintenance expenses in mind when determining whether or not professional property management is practical.

If the cost of your mortgage, insurance, property taxes, other maintenance expenses and commissions for property management exceed the monthly rents you collect, hiring a property manager may not be in your best interest. If you can cover all of these expenses or even take home a profit, professional property management could be an effective way to maintain your investment properties without having to be a hands-on landlord. This hands-off approach will free up your time, and if your time is money, you must consider the value that property management services can produce for you in terms of your lifestyle.

What is Your Time Worth?

Most private landlords today are not simply real estate investors. If you have a full-time job, managing your own rental properties can feel like a second full-time job. Not only do you have to become your very own marketing specialist, you must also become a bookkeeper, a real estate lawyer, a maintenance man, an inspector, and a manger. Take a second to sit back and think about how valuable your time is. If you are spending 10 hours a week marketing a vacancy, answering calls, touring the property and reviewing applications, you are doing all of this work for free if you do not end up finding a tenant.

When you hire a professional property management team to do the job for you, you do not have to worry about wasting your valuable time. In fact, most management teams do not even charge you a commission rate or percentage until they have found and qualified a tenant for you. If demand for a rental is low and you have a vacancy for 6 months, you have peace of mind in knowing that you are not spending your valuable time marketing with no results. You also have the peace of mind in knowing a team of professionals is working diligently to find you the perfect match so that they can earn a commission for their hard work. In many ways, hiring a property management firm to do the job pays off.

How a Property Management Team Can Actually Earn You Larger Profits

If you are focusing on the commission rate a firm charges, you may be overlooking all of the ways that a property management firm can actually save you money on your investment. A property management team is made up of several different professionals with an expertise in different areas of rental properties. Firms have marketing managers, real estate agents, real estate lawyers, technology experts and customer service representatives that handle all of the emergencies. The key to earning a profit as a landlord is charging competitive rents and keeping your current tenants happy. Here is a breakdown of how an expert property management team can earn you more than they cost:

Setting the Right Rental Price

Chances are you are not an expert in rental price trends in the area where your investment property is located. What you might not know is that trends change on a regular basis, and only real estate professionals know how to do research to see how prices are fluctuating. Charging rents that are too high can translate into long periods of vacancy, which can cost you quite a bit of money. Charging rents that are too low will make you lose out on profits for periods of 6 months to a year. By hiring a professional management team, you can compare rental rates in the area and settle on a price that is fair and competitive.

Finding Long-term Tenants

Every time you lose a tenant, you must pay to fill the vacancy. Marketing a property costs money. If you hire a team to match you the right tenants, you have peace of mind in knowing that the team’s goal is to find you a long-term tenant that plans to stay in your investment property for more than just a single lease term. The firm also takes time to review rental applications to determine which tenants are the most responsible. Firms will verify the information provided, and run every applicant’s information through a screening database to ensure they are financially responsible. Hiring a firm reduces your chances of choosing an irresponsible tenant who is late with rents or breaks the lease without any notice.

Inspections and Addressing Maintenance Issues

Do you have time to perform a monthly inspection? When you hire a full service property management team to manage your property, inspections are generally part of the package. While this may sound like an inconvenience to your tenants, if you have the right tenants this can be seen as more of a safeguard. The team will identify possible hazards and maintenance issues that need to be addressed immediately. By doing this, the team can actually save you money and arrange repairs before a minor problem turns into a major one.

As you can see, property management services are more than just an expense. If you are ready to be a hands-off landlord, now may be the time to meet with a management team to discuss your options. You should consider how much you will be paying out-of-pocket, how much time you will spend managing your property on your own and how much your time is worth before you make the final decision. If you can break even or still profit, hiring a professional team is probably the most practical choice.