While certain investment real estate owners swear by property management companies, others refuse to hire them. In essence, third-party property managers do the owner’s job. While this can be a major time saver, it also means that owners give up control of the day-to-day operations of their buildings.
Reduced Management Responsibility
A property manager reduces an owner’s management responsibility. Having a third party to take calls from tenants, schedule workers, meet with prospective occupants, and pay bills is a major time saver for owners. Certain property owners are able to turn time-consuming assets, such as apartment buildings, into passive investments just by hiring a good property manager.
Tenant Sourcing and Screening
It takes time to source and screen tenants, as well as manage property advertisements, take tenant calls, and wait for prospective tenants to show up and view the rental. At the same time, the screening process can be difficult to maneuver. A property owner who doesn’t know the fair housing laws inadvertently could ask an illegal, discriminatory question or admit unsuitable tenants because of a lax screening regime. A property manager has experience in handling all these tenant-related issues and can save the property owner time, reduce his liabilities, and screen out undesirable tenants.
Potential Vendor Savings
Generally, property managers have their own roster of vendors to help maintain an owner’s rental or respond to tenants’ problems. While these vendors might not be the least expensive on the market, they have a strong incentive to keep getting business from the property manager. This working relationship increases the likelihood that vendors will do their work at a fair price. This eliminates the risk of being cheated or overcharged by unscrupulous vendors that individual owners may encounter because of a lack of industry connections.
Potential for Increased Cost
Third-party managers can save you time, but they also can reduce your investment income because they may have expensive base rates or charge a fee based on the gross rent that they collect. Property managers that follow good management practices often are worth their higher prices for the peace of mind they provide property owners. Hiring a manager based solely on cheap rates could lead to an owner’s property becoming rundown and inhabited by undesirable tenants.
Reduced Attention
Because third-party property managers don’t own the properties that they oversee, they don’t necessarily handle matters in the same way an individual owner would if he were running the property as a manager. For owners who want things done their way or who want to have relationships with their tenants, hiring a property management company may not be the way to go. Property managers tend to follow guidelines strictly in regards to screening tenants. So while this attitude has its advantages, it also can mean that good tenants with a few blemishes get turned away while bad tenants with clean records get to sign a lease.
