Should you hire a property manager or should you self-manage?
This is a question that many new landlords usually ask themselves.
Real estate investors have the common goal of obtaining the highest returns possible from their rental property investment.
One way of achieving this goal is to ensure that every aspect of the rental business runs efficiently. As such, making the right decision of who should manage your property is key.
To make the right decision, you will need to weigh the benefits of each option against each other to determine the perfect fit for your property.
What are the benefits of hiring a property management company?
Benefit #1: You’ll help save time.
Landlording tasks include advertising your units, screening tenants, carrying out annual inspections, and handling late-night emergency repairs.
These jobs require time and patience.
By hiring a property management company, it will help you free up time.
Benefit #2: You can enjoy minimal vacancies.
Property management companies have the experience, skills, and manpower to market rental properties. This can help reduce the amount of time your properties stay vacant.
Benefit #3: You may get proper legal backing.
Running a rental property business requires a good understanding of the law. For example, you need to know the right process to follow when a tenant fails to pay rent on time.
Harassing or intimidating the tenant to pay for rent can lead to legal issues. A good property management company can help you handle situations professionally and prevent cases like this from happening.
Hiring a Property Manager
If you decide to hire a property manager, be cautious. No two property management companies are created equal. Some may have your best interests at heart while others may have the primary goal to make as much money off of you as possible.
How do you better your chances of landing the right property management company?
It is suggested to get recommendations from your local apartment association as well as from your colleagues.
Look up professional directories on the internet. Websites like the Institute of Real Estate Management and the National Association of Residential Property Managers can help you in this regard.
Once you have cut down to a couple of potential property managers, schedule individual interviews with them. The following are some questions to ask a property manager before hiring one:
- What is your rental marketing strategy? Is the property manager still placing “For Rent” signs and hoping for the best? If so, continue your search. You want a property manager that utilizes a variety of marketing strategies.
- Do you guarantee occupancy? A good property manager should be able to guarantee vacancy for a specific period of time. If he or she doesn’t, it may be a sign that they have an inefficient tenant screening process.
- What percentage of your tenants renew their lease at the end of their tenancy period? Look for a property manager who has a lease renewal rate of above 80%.
- What is your average eviction rate? Evictions are bad for business. A bad eviction rate may signify that the property manager is doing something wrong. Look for a manager whose average eviction rate doesn’t exceed 5%.
- How many owners do you usually retain at the end of a lease cycle? If the property manager retains most of his clients, it’s a sign that their services are good. Thus, look for a property manager with the highest owner retention rate.
- How long have you been in business? Look for companies that have been in business for more than 5 years.
What are the benefits of self-managing a property?
Landlords that self-manage their property screen potential tenants, market their properties, and carry out property inspections and evictions.
Although this list of responsibilities can seem overwhelming, don’t let it discourage you. Self-managing your own rentals can provide a host of benefits that include:
Benefit #1: Saving on property management fees.
This is often the #1 reason why some property managers choose to self-manage their properties over hiring a property management company.
Broadly speaking, management companies charge a percentage of the monthly rental income.
By self-managing your rentals, you can save on this expense. This could help any experienced investor to reach their goal of maximizing their profits.
Benefit #2: Having direct involvement in day-to-day decisions and activities.
Self-managing your property means taking part in the day-to-day running of your rental business. You’ll have control over things like property advertisement, maintenance issues, and rent collection.
Some decisions may, however, require you to be well-versed in matters regarding the rental business. For instance, tenant screening, and tenant evictions.
Benefit #3: Avoiding the possibility of being a victim of fraud.
Just like any other profession, not all property management companies run ethically. In some rare cases, some may engage in unethical activities such as receiving kickbacks from contractors or pocket rent from “vacant units”.
Due diligence before hiring a property manager can help to avoid these types of businesses.
Becoming Your Own Property Manager
If you decide to self-manage your rental property, then you need to familiarize yourself with all relevant laws. Such laws include the Landlord-Tenant Law and the Fair Housing Laws.
When coming up with a lease agreement, make sure to include the key elements of pet policy, subletting, and when late fees apply.
Should you hire a property manager or should you self-manage your property? Ultimately, the decision is yours to make based on your specific needs. We have provided some benefits for each decision to help facilitate the process of making the final choice.