Many newer real estate investors grapple with deciding whether to engage a property management company. One of the big concerns, of course, is how it will affect the bottom line; typical management fees are around 5 to 10 percent of a property’s gross monthly income.
On the other hand, a property manager’s services can save you a great deal of time and hassle, and even help you bring in more money. They deal with tenants, maintenance, emergencies, contracts, collecting the rent, and more, all while protecting your investment and working to maximize its returns.
Below are some considerations when deciding if you should use a property manager for your residential or commercial investment property.
Can You Afford a Property Management Company?
Management fees are not particularly high at 5 to 10 percent, but may be enough to impact your investment math. That shaves off $100 to $200 per month from a property renting at $2,000 per month, which adds up to $1,200 to $2,400 over the course of a year. If this eats up most of your profit margin after covering the mortgage and other expenses, it may not be worthwhile.
Are You Close to Your Investment Property?
Proximity to your property is not necessary, but it is definitely helpful. If you do not live nearby, it will be challenging to meet potential tenants, address tenant complaints or emergencies, perform property inspections or minor maintenance, etc. An agent from a local property management company provides you with a convenient presence if you do not live within easy traveling distance of a property.
How Many Properties or Units Do You Own?
Every property or unit takes up time and requires attention. Obviously, the more you have, the more time and attention needed for your real estate investments. When they are a supplemental income stream in your busy life, this can quickly become overly stressful across multiple properties. A property management company may be the only way to stay sane and on top of everything!!!
Are You Prepared to Manage Your Own Properties?
Successfully investing in rentals requires some know-how. Do you know how to screen tenants and deal with contracts? Do you have trustworthy contractors to handle maintenance and repairs? Are you up on local laws that govern the landlord-tenant relationship? If you have no property management experience, professionals can simplify things, minimize expenses, maximize profits, and even spare you from litigation.
How Enthusiastic Are You About Dealing with Tenants?
Someone has to find tenants, screen them, collect rent, handle their concerns, deal with contractors and move-out inspections etc. If you do not have the time or the inclination to be hands-on, engaging a property manager holds considerable appeal.
Do You Struggle with Property Vacancy?
Rental properties must be occupied to produce revenue. Every day and month that they sit empty, you are incurring the costs and receiving none of the income. Property managers are experts at finding, screening and renewing tenants. If you are missing too many rent payments due to lack of occupancy, a property management company’s fee will probably be worth it.
Are You Willing to Accept Some Liability?
While a good property manager reduces your risk of lawsuits, the wrong one—or a good one that makes a mistake—can lead to litigation. Many property management companies have “hold harmless” clauses in contracts with property owners that protect them from liability (except in cases of gross negligence). For example, if your property manager violates the Fair Housing Act, the liability may very well fall on you, even though you had nothing to do with the issue.
