It handles most — and often all — of the tasks related to owning rental properties. A property manager oversees tenant turnover, collects rent, screens tenants, runs background checks, performs property maintenance, and does many other things you would otherwise do as the property owner.
If you hire a property management company, you pay a management fee to make most of the headaches of rental property ownership go away.
When you own a short-term rental or vacation rental property, there’s a lot of work associated with keeping the profits coming in. You need to find and market to people who want to rent the property. You also need to handle the basic mechanics of having short-term guests. That’s what a rental management property company does for you.
Handling things like tenant turnover, background checks, and day-to-day upkeep isn’t easy, especially if you don’t live nearby. If you can’t easily visit, it’s hard to know if guests left at the proper time. Arranging for check-in is a challenge, too. These logistics can be hard even when things are going well, and they could be too much to manage even if you live close by.
In many cases, people who own short-term or vacation rentals outsource these tasks to a property management company. The company makes sure everything runs smoothly.
Choosing whether or not to use property management companies is a hard decision for many real estate investors. Some wouldn’t dream of investing in real estate without a property management firm in place before closing on a respective deal. Others, however, struggle to break free of the “do-it-yourself” mindset that prevents them from accomplishing more. As it turns out, only one thing is certain: using a property management company isn’t as obvious as I would have liked to assume. You may ask yourself questions like “What does a property management company do?” or “Are property management companies worth it?” If for nothing else, I am convinced the benefits of using a property management company far outweigh the negatives.
It is fair to say the argument stems from the cost one must absorb to work with a property manager, but I digress. The cost isn’t so much a negative, but rather an investment. While it does, in fact, cost money to hire a third-party manager, I can assure you it’s well worth the price. What’s more, their involvement could very easily increase the chances of growing your bottom line. If that’s not enough, here are some of the important tasks a good property management company will contribute to your rental portfolio.
The Property Management Team
When hiring a property management company, the team that will you will work with typically includes:
- Property Manager
- Assistant Property Manager
- Property Administrator
- Property Accountant/Accounting Team
- Maintenance Engineer(s)
Do I Need A Property Management Firm?
There are plenty of investors who fully support the use of a property management company. However, there is no rule stating that anyone needs a property manager. While property management companies have several advantages, they are so costly. Therefore, plan on hiring a property manager if:
- You plan on acquiring multiple rental properties. The more rental properties one has in a portfolio, the more necessary property management firms become.
- You are not within proximity of your asset. If the rental property is far from where you live, it’s a good idea to hire a manager who can keep better tabs on it.
- You don’t want to actively manage the property. If you view the property as a source of passive income, you’ll need a property manager to take care of routine maintenance and daily operations.
- You don’t want to be an employer. Hiring employees like a resident manager comes with several responsibilities such as payroll and legal requirements. A property management company is not your employee; they are independent contractors. Using one will save you the burden of becoming an employer.
- You can afford the added cost. Property managers will charge a percentage of the rental fee, which is well worth it. The same fee can rid landlords of a lot of headaches and free up a lot of their time to invest in other places.
- You have limited time. Even if you don’t mind managing your own property, you may not be able to actively work on the property every day. If you plan on focusing more on running your business, hiring a property management company may be your best course of action.
- You can afford it. When choosing a property management company, you can expect quotes ranging from 5% to 10% of your rental revenue. The exception to this would be in the case of a down market. In this case, it is wise to continue managing the property yourself or with the help of a resident manager.
- You have a property in the affordable housing program. Usually, in programs like these, owners may receive grants, tax credits, or loans with low interest rates in return for renting to those with low-income levels. With these benefits also come more complicated rules you must adhere to. Having a property management company that knows the ins and outs of these rules can help exponentially in the long run.
What Does A Property Manager Do?
The cost of property management is a valid argument, especially when you consider detracting from your bottom line, but I can assure you it’s doing anything but. Yes, a property management company will indeed cost additional money to hire, but I like to think of it as an investment, as opposed to a cost. You see, a good property manager can very easily return more than their own initial cost. After all, the average property management company will typically award investors with the following:
- Property managers will collect rent from tenants
- Property managers will listen to maintenance requests and address the problem
- Property managers can deal with defaulting tenants that are months behind in rent
- Property managers will market a subject property to limit vacancies
- Property managers will keep detailed records of everything happening at the property