As the owner of an investment property, one of the first decisions you’ll have to make is whether to become a self-managing landlord or hire a professional property management company. There are pros and cons to both and your day-to-day life could look pretty different depending on which option you go with.
Self-managing your rentals could be quite rewarding, however, there are a lot of responsibilities associated with it. To successfully manage your units and tend to your tenant's needs, you’ll need to dedicate a lot of time and energy to the job.
On the other hand, hiring a property management company means you’ll have a real estate and management professional to handle everything on your behalf.
If you want to learn why investors partner with property management firms, this is the post for you!
Understanding Property Management
Property management is a practice in which a third party takes on the responsibilities associated with overseeing a rental property on behalf of the owner. Generally, a professional property management firm is hired by a property owner to take over the day-to-day operation, handle tenant concerns and provide qualified advice.
They can help you ensure the health of your investment property. For instance, if your property is vacant it’s not only failing to bring in passive income, but it’s also generating costs in the form of maintenance fees.
However, a property management company would be able to market your vacant rentals and screen prospective tenants to ensure that vacancies are filled quickly and by qualified renters.
A management company would also be able to help you with leasing, rent collection, coordinating maintenance and repairs, financial reporting, and so much more. A qualified property management company would also be able to help you see solid returns on your investment. Here are some of the ways they can help you:
- Collect monthly rent promptly and address instances of late or missed payments on your behalf.
- Craft a detailed lease or rental agreement and walk the tenant through it to ensure that all parties understand their rights and responsibilities.
- Handle property inspections and maintenance by coordinating with their in house-team or their network of vetted industry professionals.
- Implement systems for tenants to make emergency maintenance requests and address them promptly on behalf of the property owner.
- Keep detailed financial records to ensure that property owners are always informed of the financial health of their rentals.
- Ensure that the rentals under their care are all legally compliant to protect property owners and tenants.
Costs Associated with Property Management
For those still unsure of whether or not to hire a property management firm, the cost can be a major deciding factor. Property management fees can vary based on the types of services offered however generally speaking the fees can range from 8-12 percent of collected rent.
This may sound like a lot, but a qualified company will essentially allow you to take a hands-off approach. If you lack the entry experience and local connections you may find self-management to be daunting. What’s more, there is a greater risk of making costly mistakes if you’re a new landlord.
Is Property Management Worth It?
Many property investors find it beneficial to hire a professional management firm. The first thing to ask yourself is, do you want to be a landlord? If you don’t, but you still want to enjoy the benefits of generating rental income from an investment property then hiring a property manager is the right move.
You also have to ask yourself whether or not you have the time and necessary skills to operate a successful real estate investment. If you’re self-managing your rentals you’ll be responsible for tenants' comfort, and safety, ensuring that your property is legally compliant, and so much more.
Consider the expertise that property managers come with:
- Marketing - Property management companies are well-versed in real estate marketing and understand the local competition very well. This allows them to craft effective marketing plans to ensure that your rentals are seen by as many prospective tenants as possible.
- Local Connections - Because they live and work in and around the communities where your rentals would be based they’ll have a network of trusted and pre-vetted vendors to lean on.
- Tenant Management - Working to ensure that tenants are safe and happy with their rentals is hard work. A property manager knows how to cultivate and maintain a strong working relationship with tenants to reduce turnover, thus protecting your rental income.
- Legal Knowledge - Property management companies ensure that they stay legally compliant and up-to-date on landlord-tenant laws, security deposit laws, the legal eviction process, and more. You’ll be able to rest easy knowing that your business is always legally compliant.
How to Find a Good Property Management Firm?
Start by connecting with your local network of real estate professionals. They may be able to refer you to several companies. Attending networking events could also allow you to meet with some firms.
Once you’ve found a few, you want to do some additional vetting. Look at their reviews and ask them to provide some references. You also want to ask them questions about how their conduct their services and make sure that they have a strong working knowledge of the neighborhood your rental is based in.
Don't forget to tell them your goals. Make sure that they understand you expectations and have a plan to deliver on them. Finally, inquire about their fees for their services. Ask whether they offer flat rates or go off a percentage of the monthly rental income.
Property management firms can offer real estate investors peace of mind. They’ll take on the task of managing your rentals, freeing up your time to pursue other endeavors. The best investment companies will be able to help you maximize your ROI.
If you’d like to work as a property management expert contact the team at Gifford Properties & Management. Our property managers are dedicated to helping you reach your investment goals!