New real estate investors sometimes come to the game with inaccurate ideas about what it will be like to become a landlord and collect “passive” income on a rental property. They may even think they can maximize profits by skipping out on third party contracts for things like maintenance or property management, and just handle these issues themselves, as they arise.
However, owning a rental property isn’t easy. If you decide to forgo a contract with a reputable property management company, your bright investment idea can quickly send you into a spiral of unexpected headaches, hidden costs, and legal trouble.
When Do I Need a Property Management Company?
Anyone who purchases any rental or investment property should at least consider the option of working with a property manager.
Your property management company will take care of finding and approving tenants, drafting and renewing leases, conducting routine maintenance, finding subcontractors for upgrades or remodels, collecting rent, handling tenant complaints, and even pursuing evictions when necessary, all on your behalf.
If your investment portfolio consists of one or two single-family homes, you may very well be able to handle all of this on your own, but when dealing with multiple units or larger properties, projects and issues can begin to pile up and get out of hand. Whether you own one house or a city block, you only have so many hours in the day to handle these types of issues.
A world-class property management company like Home365, with offices in Las Vegas, NV can do any or all of these things for you, typically for a small cut of the rent, amounting to no more than 10% for routine property management services (though highly customized packages to fully automate your operation and reduce risk may, naturally, be more).
If you’re unsure whether you need to contract with a property manager, ask yourself some of the following questions:
- How many units do I have? If you have more than one or two units to manage, imagine what your life would be like on a week where each of your tenants calls with a separate issue. A non-flushing toilet or an oven that needs replacing don’t sound like major issues on their own, but think about what happens when you have half a dozen small problems all at once, plus other tenants behind on their rent that need to be followed up with, or other issues.
- Do I have time for this? If you’re already working another job, or trying to make property acquisitions into a full-time career, it’s simply not feasible to simultaneously manage your day-to-day rental operations and be on-call for tenants with maintenance issues while also living your best life.
- How far away is my property? If you’re located in a different town than your rental property, hiring a property management company is an absolute no-brainer. Even if your investment is only in the next town over, the constant round trips will eat up gas and put wear and tear on your vehicle, constantly eating into your profit margins.
- How badly do I need to save money? If pinching every penny isn’t absolutely necessary to your operation at this stage, you’re better off getting a property manager. While high-quality property management services aren’t cheap, there is some irony in the fact that they can actually be a lot more affordable than doing maintenance, leasing, and management activities by yourself, once you’ve factored in the costs of your time, labor, acquiring specialized equipment, and third-party contracts.
- Do I want to hire my own employees? One option that splits the difference between being a DIY landlord and handing your whole operation over to a property management company would be hiring a staff of your own. The annual salary for an office manager and a maintenance worker might very end up lower than the cost of contracting with a property management firm, but you also have to consider whether becoming an employer is something you really want. Hiring your own employees subjects you to a whole new set of legal requirements and obligations that can be circumvented by working with a third-party property manager instead.
Pros of Hiring a Property Management Company
At this point, the benefits of working with a qualified property manager should be apparent. Here’s a rundown of the big ones:
- More time for yourself
- No direct responsibility for tenant complaints
- No specialized maintenance knowledge (or tools) required
- No need to interact with difficult tenants or handle evictions in person
- Risk mitigation
- Professional expertise
- Existing relationships with local contractors and advertisers
- Peace of mind
Cons of Hiring a Property Management Company
Contracting with a property manager might sound like a pretty good idea after all you’ve read, but there are potential drawbacks to any business relationship, and it’s worth considering carefully whether working with a property manager is the right choice for you.
Here are some of the things investors sometimes dislike about working with property managers:
- Loss of control. This is the major sticking point. When you hire someone else to run your rental business, you’re giving up a lot of control over how things get done. A property management firm will hire its own employees, screen and approve tenants without your input, and may even make superficial changes to the property in the course of conducting maintenance or upgrades.
- Cost. As we’ve discussed, a property management firm’s fees might be close to 10% of your rental income, which is significant. It’s also important, however, to consider the costs you’re eliminating by working with a good property manager, such as employee wages and separate maintenance contracts.
Home365 Property Management Solutions
If you’ve weighed the pros and cons and you’re ready to take your rental business to the next level, check out full-service property management plans from Home365 Property Management.