As a landlord, one of the biggest decisions you’ll make is whether you should self-manage or hire a property manager.
When you invest in rental properties, the key is to make sure that every aspect of the business is handled efficiently. Therefore, making the right decision is important.
Decision making isn’t easy. That is why today we’ll compare the advantages of each to help you make the right choice.
Benefits of Working with a Professional Property Management Company
There are many benefits when working with a professional property management company. Some of them are:
- Proper legal backing
Property management companies are in the business of dealing with all rental property related matters, including legal issues. When a tenant fails to pay rent or causes excessive property damage, you may need to take your tenant to court. A management company will handle this for you.
- Money management
By being directly involved in your property’s financial activities, you can rest assured the finances are in order.
- Better and wider networking
Property management companies know the ins-and-outs of the rental property business. They have social connections that enable them to get better pricing on services, contractors, and materials.
- Minimal vacancies
The right property management company will advertise your rentals aggressively across many platforms. With plenty of exposure, you have the opportunity to place top-notch tenants in your property.
Employing a property management company will free up your time to do the things you enjoy. You’ll be free of countless hours normally spent marketing vacant properties, annual inspections, or late-night emergency repairs.
- Fluid infrastructures
Property management companies come as an all-in-one management package. They will help you with tenant screening, rent collection, and even eviction procedures.
Benefits of Self-Managing a Property
If you choose to manage your rental properties yourself, keep in mind there’s a lot of work to be done. This doesn’t, however, mean that there aren’t a host of benefits to gain while managing your own rentals.
Self-managing your rental properties will help you:
• Avoid victimizing yourself
Sadly, not every management company is run ethically. Some engage in unsavory activities such as pocket rent from “vacant units” or receive kickbacks from contractors.
While chances of this happening are slim, doing your thorough research beforehand is necessary.
• Direct involvement in day-to-day decisions and activities
You’ll have control over things like how to collect the rent from each of your tenants, which contractors to hire for maintenance issues, and where to advertise your vacant rentals.
Making the right decisions will require you to be well-versed in matters regarding rental properties. For example, conducting background checks, evicting problem tenants, and legal knowledge regarding local landlord-tenant laws.
• Save on management fees
Generally, management companies will charge you 10% for their services. This is an expense that you can save by managing the property yourself.
However, you’ll be left to handle all expenses related to leasing your rental property. For example, legal matters, property upkeep and maintenance, tenant-screening services, and advertisement fees. All these tasks can seem overwhelming.
Ultimately, you may end up spending more by managing the property yourself despite saving on a monthly management fee.
Becoming Your Own Property Manager
If you choose to manage the property yourself, make sure you are familiar with fair housing rules and landlord-tenant law.
Fair housing rules are straightforward. The rules make it illegal to discriminate against a tenant based on certain protected characteristics.
Generally, such protected characteristics include sex, familial status, gender, national origin, disability or race.
In addition, you also need to be knowledgeable when it comes to creating important documents such as the rental application form and the lease or rental agreement.
You’ll also want to come up with certain policies. For instance, whether you accept roommates and pets, when late fees will apply, and when to file for an eviction.
Hiring a Property Manager
Use caution if you decide to use a management company. To better your chances of getting the right manager, you could:
- Look up professional directories on the internet. Visit the National Association of Residential Property Managers (NARPM) website and click “Property Managers. Or visit the website of the Institute of Real Estate Management (IREM) and click “Find a Professional.”
- You could also get recommendations from colleagues and your local apartment association.
Regardless of which method you use, vetting them before hiring them is critical. Preferably, ask them specific questions. Such questions may include:
- How long they’ve been in business? Ideally, choose a company that has been in operation for more than five years.
- How do they handle maintenance requests?
- What is their average occupancy length? Preferably, you want to have most tenants renew their lease, or at a minimum stay for the full lease term.
- What is their average owner retention rate? Shoot for companies with above 97% owner retention rate.
- What percent of the security deposit do they usually refund? The percentage should be high. Otherwise, it may indicate a problem with their tenant screening process.
- What is their average eviction rate? A vacancy rate for a good management company should not exceed five percent.
- What percentage of their tenants renew their leases? Usually, the lease renewal rate for a good property manager will be eighty percent or higher.
- Do they guarantee occupancy? If the manager can’t guarantee tenants will stick around for a certain period, chances are that their screening process is flawed.
- What is their rental marketing strategy? Marketing has now moved past classified newspaper ads and road signs. Nowadays, people consume most of their content online. Look for a management company that makes use of SEO, PPC, email and social media marketing strategies among others.
Each option has plenty of benefits that will help you succeed in the rental property business. Ultimately, the decision to hire a property management company or self-manage your rental property is largely a personal one.
Whichever route you choose, make sure you have a diligently executed plan.