As many rental property owners would tell you, it is quite logical to ask yourself whether you would like to hire a property manager or whether you would prefer to handle the ins and outs of property management yourself.
There are advantages and disadvantages to hiring and managing a property management company.
In this article, we will discuss some of the finer relevant points so that you can make an informed decision.
Firstly, we will look at what property management companies do to save you time and effort; thereafter, we will look at what you could do to manage your own property and whether it is worth it.
What Property Management Companies Do For You
Licensed Property Managers are qualified personnel whose expertise is handling rentals on behalf of and in favor of the owner. Let us have a look at the typical property management responsibilities. This will give you an idea of how much work they will get done and how much hassle they will save you in the end.
A good property management company saves you time by taking care of the day-to-day business of renting out a unit, be it a beachside apartment or family house. This will include a number of tasks, such as:
- Advertising and marketing
- Screening and managing tenants
- Handling leases and renewals
- Collecting rental payments
- Inspecting, maintaining and repairing properties
Bear in mind that it is possible for you, as a rental property owner, to handle some of these responsibilities if you wish to do so. You could always discuss with your property manager the tasks you want to take responsibility for.
Let’s expound a little more on seven real estate duties that save you effort, time and money.
Rental Property Pricing
The property management company of your choice will secure a higher rental price since they are keenly aware of prices in the surrounding area.There is no benefit in placing the rent price so high as to turn away potential tenants. The best property managers will strive to find a competitive rent price for your rental properties, maximizing the monthly income generated.
Advertising and Marketing
This is an important point since a vacant property will not make any money and could cut your profits as time passes.If you manage a property on your own, it is possible that the other obligations you have might not allow you time to fill such vacancies as soon as you would like.
If you hire a property manager, they will ensure that the rental unit is advertised in the right places and marketed in the right way to procure tenants and reduce vacancies.
Showings and Tenant Screening
It is not enough to just advertise and market the property. Somebody will have to be available to hold showings with interested parties when it is most convenient for them.
Once somebody is interested in the property, a certain amount of interviewing and tenant screening is still involved. This is also an important step to avoid problematic tenants and unwanted evictions.
Most property managers have systems in place to run background checks. They treat tenants as clients and not as acquaintances, so they are not swayed by the hopes and dreams and stories of the prospective tenants.
Property management companies will handle the execution of the lease agreements in a professional manner. This will certainly save you a lot of time and hassle. You won’t have to concern yourself with the finer details and legal aspects of the lease if you prefer not to.
Inspecting, Maintaining and Repairing
An experienced property manager will have a network of maintenance contacts and companies who provide quality work at affordable prices.
Having somebody handle the regular inspection, maintenance and repairs, particularly if you have multiple properties, will save you time and the annoyance of getting calls at odd hours of the day.
Accounting and Collecting Payments
You might be able to have the tenants transfer the rental payments directly to your bank account. However, property management companies typically collect rent. They happily follow up on late payments as part of their monthly to-dos since collecting rent will also mean procuring their own property management fees.
In addition, it is common practice for property management companies to take care of the necessary accounting for your property. As with the other points mentioned so far, you might have the skills and software to handle this yourself, but getting somebody else to do so will save you time and effort.
Laws and Regulations
If you were to manage your property by yourself, you would need to be aware of laws governing real estate where you live. However, in case you hire a property manager, you can rest assured that as a certified property broker, they have studied the necessary legal aspects of property management service as part of their licensing.
In this regard, you can place your full trust in the legal expertise of Lotus West Properties as a board member of the Apartment Association of Greater Los Angeles (AAGLA).
When Should You Hire a Property Management Company?
Let us point out three reasons to consider hiring a property manager:
You live far from the property
What if you do not live close enough to the rental property to handle all the property management tasks effectively?
It is also not uncommon for a real estate investor to purchase an investment property elsewhere in the country.
Additionally, we live in a world where more people work remotely and travel constantly. If any of this describes your circumstances, you may want to consider having a property manager take care of your month-by-month rental property business.
You own several rental properties
What if you own a number of rental units or if you own properties in different locations? Many rental property owners enjoy a varied real estate portfolio.
If you have a sizable portfolio, it would make sense to have a good property manager care for them instead of managing multiple properties without any help.
You would like to focus on investing or your own work
What if your full-time job requires a lot of your time? If that is the case, a rental business on the side could be unnecessarily time-consuming and best left to a dedicated property manager.
On the other hand, it could be that your interest is in real estate investment and not property management. In that case, you probably prefer to focus on finding suitable investment properties and spend time developing your portfolio. This could be a good reason to hire a property manager.
Hiring a property manager will afford you a great amount of freedom to spend your time on something else, be it your family or even some or other hobby you enjoy.
Lotus West Properties take their responsibility as a property management company seriously and charge a minimal management fee for Los Angeles, Hollywood and Mailbu rental properties.
Make sure to read over the FAQ section to ease all of your concerns.
What You Can Do to Manage Your Rental Property
If you are genuinely contemplating managing a single property or even a few properties you own, let us now discuss some of the benefits, and well as some of the concerns that you may have.
One of the first things to consider is your own management style. Property managers handle a lot of responsibility for each property. If you have a more hands-on management style or you are the kind of person who prefers to take a more in-person approach, then by all means you could decide not to hire a property manager.
Some owners prefer to maintain control over their rental units and some are quite passionate about this kind of property business. Lastly, some owners may even prefer to have a relationship with their tenants from the tenant screening process on.
Saving Money on Fees
This is basically the key point when it comes to making this kind of decision. Choosing not to hire a property manager could potentially save you money depending on some essential factors.
Look at this article if you want to get some ideas on making your money go further in real estate investing (1).
Initial fees. The property management company can rightly charge their well earned fees. Finding tenants and executing leases generates costs. The initial fee could up to 100 percent of the monthly rental price. Expect to pay on average 50 percent.
Recurring fees: Thereafter, property managers usually charge from 8 to 12 percent of the established rent price. Again, expect to pay on average 10 percent.
Since a good property management company will usually handle everything related to maintenance and repairs, they might also charge a maintenance fee as a percentage of the maintenance cost.
The question is whether the cost of having a property manager is worth it? Well, only you can make that final call.
When Would you Not Hire a Property Management Company?
The following are reasons why you could decide to manage your own property:
You have stable tenants, or your live close to the property
Clearly, if you already have good tenants, particularly if it seems that they will stay for a long time, perhaps you could handle everything by yourself. This would also be the case if you live close to the property and can easily find potential tenants.
You manage a single property
As often happens with single-family properties, it is relatively easy to handle everything if there is only one contact person or if you manage a single well-maintained property.
You have a lot of time
If your line of work won’t require a lot of your time and attention, this might leave you with enough energy and time on your hands to fill the role of the property manager.
It all comes to balancing how you would like to invest your time and money. A number of factors will determine if it is in your interest to hire a property manager or not.
The factors include whether you own a single property or multiple investment properties and how much time you intend to spare to ensure that they are well maintained and ultimately well managed.
The clear benefits of hiring a property manager include their expertise in handling:
- advertising, marketing and pricing your property
- showings and tenants screenings
- leases and legal aspects of property management
- accounting aspects and rent collecting
- maintenance and repairs
Although managing a property on your own potentially means saving on monthly expenses, it is worth mentioning, as a final point, that there have been cases where paying for a property manager actually reduces your overall management expenses, considering all the points mentioned in this article.