As a real estate investor, one of your primary goals is making a profit. In that quest, added expenses that eat away at that profit can be detrimental.
But sometimes it’s necessary to pay extra fees for services that protect and grow your investment. If you own rental property, one of those costs may be hiring a property manager to manage it on a full-time basis.
Do you need a property manager?
In this article, we’ll explore the advantages and disadvantages of a property manager to increase your real estate investing education so that you can make a wise decision.
What Does a Property Manager Do?
A residential property manager — or a property management service —oversees daily financial duties for a residential or commercial investment.
They're a bit like an on-site maintenance supervisor, except they manage the investment rather than repairs and upkeep.
The primary job of a residential property manager is to keep buildings occupied, and is the point person for relations with current tenants.
A residential property manager or property management service’s responsibilities include:
- oversee marketing and advertising efforts
- follow up on inquiries from potential tenants and lead property tours
- approving and admitting new occupants to the property
- drawing up and enforcing agreements
- collecting rental fees
- answer and fix complaints residents have
- resolve disputes between tenants
- if eviction is necessary, the residential property manager handles filings and legal proceedings
Property management services generally don't include doing repairs, but they choose who will.
They vet, negotiate with, and schedule contractors to work on the property. The residential property manager makes regular inspections, looking for issues and handling emergencies.
Finally, a residential property manager is the point of contact for the owner. They maintain and submit all the property's financial reporting.
They also talk to owners about the issues affecting their investment. These include:
- vacancy rates
- physical maintenance
- tenant issues
- financial liabilities
- and more
How Much Does A Property Manager Cost?
Simply put, how much a property manager costs hinges on how much responsibility they take on.
Some owners prefer to handle a few property management details themselves and be active in their investment. Others want to let property management services handle it all.
Rates also vary according to:
- property size
- Residential vs commercial
- number of units
In a standard agreement, a management company may charge between 8% and 12% of the property's monthly rental value.
They also charge for added expenses. Some companies charge flat rates, but most charge a percent of rentals.
The property manager charges a setup fee, usually no more than $300, to set up your account. Most management companies also charge new tenant placement fees. These cover all the costs of populating the property, including:
Other potential charges include lease-renewal fees and maintenance expenses.
Property Manager Advantages
Some of the benefits of hiring a residential property manager include:
More Time for Owners
The biggest attraction of a residential property manager, of course, is that they take daily responsibilities off the owner's back.
Owners don't have to deal with day-to-day issues, freeing up their time. This is especially helpful for owners who hold multiple properties.
Handling Tenant Intake and Relations
A professional residential property manager screens all tenant applications. They know what qualities and warnings to look for.
They also handle all the problems that may arise between tenants, so you don't have to get involved.
Timely Rent Collection and Low Turnover
Property management services make sure the rents come in on time. They know how to handle delinquent or missing payments and enforce late policies.
A great professional residential property manager also tries to keep their tenants happy. That makes for lower unit turnover, consistent income, and less reluctance to the occasional (but fair) rent increase.
Property Manager Disadvantages
The main drawbacks to hiring a residential property manager involve expenses. We've mentioned a few possible add-on costs above.
Some property management services may charge "surprise" fees, like:
- cancellation fees
- term renewals
- other fine-print expenses
Some owners might be nervous about giving up day-to-day management of their properties.
A residential property manager operates best with only occasional contact with the owner.
They handle everything themselves and won't loop you in on every incident on the property. You may find it hard to live with your lack of involvement.
If you're the kind of owner that likes to be involved, you might be better off managing the property yourself. Just understand it's a full-time job.
The Bottom Line: Property Manager Services
When you own rental residential properties, you have responsibilities you must answer to. A property manager or property management services can take on most of those burdens.
It comes down to your real estate strategy: do you expect to be largely active in your rental properties, or largely passive?
Once that is decided, it makes it obvious whether or not you need help managing the property.