Hiring a property management company can be great for your business.
One of the biggest decisions you'll make as a landlord is whether you should hire a property management company. Many landlords manage properties on their own or with the help of a direct employee. But sometimes landlords need more help, and that's when a property management company might make sense.
Property management companies can be a huge asset to your business and are usually well worth the cost which is typically about 10% of the monthly rent for a single family rental home. Carefully review the factors discussed below to determine if hiring a property management company is the right move for your business.
Management companies deal directly with prospects and tenants, saving you time and worry over marketing your rentals, collecting rent, handling maintenance and repair issues, responding to tenant complaints, and even pursuing evictions. Most importantly, a good management company brings its know-how and experience to your property, giving you the peace of mind that comes with knowing your investment is in good hands. Finally, a management company is an independent contractor, so you avoid the hassles of being a direct employer.
Although hiring a property management company has many advantages, your particular situation must justify the cost. Even apart from the cost, relying on a property management company is not for everyone. Consider the following factors to determine if hiring a property management company would be a good decision for your business. You should consider hiring a property management company if:
You have multiple properties or rental units. The more rental properties you own and the more units they contain, the more you're likely to benefit from a management company.
You don't live near your rental property. If your rental property is located far from where you live, hiring a property management company can be invaluable in dealing with the many issues that you will not be able to handle from afar.
You're not interested in hands-on management. Many landlords look forward to the challenge of finding good tenants and the rewards of maintaining a safe and attractive property on their own. However, many new landlords underestimate the work and resources involved, especially when something goes wrong. If you view rental property ownership strictly as a financial investment and want little or nothing to do with the day-to-day management of your properties, consider hiring help to manage your property.
Your time is limited. Even if you enjoy hands-on management, you may not have much time to devote to your business, especially if land-lording isn't your day job. And if you prefer to spend your time growing your business, including searching for new properties, arranging financing for renovations, or changing your business structure, then a management company may be a good way to spend your money.
You can afford the cost. Hiring a property management company is an attractive option if you can afford the fees. When interviewing companies, expect to hear quotes ranging between 5% and 10% of what you collect in rent revenue. 10% would be the typical rate for one single family rental home. If it's a down market and you're able to manage things yourself (or with the help of an employee), you may want to keep doing so until the market turns around.
You're suddenly inundated with management tasks. If your business is growing, at some point you may find that you need a substantial amount of help to manage everything properly. At that point, it might make sense to hire a management company.
You don’t know the laws or rules regarding the rental business. Landlords and investors often get excited about the potential income and wealth they can build, but fail to become experts in the business due to lack of interest, lack of time, etc.. This creates liabilities and can cost Landlords significantly, thus wiping out any potential profit. Most cities have stringent rules in today’s market. Good property management companies know the laws and rules of your local municipalities and have processes and systems to deal with them efficiently.
You don't want to be an employer. If you hire a direct employee to help with your property, you become an employer. You'll have to handle payroll and deal with a host of other legal requirements and considerations. But, because a property management company isn't your employee (it's an independent contractor), and neither are the people who work for the company, by using one you avoid the hassles of being an employer.
By: Bradley Cohen, Owner of The Home Store