Should I get a property manager for my rental properties?

June 27, 2022
● Written by
Julia

If you own rental property, then you know that it can be a lucrative investment. It’s reassuring to know that you’ll have a designated amount of money coming in from your tenants each month.

However, you also know that it can be a lot of work. This is especially the case if you live in a different location. From rent collection to repairs, it might not be feasible for you to be physically present for all of the day-to-day tasks that the property requires.

Knowing this, hiring a property manager might sound ideal. After all, who wouldn’t like to outsource the legwork of rental management to a third party? While there are benefits to going this route, there are also drawbacks to consider. 

Understanding the full picture can help you make a more informed decision and avoid unnecessary risks.

What Is a Property Manager?

A property manager is someone who will oversee the basic upkeep of your rental property. Depending on their role, they may manage all communications with your tenants and fill vacancies as they occur.

In addition to marketing and showing the property, they’ll also be responsible for screening potential tenants to ensure a good fit. Then, once the renters move in, the property manager will become their chief contact.

If they need maintenance or repairs, they won’t contact you to perform them. Instead, they’ll call your property manager. This is true whether it’s a quick fix, like a broken faucet, or a more significant repair, like a damaged roof.

Pros of Hiring a Property Manager

If you want to retain full control over your rental property, then you can choose to manage it yourself. However, there are benefits to allowing a reputable property manager to take the reins.

When you do so, you can be confident that your property is well-kept, around the clock. You can also rest assured that your tenants are taken care of, rent payments will be on time, and other issues will be resolved as they occur. Let’s take a closer look at some of the pros of property manager services.

It Saves Time

While investing in a rental property can be an excellent source of supplemental income, it’s unlikely to be your only source of income. Most landlords also hold full-time jobs elsewhere, which take up a majority of their time and attention.

When you self-manage your property, you have to shoulder all of those tasks in addition to your day job. This can cut into your personal time, and leave you feeling stretched too thin.

When you hire a local property manager to take care of the work instead, you can free yourself from those everyday responsibilities. Then, you can pour that extra time back into your family, career, and hobbies.

It Improves the Tenant Experience

Happy, content renters are more likely to respect a rental space and treat it like it’s their own. They’re also more likely to pay their rent on time and stay in the property as long as possible.

Yet, the opposite can also hold true. Unhappy or disgruntled tenants may lag on their payment, and could even leave if the situation worsens. This can leave you with an expensive vacancy to fill, which isn’t always easy to do from afar.

A property manager is skilled in optimizing the tenant experience. They’ll respond promptly to requests and remain available to support your renters’ needs. This can help you reduce tenant turnover and avoid unnecessary vacancies.

It Saves Money

Hiring a property manager can also be an economical decision. While there will be fees associated with this service, consider how those prices compare to the costs you’d incur if you managed the property yourself.

In addition to travel costs, think about how easily a small maintenance issue can snowball into a major, expensive repair if left untreated.

A property manager can stay on top of both on-call and preventative maintenance services, keeping a close eye on the condition of your property and ensuring it stays in good shape.

In addition, they also know how to communicate with tenants so you can receive your rent on time, and will fill vacancies as quickly as possible. Both of these steps improve your cash flow and save you money in the long term.

Cons of Hiring a Property Manager

While there are obvious advantages to hiring a property manager, there are also potential risks and downsides to consider. Let’s review a few of the cons of property manager services.

You Have Less Control

Allowing someone else to manage and make decisions for your property is a little like riding shotgun in your own car. There might be times when you want to get behind the wheel, but they’re the ones in the driver’s seat.

Ask yourself if you’re willing to give up control of the property, and allow yourself to answer honestly. If you think this step will be too difficult, then self-managing might be a better option for you. Keep in mind that a property manager might not approach every situation in the same way that you would, and you have to be comfortable allowing them that authority.

If the thought of losing autonomy raises your eyebrows, it’s best to continue managing the property yourself, at least while you continue to weigh your options.

The Contracts Can Be Complicated

Before you can hire a property manager, all parties have to agree to common terms and sign a contract. While these contracts can vary with each company, most of them are complex. In addition to major sections, there may also be a substantial amount of fine print to read through.

Before signing on the dotted line, it’s important to read and understand the contract in its entirety. You need to know details such as the manager’s after-hours work policy, screening criteria, eviction process, and more.

Property Managers can be Expensive

There are costs associated with hiring a property manager, and they can reduce your overall profit margin. Some common pricing models include:

  • Charging a one-time fee to find and lease to the tenant 
  • Charging a monthly fee
  • Requiring a reserve to be held with the property manager
  • Marking up the cost of service

Make sure you understand these costs before entering into any type of hiring negotiations. Calculate the profit margin that you need to make off the property, and consider whether a property management company will cut into those profits too much to make the investment worthwhile.

To maintain visibility into every facet of your financial operations, consider implementing accounting and banking software to help automate some of the operations. Platforms like Nophin help you categorize expenses, calculate returns by property, digitally collect rent, and more.

How Much Does It Cost to Hire a Property Manager?

There is no rule that dictates how much property management companies can charge. Again, the costs will vary depending on the pricing model.

If the company charges a percentage of your monthly gross rent, you can expect it to be between 8% and 12%. This means if you charge your tenants $1,500 each month, the property management fee can be around $150.

Note that if the property manager is the one who finds the tenant for your property, they may collect a higher monthly percentage.

If your property is vacant, most managers will either charge a fixed fee, or they’ll estimate what the monthly rent will be once the vacancy is filled, and charge a percentage accordingly.

If the company charges a flat monthly fee, the charge usually depends on several different factors, including:

  • The square footage of your property
  • The type of property
  • The specific property management services provided

On average, most flat fees will set property owners back around $100 per month, though this can vary greatly depending on the size and scale of your property, as well as your local market.

In addition to the basic monthly fee you pay to procure the property manager’s services, there may also be other costs to consider. These include:

  • Routine inspection fees
  • Costs to maintain and repair the property
  • Fees to lease vacant properties
  • Fees to oversee vacant properties
  • Contract setup fees
  • Contract termination fees

Not every company will charge all of these fees, but it’s important to be aware of them. Always make sure you understand every potential cost before agreeing to any type of contract. Some property managers may charge less if the landlord handles certain aspects of the process, such as rent collection or leasing, so it’s always helpful to ask.

Simplify Your Approach

As you think about whether or not to get a property manager, keep your long-term goals in mind and consider what will work best for your monthly budget, as well as your lifestyle.

Whichever direction you choose, Nophin is here to make the financial part a little easier. Our technology is built for modern landlords and is designed to work for you and your property manager, should you choose to work with one. Sign up for free today to get started!

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Please note: Nothing above should be construed as legal, investment, tax, nor financial advice. This content is for informational purposes only. Consult a lawyer and/or an accountant if the above is right for your personal situation.

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