There is no question that managing your own rental property can be a lot of work. Regardless if you have one property or five you will inevitably have to deal with an unexpected issue at some point along the way. Some of these issues will be minor while others will completely engulf your business. Like almost everything else in the world of real estate deciding on a property manager is a matter of personal choice. If you have a good system in place and you are comfortable with the workload a property manager isn’t for you. However, if dealing with even one property starts to engulf your business you should consider utilizing help. Here are three pros and cons in dealing with a property manager.
- Cost. Depending on your perspective you can take cost as a pro and a con. Let’s start by looking at it from a negative. There is no question that the most common reason landlords don’t hire a property manager is for the cost. The monthly fee paid eats into profit margins and monthly cash flow. Most property managers charge 10% of the monthly rent collected. In the grand scheme of things, this is money well spent. However, if your cash flow is tight this could wipe away any residual money the property brings in. You will get plenty for your money, but do you want to spend it all on property management? Most landlords will say no, but it truly does depend on your long-term plan with the property.
- Lose control. Most real estate investors are micromanagers by nature. They need to be in the middle of everything and know what is going on at all times. When you enlist the services of a dedicated property manager they assume most of the responsibilities with the property. You may be asking why this would be thought of as a negative. For every landlord who wants to let their property manager handle everything, there are some who simply have trouble letting go. They need to know everything going on and want to be in the middle of everything. A good property manager has their own rolodex of people and their own way of doing things. If you are not willing to let go of the property, you may want to reconsider a property manager.
- Time gained. Who wouldn’t like more hours in a day? While a property manager won’t technically help you find time, it does free up more hours to use as you please. For busy investors, a few extra hours a week allows them to start or finish projects, find new deals and explore marketing options. Instead of dealing with tenants and minor property issues you let your property manager field phone calls and drive to and from the property. In many respects, with a property manager it will feel like you don’t even own the property. You will still deal with major items but for the most part you can sit back and collect checks and not have to worry about the daily grind of a rental property. It is tough to put a price on this.
- 3rd party buffer. It can be difficult even for the most seasoned landlord to separate personal feelings while running their property. They may have rented the property to a young couple they have a lot in common with, and really like. A few months after the start of the lease they are two weeks late on the rent and not returning phone calls. Playing the role of the bad guy and getting to the bottom of a situation like this is not for everyone. Having a buffer between you and the tenants helps expedite and resolve issues. A property manager needs all the rent coming in to get paid. Having a middle man handle the uncomfortable aspects of management is a load off your mind.
- Organization. It is amazing how many landlords know how little about their rental. They may have a roundabout idea of revenue and expenses but don’t know every dollar going out. One of the first things a property manager does is look at the books and pour though the numbers. In a few days you will see where you can trim the fat. In most cases, your property manager will have personal contacts that may be able to offer a lower price on snow removal, lawn care and simple maintenance. Either way you will be able to make some changes and tweaks that will impact your bottom line.
Don’t base your decision solely on how many rentals you own. One difficult property can be as time consuming and challenging as owning three. Examine property management as a return on investment. Are you willing to invest in a property manager to help free up time and focus on other areas of your business? With that, can you withstand the loss of cash flow every month? If you have a long-term view of the property, the answer is almost always yes. However, if you only intend on holding the property for another year or two you may not be willing to give anything up. Always make your decision on what is best for you and not what you think you should be doing.