Are you close to your rental property?
The distance between you and your property has a significant impact on your ability to manage. If your property is not in the same town as you, managing becomes a much higher responsibility. It’s harder to find tenants, deal with complaints, respond to emergencies, and to take care of maintenance issues.
If you were to manage a property in another town, you must consider the added costs of travel. Going back and forth between your residence and your rental property can quickly become very costly. On top of an added cost, your involvement with the property also takes a massive toll. For example, your tenant screening process can only take place when you are in town or through email, calling, and Skype.
Typically when you find yourself in a situation like this, hiring a property manager makes sense to protect your assets. Managers can screen tenants, handle maintenance requests, complaints, and ensure that your rental property is operating in a profitable state.
How Many Rental Properties Are In Your Portfolio?The bigger your portfolio, the greater your responsibility. Maintenance issues, complaints, tenant screening, and vacancies. If your rental properties are spread out ‘you’ll also have to account for all the extra time that you will spend going from site to site, in addition to managing the cash flow of each property.
When a company grows, they hire new employees to manage the workload. The same logic applies to your portfolio. Depending on your budget and workload, hiring a property manager to help you manage your units is a profitable decision when you have an extensive portfolio of units spread out from each other.
Are You Experienced In Managing Properties?Experience plays a huge role in managing a rental portfolio. When you are dealing with hundreds of thousands worth of property, learning can become a costly process.
For a first-time investor, hiring the wrong maintenance worker or taking a long time to fill a vacancy which will affect your properties cash flow. Learning curve mistakes, for instance, failing to understand the fair housing laws could result in a tenant accusing you of discrimination, or being cheap for not fixing a broken pipe in time will both result in a lack of return on your investment.
Equally as costly to your business is hiring an unqualified property manager. If the person responsible for your portfolio is in over their head, your property ‘won’t be able to maintain positive cash flow. ‘It’s crucial when you are seeking a property manager that you talk to multiple companies to see who would best benefit you.
Do You Have The Budget To Hire A Property Manager?Before hiring a property manager, you need to review your budget and expenses. Typically, all managers will charge a fee of between 4 – 10% of your overall monthly gross income from the property. For a single home, the fee is closer to 10%. The fee for a portfolio with ten plus investments is close to 4 – 7%.
To put things into perspective, a stand-alone family residential property which has a gross income of $1,000 per month will have a management fee of 10% or $100, whereas a 5% managers fee would only be $50 per month. This is not an attractive figure for high-level professionals. On the other end of the spectrum, say you have a portfolio which has a monthly gross income of $30,000, a 5% management fee would be $1500. This figure is a lot more attract than $50 and will attract high-level professionals who are well versed in managing large portfolios.
In addition to a management fee, property managers can charge a fee for finding you tenants commonly referred to as ”Placement fees”. They can range from a few hundred dollars to a full month’s rent.
When you are hiring a property manager, it’s crucial to look at the contract they present you. SnapInspect suggests hiring a legal representative to scan the documents and alert you of any hidden costs.
Are you able to give up control?Property managers can be in charge of everything from collecting rent to filing leases and taxes for the property. Are you willing to give someone else that much control over your investment? While they may boast experience and a piece of paper that says they are certified.
Are You Comfortable With The Liability A Property Manager brings?
Property managers make decisions on behalf of you. They can make mistakes which are on your behalf. It’s common for property management contracts to have a ”hold harmless” clause. This clause is in place to protect the manager, apart from extreme cases of negligence, this places the responsibility on the portfolio owner.
Say your property manager break any fair housing laws when looking for tenants and has a complaint lodged against them because you are the property owner, even though you are not responsible for the law violation.
How Much Patience Do You Have When Dealing With Tenants?Dealing with evictions, complaints, maintenance issues, and other less glamorous aspects of property management can quickly take a toll on you. Hiring a property manager means that you have a skilled professional who is well versed in handling tenant conflict.
They know how to defuse a situation before it escalates, understand tenant laws, and can act as the middle-man for problems between the homeowner and tenant. A tenant will typically operate more professionally when they know that the property manager does not directly own the property and is acting off orders to please all parties.