Buying a rental property can be a great investment if done right. You can build long-term wealth through real estate. But being a landlord also comes with responsibilities. Managing the property yourself or hiring a professional property manager are two options. In this article, we’ll look at the pros and cons of each to help you make the best decision.
Why Property Management Matters
Landlords balancing full-time jobs with rental properties. Quickly learning to manage tenants, maintenance, regulations, and finances for many properties is challenging. Self-managing eats up evenings and weekends. Without enough time and expertise, it also increases risks due to overlooked duties.
Take time to make the best match. This is a long-term business partnership built on trust. If you own rental property in a major metro area like Los Angeles, look for an established local property management company in Los Angeles with extensive experience in the market and managing similar types of properties. Their market knowledge and connections will benefit your investment.
This is where property managers earn their keep. They shoulder the day-to-day property workloads so you can focus on high-level ownership priorities. Benefits like:
Less Work for You
Managers handle advertising vacancies, screening tenants, signing leases, collecting rent, following regulations, coordinating maintenance, keeping records, and more. That lifts a ton of work off your plate!
You can deduct property management fees from your taxes, which saves you money.
Local Market Knowledge
An experienced local manager brings super valuable knowledge of typical rents, demand, local laws, and contractor connections in your area. This helps maximize operations.
Having ongoing pro oversight keeps properties occupied with good tenants, maintained properly, and compliant with laws. This smoothes out management for steadier returns.
Managers help avoid mistakes like compliance issues or picking bad tenants, which could lead to big problems like lawsuits down the road. Their expertise protects your properties.
A dedicated manager provides better service for any maintenance requests, questions or concerns from tenants. This reduces turnover. Happy tenants also give good reviews to friends.
More Free Time
Letting a pro handle the work gives you more time to focus on your career, family, hobbies or even expanding your investments instead of daily property things.
As investments grow in scale and scope, professional management becomes essential.
Typically, fees range from 8-12% of monthly rent. This covers services like:
- Screening Tenants
- Lease Contracts
- Rent Collection
- Maintenance Oversight
- Managing Vendors
- Regulatory Compliance
- Responding to Emergencies
Think about whether it’s worth spending lots of time managing things yourself. Sometimes, you might save money on fees, especially as you have more investments. But remember to consider the risks and what you might miss out on. Sometimes, it’s better to pay for professional help because the benefits are more significant than the costs.
When To Hire a Property Manager
There are a few common situations that signal it’s time to hire a property manager. Frequent tenant headaches, violations, complaints, and conflicts can become unmanageable if you’re handling everything yourself.
Letting problems like maintenance and repairs pile up faster than you can address them is also a sign you need help. If you find yourself managing many units across multiple buildings or a large multi-family property, that complex workload may exceed your capabilities too.
As regulations increase over time, keeping up with all the legal knowledge needed to avoid violations can become difficult if you don’t have experience. Major life changes like a new job, having a baby, divorce, illness or move can leave you with insufficient time to manage your properties properly while also handling your responsibilities.
Finally, falling occupancy rates, rents or overall investment returns often mean professional expertise is needed to turn things around. Don’t wait until huge problems arise – the right property manager helps proactively prevent headaches and optimize your investments.
Finding the Ideal Property Manager
Securing an excellent manager means researching options thoroughly:
- Ask local real estate investors for manager referrals
- Search industry associations’ member directories
- Check ratings and reviews on Google, Facebook, and Better Business Bureau
- Confirm state licensing/bonding requirements are met
- Look for certification from the National Association of Residential Property Managers
- Ask about experience with similar properties
- Request 3-5 client references to contact
- Interview multiple candidates before deciding
Take time to make the best match. This is a long-term business partnership built on trust.
Screening Crucial Questions to Ask
Explore these key topics when interviewing prospective property managers:
- What is the monthly management fee percentage?
- How are maintenance markups or construction oversight fees structured?
- What other fees like leasing, security deposits, etc. apply?
- What specific services are covered in the monthly fee?
- What additional services carry added fees?
- Who performs maintenance work and how are vendors overseen?
- What methods and criteria will you use for screening tenants?
- How will you handle emergencies or major repairs if they arise?
- How long have you operated in this area?
- Are you familiar with local landlord-tenant laws?
- Do you have relationships with vendors to call on for repairs?
- How many rental units do you currently manage?
- How many staff members will support the management of my property?
- Have you managed similar types of rentals as mine?
- How do you stay current on state and local compliance requirements?
- Ask lots of questions to make sure the manager has the right tools and skills. To follow the rules for collecting rent, handling security deposits, and keeping records.
Check if they have the right experience and resources that fit what you’re looking for.
Defining a Clear Service Agreement
Cover essential details in a strong property management agreement such as:
- Detailed scope of manager responsibilities and limits
- Fees for base services and any extras
- Management term length, renewal terms, and termination conditions
- Protocols for regular communications and reporting
- Property operating budget parameters
- Maintenance request authorization thresholds
- Standards for tenant screening and selecting qualified vendors
- Handling of security deposits, last month’s rent, income/expenses
- Insurance and liability apportionment
- Grounds for contract termination
Proactively addressing these aspects upfront prevents misunderstandings down the road.
Fostering a Strong Partnership
Once a manager is selected, set them up for success by:
- Providing complete details on the condition, history, and quirks of your property
- Introducing the manager to existing tenants
- Outlining priorities, goals and expectations
- Agreeing on metrics for evaluating performance
- Scheduling periodic check-in meetings/inspections
- Being reasonable regarding maintenance spending while also properly maintaining properties
When you incentivize a win-win relationship with clear expectations, property managers shine.
Potential Pitfalls to Avoid
Watch for these potential trouble signs:
Does the manager take a long time to return calls, emails, or texts regarding time-sensitive issues that require prompt response? Chronic unresponsiveness can lead to problems going unaddressed. Also, beware if the manager seems chronically disorganized overall. For example, do they lack systems and oversight causing dropped balls on critical compliance items like inspections and repairs?
Addressing problems promptly preserves positive partnerships. But know when it may be time for a change.
The right property manager complements landlords’ skills and fills critical gaps like:
- Expanding capacity for oversight as investments grow
- Supplying expertise landlords may lack
- Improving tenant satisfaction through greater responsiveness
- Optimizing operations using local market insights
- Reducing risks and legal headaches
- Freeing up investors’ time while enhancing returns
Partnering with an experienced manager aligned in values allows focusing energy on high-payoff priorities. Property management pays dividends. Renting out property smoothly requires diligence. However, the right property manager lightens the workload and optimizes operations. They allow you to sit back, focus on big-picture ownership strategy, and maximize returns more with confidence.
What are common property manager fees?
Typical fees range from 8-12% of monthly rent. Covers core services like marketing, tenant management, maintenance coordination, and record keeping. Extra services may incur added costs.
What qualifications should property managers have?
Look for proper state licensing, insurance, bonding, and certification. From the National Association of Residential Property Managers, plus strong reviews and portfolio.
Should I ask property managers for references?
Yes, references help confirm their capabilities and reputation. Check ratings online too. Talk to 3-5 current and past clients before deciding.
What agreement terms are important for property managers?
Detail fees, scope of services, communications protocols, budget/parameters, liability apportionment, termination conditions upfront in a strong contract.