When Hiring a Property Management Company Makes Sense
There are many factors a landlord needs to take into consideration before hiring a property management company. For many landlords, this may be a big decision and therefore requires a lot of thought to make sure it is the right decision.
Many owners manage their properties themselves, sometimes with the help of an employee who usually lives on site. Often the time it takes to manage a property properly is more than the landlord and his resident manager can manage between them, and that is when it is time to consider hiring a property management company to take some of the burdens off them.
While hiring a property management company has many advantages it carries a hefty price tag. Aside from the cost, there may be other factors that may make hiring a company to manage your property not make sense. The following list has been designed to help you reach the right decision for your business.
What a Property Management Company Does
A property management company deals with the day-to-day management of prospective and existing tenants, doing everything from marketing your property to gain new tenants, collecting rents and processing evictions, managing the maintenance and repair of the property and responding to tenant complaints and requests. As a management company is under contract to undertake the management of your property and not considered an employee, there are not the same requirements as would be the case if you hired an employee.
When Hiring a Property Management Company Makes Sense
Hiring a property management company will be good for your business when:
- You own more than one rental property. The more rental properties you own, the more work, is involved in managing the day-to-day operations.
- You live far enough away from your rental properties to make managing them yourself not viable. Your distance makes responding promptly almost impossible; especially when emergency situations arise.
- You simply have no desire or time to manage your rental properties. Some landlords enjoy the hands-on approach to investing in and managing rental properties and will make it their full-time business, while others enjoy the purchasing and receiving income but have no wish to manage the day-to-day operations.
- You do not have the time to manage the properties yourself. Often investing in rental properties is a side business and not a person’s primary business and so you cannot be available to handle emergencies, tenant complaints, evictions and all the other things a property management company can take care of for you. Being free of these responsibilities allows you to focus your energies on your primary business.
- You realize that the cost of hiring someone else to take responsibility for day-to-day operations is worth the price. Typical fees range between 5 and 10 percent of your rental income, which in a good market is likely to make having a property management company take care of your rental properties a more viable proposition. In a market downturn, provided you have the time and willingness, managing your rental properties yourself may be the better option.
- You are overwhelmed with the amount of work involved, and you find yourself out of your depth. The more properties you own, the quicker you may find yourself in this position. If you intend to add to your real estate investment portfolio, you are only going to find yourself busier as each one is added.
- You don’t want to hire employees and become an employer. There are many responsibilities when hiring an employee that many landlords simply don’t want to have to deal with, such as payroll, medical insurance and a host of other legal requirements employers have to manage. By hiring a property management company, you avoid becoming an employer, as the property management company operates as an independent contractor.
- You purchased the rental property as part of an affordable housing program and obtained financial assistance with that purchase. This type of investment can become quite messy to manage as there are stipulations that must be met. The rules may be very complicated, but a property management company will be familiar with all of the requirements, obligations, and stipulations and be able to do everything necessary to comply with the terms of the deal.
