If you are reading this blog, you are obviously considering hiring a property manager.
And we understand the quandary.
Rental real estate is serious business.
If you want to have a successful rental property business (and who doesn’t?), you need to be fully bought into whatever route you decide to take.
We recently published a blog that outlined the Top 4 Reasons It’s Time to Hire a Property Manager. That blog dives into the various pain points that many real estate investors experience that could result in hiring a property manager.
But, for this blog, we want to examine the pros and cons of hiring a property manager.
While you certainly can argue the advantages and disadvantages of hiring a PM, what it really boils down to is value.
Are the services you receive worth the money?
Pros of Hiring a Property Management Company
Peace of Mind
The important thing that a professional property management company can – and absolutely should – provide you with, is peace of mind.
In simple terms, a property manager, despite what you might hear, should LESSEN the overall stress of owning an investment property.
A good property manager will be equipped with the necessary staff, tools, and processes to handle every little detail of your rental property, which should make you feel more comfortable with your investment.
All the time that you would have otherwise spent marketing, conducting showings, screening renters, collecting rent, handling maintenance requests, etc. will now be taken care of by your property management company.
This provides you with more free time to focus on other priorities, which could include adding to your investment portfolio, raising capital, or simply spending more time on your family or the hobbies you enjoy.
Valuable Rental Market Insight
Unless you’re an experienced, licensed real estate agent, you likely have to rely on others to provide you with market insight.
Tools like Rentometer and Zillow can give you some insight into what your rental property may be worth, but, as we’ve learned time and time again, they only provide estimates – and sometimes really bad estimates.
The property manager will let you know what other homes in your neighborhood may be renting for, or if there’s been a decline or increase in rents in your neighborhood since you last rented the property.
As we noted, it’s sometimes difficult to find reliable information regarding rental market trends, which makes this an incredibly huge perk of hiring a property manager as a partner.
We’re sure you’ve heard the horror stories of 3 a.m. calls from Tenants frantically ranting about a running toilet or, even worse, an active fire.
While these calls won’t happen every week (at least they shouldn’t) but, if you do this long enough, or build a large inventory of rental properties, these calls WILL happen. And when they do, you likely won’t be prepared to deal with them and, more specifically, you WON’T want to deal with them.
A property manager should have a full suite of contractors capable of handling every issue at any time of the day or night.
Outside of maintenance problems, a PM will also be able to show rental properties on nights and weekends – times when most potential Tenants want to tour homes. So, instead of showing your rental home at 2 p.m. on a Saturday you can, instead, attend a sporting event, hang out at home, etc.
Again, like with market research, there are some online tools that now allow landlords to conduct basic Tenant screening.
However, as you’ve likely heard, fraud is rampant in rental real estate. There are industries devoted to creating fake paystubs that are essentially impossible to distinguish from real ones.
Professional property managers will employ sophisticated software to ensure a highly qualified Tenant is placed into your rental property. This is software that most landlords cannot access.
And keep this in mind: Tenant screening is an activity where mistakes CANNOT be made. Placing a qualified Tenant is arguably the most important part of the entire process. Be sure you get it right.
Cons of Hiring a Property Management Company
Arguably, one of the main reasons you may choose to self-manage is to retain full control over your rental property and be the sole decision-maker.
A LOT of Landlords share this sentiment, and we get it.
Third-party property managers are going to have certain processes in place for managing rental homes, and they likely won’t always handle things the same way you would.
If you want to hire a property manager, you have to be willing to let them do their job.
If you are someone who wants to manage your property managers, neither party will be happy with the relationship.
However, if you view your property manager as a true partner, you have a much higher chance of not only a successful relationship but a higher chance for a successful rental property investment, which, at the end of the day, should be everyone’s goal.
In some cases, giving up some control to your property manager might mean you don’t agree with a certain decision or outcome. But, that’s an aspect of professional property management that you’ll have to accept.
If you hire a property manager with significant experience and that you’ve vetted, they should always work with your best interest in mind.
Property Management Fees
The fees involved are an equally, if not bigger deterrent to most people considering a property manager.
We understand this mentality totally… “Why would I want to pay someone X% per month when I can do it on my own?”
And, in our experience, some DIY investors do a reasonable job of managing their rental property. These people have time, are usually handy, and don’t mind the day-to-day interruptions that come with management.
The reality is that, if you self-manage, you WON’T pay a monthly fee to a management company, a leasing fee, a renewal fee, etc.
However, as most property managers will argue – including us – a well-run property management company will actually save a property owner money… i.e. we’ll lease your home faster than you will, we’ll save you money on maintenance because of our volume discounts, etc.
But, I digress.
Keep in mind that finding a “low-cost” property manager may seem like a good compromise, but I can assure you that cheaper isn’t always better. Hiring a property management company that isn’t of high quality at the outset will likely lose you more money in the long run.
Property management fees may reduce your profit margin, so if you depend on every single dollar of monthly rental income, then it can be a definite downside you need to be aware of.
Quality of Service
Not all property managers are created equal. It’s a HUGE mistake when vetting various property management companies, to choose the property manager with the lowest fees.
That’s like buying the cheapest car seat for your child.
OK, not exactly, but you get the point.
When selecting a property manager, you are turning over a very large asset to someone you’ve likely never met.
So, do your due diligence, including:
Read the Reviews of Potential Property Management Companies
Check out Google, Yelp, etc. Keep in mind that not every property management firm or company will have all 5-star reviews. In fact, if they do, that might be a red flag.
Every property manager, if they’ve been in business for any length of time, will receive bad reviews from Tenants. It’s just inevitable. These reviews typically surface when Tenants are denied a rental property during the screening process or after move-out when a Tenant feels like the property manager didn’t provide a large enough security deposit refund.
You should, however, read to see if the property management company has received multiple negative reviews from Property Owners. That could be another red flag and cause for concern.
Have a detailed phone call or phone calls with the Property Manager
If you have questions, an experienced property manager should be able to answer them. Property managers should, at a minimum, have their pricing clearly outlined on their website. Some property management pros may even have content where they detail their various services and processes.
The reality is that no one property manager is a good fit for everyone. All property managers have their strengths and weaknesses and areas of expertise. For example, if you own a large apartment building that requires on-site management and has other common area nuances, it probably doesn’t make sense to seek out property management companies that focus on single-family rental properties.
Again, it’s important that you do the work upfront to ensure that you find a great fit for your specific needs.
Collaborate with other investors in your market
Plenty of online resources allow you to learn from other real estate investors about their experiences. This includes their experiences with other property management companies.
Ask for referrals. Have thoughtful conversations about why a particular property owner values, or is frustrated with, their property manager.
Again, where you find value in a property manager may not align with where your investor buddy finds value.
The decision of hiring a property management company for your rental property should not be taken likely.
If you prefer being hands-on, and have the necessary time and resources to devote to self-management, then it may make sense to avoid hiring a property manager.
However, if you feel the pros far outweigh the cons, and you will get more value out of your time, then your next step is to begin your search for the right property management company.