Should You Hire a Property Management Company?
If you’re a rental property investor, you’ve most certainly wondered at some point whether you should consider hiring a property management company or not. This article is here to serve as a guide as you make that decision.
Hiring a property management company can be pretty tough if you don’t know whether you need it or not and if you’re unsure what the company can do to make your life easier and better. This is why we’re going to list 10 of the most important questions you should ask yourself to determine whether you should be hiring a property management company or not. Of course, every investor’s situation is different but there are certain patterns and factors that make hiring a property management company a necessary step.
Ten questions you should ask yourself before you hire a property management company
• How many rental properties do you own?
Basic logic: the more your property portfolio grows, the harder it gets to deal with the management. You start letting things fall through cracks, you don’t notice important factors, you have no time to deal with urgent situations. While one can deal with these things (though usually at the cost of their time and peace and quiet) when it’s only about one or a couple of properties, it gets significantly more difficult when there are more units involved. If you’re an investor with many rental properties, it’s highly recommended that you seek out the benefits that hiring a property management company will undoubtedly provide for you. Having someone take care of the management for you will always let you consider whether you want to expand your portfolio further and gain more profit because you won’t be overwhelmed with dealing with your current holdings.
• Do you live far away from your rental property?
If you don’t, you may be able to keep track of your property and pay the regular visits that will be needed for maintenance, rent collection, etc. If you live far away though, this will make your traveling expenses, both in time and in money, a lot bigger. The farther away you live, the harder it gets to keep an eye on things and this never works out well in the world of rental property investment. Consider hiring a property management company that will help you stay on track with properties located far from you.
• What is your experience with property maintenance?
Maintenance and repairs are a big part of what property management companies do for you. If you don’t use one, then you either have to do the repairs yourself or to have a list of reliable vendors to call when you need some work to be done on your property. It takes time to find contractors you can trust, meanwhile you’re under risk of hiring unethical people who do their work poorly or charge you too much. If you don’t have much experience with property maintenance, it’s best to ensure it’s done properly and on time by hiring a property management company.
• Do you understand the laws concerning rental property?
This is something that many people forget about and it’s very important when it comes to managing your rental property. You need to know the law in order to prevent lawsuits and shield yourself from liability. Some familiarity with contracts is also great because this will be the only thing binding you and your tenant.
• Do you work well under pressure and do you deal with stress easily?
We all like to believe we perform well under pressure and manage to deal with stuff without getting overwhelmed. And sometimes it’s true. The question is: at what cost? Sure, you can push yourself to your limits and get everything done. But why would you do that, if you have the choice to let the professionals handle this for you and save you time and a ton of stress? And rest assured that managing property can be stressful as hell. Property management isn’t just going to your property once a month to collect money. You often get in unpredictable situations that you probably have zero experience with and they have to be dealt with urgently. What would you do if tenants conduct illegal business on your property? Or if the neighbors keep complaining that they have loud parties every night? What if the tenants sneak animals into a property where you don’t want pets? What happens if they trash the property? Are you familiar with the term “professional tenant” and how the system can be worked so your tenant won’t pay rent? Really, property management is so much work and there’s no way one person can deal with it effectively without getting overwhelmed. That’s why hiring a property management company can be extremely helpful.
• Are you a person who is comfortable with confrontation?
Because the ability to handle confrontations is absolutely necessary if you intend to deal with tenants. Many rental property investors, especially those who are new in the business, try to be understanding and make exceptions for people. This can be good sometimes but often it just invites tenants to take more advantage of the owner. You need to deal with late payments efficiently: a call to remind them they have to pay sometimes isn’t enough and you need to start a confrontational process that ends in eviction. Owning rental property is not the same as running a charity and rules must be enforced if you want to make a profit out of it.
• What’s your vacancy rate?
Among other things, hiring a property management company means that they will quickly find high-quality tenants for you through targeted marketing and thorough tenant screening. It eats up a lot of time – all the advertising, calls and property showings, but it’s critical to do it fast and well if you don’t want to lose profit. If you’re not sure that you have the necessary skills and time to find proper tenants fast or if history shows you have a very high vacancy rate, it’s best to consider hiring a property management company.
• Can you be on call 24/7?
If an emergency happens on your property – and it often does, you can’t just ignore it and put it off for later. Regardless of whether you’re in an important business meeting, on a lovely family holiday, hosting a long-planned event or going through an identity crisis, you need to stay true to your legal obligation to your tenants and deal with their problem now. Are you willing to take 3 a.m. calls about a busted pipe that you need to go and fix for free? This is a lot easier if you own one property, but the more units you have the more often you will receive such calls. Hiring a property management company means someone else will handle this for you.
• Do you participate in an affordable housing program?
The common practice is that landlords who participate in such programs receive financial assistance : it can be low-interest loans or tax credits or money, and in exchange, the landlords rent at least some part of their property to people who earn income below a certain level. If the landlord wants to continue receiving the assistance, they need to comply with some strict rules. This makes the situation a lot more complicated and it’s recommended to hire a property management company that has experience with affordable housing programs.
• Can you afford the cost of hiring a property management company?
When you’re interviewing property management companies, you will find out most of them collect 5 to 10% of what you get in rent revenue. If you can afford this, hiring a property management company can be quite beneficial for you. If it’s a down market and you’re okay dealing with things on your own, it’s best to wait for the market to turn around before you hire one. However, it’s best to remember being a do-it-yourself landlord sometimes ends up being more expensive than it is to hire a property management company, especially if you don’t have much experience.
To sum up the questions above, there are two main things that you should consider when you’re thinking about whether you need a property management company:
1. The cost of managing your property by yourself.
To manage your property, you need to be a jack-of-all-trades. You need advanced skills in marketing, maintenance, accounting and understanding laws. And also in communication! And in being a detective – screening tenants can be quite the process…Doing this on your own is draining to both your finances and your time, so it’s important to calculate for yourself which comes cheaper: hiring a property management company or dealing with everything on your own. And remember: you often put a lot more time and money in things you’re not an expert in than in the areas where you have experience and know your ground. That’s why trusting the professionals is the most time- and money-saving option. The question is, are you a professional in property management?
2. If you can afford not hiring one.
Consider your location, how many units you own, is it physically possible to manage them all, how do you feel about investing most of your time in property management? Also, can you invest your time somewhere else for more profit? Can you deal with the stress? Do you want to? You need to weigh your options carefully. When you’re hiring a property management company, don’t forget you get access to years of experience and established and trust resources. There is a whole team of professionals that can manage efficiently every aspect of your rental investment. Can you manage all of this by yourself?
Contemplating these questions, assessing your finances to determine which choice would be best for you, calculating estimates and weighing out your options will help you make the best choice.
This is why we’ve compiled this short list that explains what benefits you will receive from hiring a property management company.
• High-quality tenants
That’s the most important step when it comes to optimizing your profit from your property. Of course, you can evict the bad tenant from your property but it’s a lot of hassle and it takes time and resources. That’s why it’s of great importance to handle the tenant screening professionally. You need someone that pays on time, rents long-term, doesn’t damage your property and causes as little problems as possible. Any experienced property management company can quickly dig up real facts about the candidates and analyze efficiently the thousands of applications they receive, scanning for red flags. Hiring a property management company defends you against rental scams and discrimination lawsuits.
• Avoiding lawsuits
Every landlord knows it takes only one problematic tenant to cause you a lot of problems, both legal and financial. Property management companies are aware of all the landlord-tenant laws and make sure you are not vulnerable to a potential lawsuit.
• Low-vacancy rate
The longer your property is vacant, the more money you lose. Property management companies take all the steps necessary to ensure your vacancies are filled fast: they prepare the property for rent to maximize revenue, determine the best rent rate so you won’t be stuck waiting because it’s too high or lose money because it’s too low, and market your property at an affordable price. This guarantees you will have the optimal profit from your rental property.
• Lower costs for maintenance
Property management companies have their own in-house maintenance staff, as well as a network of licensed professionals that have proven themselves to be experienced and ethical. They usually get plenty of discounts and supervise the work to assure it’s of the best quality.
• More time and less stress
There are plenty more services that property management companies offer but the bottom point of it all is you have more free time for yourself, for the people you care about and for more business, and your life is a lot less stressful. By hiring a property management company in Orange County you’ll be saving yourself all of the night emergencies, confrontational evictions, chasing of late payments, rental scams and tons of accounting paperwork.
Start living freely right now – contact Caris Property Management to find out more about the services we offer and how we can make your life as a rental property investor better!