As a landlord or property owner, having total control over property management seems ideal. In many cases, managing your property is worth the time and extra effort. Not having to pay management fees means extra savings, and handling your rentals will be a breeze as long as you stay organized and integrate your responsibilities into your schedule.
Those are all advantages, sure, but there are also downsides in managing your property that are legitimate causes for hiring a property manager rather than becoming one. In this resource guide, we’ll discuss why you might not want to manage your own property and what considerations to keep in mind when you hire a property manager.
What’s covered in this guide:
- Pros and cons of hiring property managers
- Pros and cons of managing your own property
- Questions to ask when hiring a property manager
- Skills your property manager should have
- Where to find a property manager
- Best tips when hiring a property manager
- Hire a property manager if…
- Don’t hire a property manager if…
- How the RentPost software simplifies the rent process
Pros and cons of hiring property managers
Hiring a property manager for your rental property comes with both advantages and drawbacks, each deserving careful consideration. Let’s take a deeper look at each of these.
Pros of hiring a property manager
- Time Efficiency: Managing a rental property involves time-consuming tasks such as tenant screening, rent collection, property maintenance, and handling emergencies. A property manager can take care of all these, allowing you to focus on other life aspects or invest your time in additional income-generating activities.
- Expertise and Legal Knowledge: Property managers are well-versed in landlord-tenant laws, ensuring that you remain compliant with local, state, and federal mandates. Additionally, property managers have professional knowledge in setting appropriate rental rates, conducting property inspections, and navigating the eviction process if necessary.
- Reduced Stress and Convenience: Property management can be stressful, especially when dealing with difficult tenants, emergency maintenance issues, or late-night calls. You can distance yourself from the day-to-day challenges and enjoy peace of mind when you hire a property manager.
Cons of hiring a property manager
- Costs and Fees: Property management fees typically range from 8% to 12% of the monthly rental income, and additional charges may apply for leasing, maintenance coordination, and other services. These associated costs can significantly eat into your overall rental income and affect your profitability.
- Loss of Control: You relinquish some degree of control when you hire a property manager who makes decisions regarding tenant selection, property maintenance, and other day-to-day operations. While this can be a relief for some, others may find it challenging to entrust these responsibilities to someone else.
- Varied Quality of Service: Not all property management companies or individuals provide the same level of service. Some landlords may experience dissatisfaction if their property manager fails to meet expectations or if there is a lack of effective communication.
Pros and cons of managing your own property
Just as hiring a property manager has its advantages and disadvantages, the same goes for managing your rentals on your own. Let’s explore why you should or shouldn’t do the dirty work.
Pros of managing your own property
- Cost Savings: By handling tasks such as tenant screening, property maintenance, and lease agreements personally, you can avoid the fees you need to pay when you hire property manager. This allows you to retain a larger portion of your rental income, contributing to higher overall profitability.
- Direct Control and Decision-Making: You have direct control over all aspects of the property, from tenant selection to maintenance decisions. This hands-on approach enables you to tailor your management style and make decisions without relying on a third party.
- Greater Knowledge and Involvement: By managing your rental property, you develop a deeper understanding of the local real estate market and property values. Being directly involved in day-to-day operations also helps you stay informed about the condition of your property and fosters a closer connection with your tenants.
Cons of managing your own property
- Time Commitment: Tasks such as responding to tenant inquiries, handling maintenance requests, and dealing with unexpected emergencies can be time-intensive and may interfere with other personal or professional commitments. It gets worse if you have multiple properties or if issues arise that demand immediate attention.
- Lack of Professional Expertise: Property management involves legal and regulatory aspects, such as tenant rights, fair housing laws, and eviction procedures. Without a background in property management or real estate law, you may find it challenging to navigate complexities that could lead to legal issues or financial losses.
- Emotional Involvement: Managing your own rental property may lead to emotional involvement, especially when dealing with tenant issues or conflicts. Emotional decision-making can be detrimental to your business interests, as it may cloud your judgment or lead to inconsistent policies.
Questions to ask when hiring a property manager
When screening property managers, here are some questions that can help assess their competence, communication style, and overall approach to managing a rental property.
- Experience and Qualifications:
- How long have you been working as a property manager?
- What types of properties do you have experience managing?
- Are you a licensed property manager, and can you provide references from previous clients?
- Services and Fees:
- What services do you offer as part of your property management package?
- What are your fees, and how are they structured?
- Are there any additional or hidden charges that I should be aware of?
- Tenant Screening and Placement:
- How do you screen potential tenants?
- What criteria do you use to approve or deny rental applications?
- How do you handle the leasing process, including lease agreement preparation and signing?
- Maintenance and Repairs:
- How do you handle maintenance and repair requests?
- Do you have a network of reliable contractors, and how do you ensure timely and cost-effective repairs?
- What is your approach to preventive maintenance?
- Communication and Reporting:
- How do you keep landlords informed about the status of their properties?
- What is your communication strategy with both landlords and tenants?
- How often do you provide financial reports, and in what format?
- Do you use property management software?
- Tenant Relations:
- How do you handle tenant complaints and conflicts?
- What is your process for addressing late rent payments or lease violations?
- How do you ensure positive relationships between tenants and property owners?
- Legal Knowledge:
- How familiar are you with local, state, and federal landlord-tenant laws?
- Have you ever been involved in an eviction process, and if so, what was the outcome?
- How do you stay updated on changes in relevant laws and regulations?
- Termination of Agreement:
- What is the process for terminating the property management agreement?
- What notice is required from either party and are there any associated fees?
- How are ongoing responsibilities handled during the transition to a new property manager or self-management?
- Insurance and Liability:
- Are you covered by professional liability insurance?
- How are property-related damages and liabilities typically handled?
- What steps do you take to minimize risks and protect the property owner’s interests?
- Tenant Turnover and Vacancies:
- How do you minimize vacancy periods between tenants?
- What strategies do you employ to attract and retain quality tenants?
- How do you handle the turnover process, including property inspections and cleaning?
Skills your property manager should have
Let’s face it—the term “property management expert” is a bit vague since it does not come with the exact qualifications. For example, one person may consider a property manager an expert just because they have 2-3 years of experience. However, others believe a much more extensive time frame, such as 10-15 years, is necessary.
Either way, there are five key components that every great property manager should be able to do well.
1. Property managers should be great with people.
Remember the TV show “The Dog Whisperer?” The idea was that this guy would help even the wildest, most disobedient dogs to become great pets. Even though you can’t quite do that with people, a good property manager must have excellent people skills. When a tenant has an issue, they’re quick to find a solution that makes most (if not all) parties happy.
Got a tenant who isn’t paying their rent on time? A good property manager should know how to handle these situations as well. Specific scenarios may require a heavy hand, and a good property manager can diplomatically address these situations.
At the end of the day, your tenants are the ones that make your investment profitable. You’re losing money if they aren’t happy, and turnover is high because you have a lousy property management team.
2. Property managers should know how to find tenants fast.
Depending on the location and current market trends, finding tenants can be one of the most tedious parts of the industry. In today’s market, where apartments and condos are sprouting left and right, you need someone excellent at marketing. Otherwise, all the best prospects may end up with the competition.
When you hire a property manager, you need to know how they’ll market your property, who they’re going to sell to, how long it usually takes them to fill a vacant home, etc. Every piece of information matters.
If they get a tenant in tomorrow but are the type to trash your place, you lose. If they find a fantastic tenant, but it takes them six months, you lose as well. If they have a well-thought-out marketing plan, it can cost you a lot of extra fees, and your ROI will suffer in the short run (but can bring in long-term gains).
3. Property managers should keep up with local trends.
Does your property manager know your area’s current rental rates per square foot? How about what your target market is looking for in a rental home? How are they staying competitive in an industry that fluctuates with rising interest rates?
If you’re paying someone to manage your property, you want them to know more about the industry than you do. So even if you spend a decent amount of time staying up to date, it’s their full-time job to stay abreast with what the big players are doing, what new laws are affecting real estate and rentals, etc.
A foolproof way to do this is to look at their management history. If a property management firm is worth its salt, they will have examples of their work that they will want you to see. If they manage rental properties according to the changing needs of the market, then they will very likely ensure that yours will measure up.
4. Property managers should have an extensive network.
If something goes wrong on your property, the property manager probably has limited discretion to fix it, right? It depends on your agreement, but there is often a dollar threshold where they will have the repair done without first getting your permission.
Because they’re constantly managing these maintenance projects, property managers should have a strong network of people they trust in multiple industries. Lawyers, plumbers, electricians, landscapers, HVAC, driveway – you name it. They should know exactly who to call to get fast, excellent service.
For instance, it always makes sense to hire a certified plumber or electrician, so it’s easier and more reassuring for any landlord if their property manager already has someone in their back pocket.
5. Property managers should be highly organized.
Let’s say a property manager is managing 30 different homes. At any one time, there could be maintenance issues, home improvements, incoming and outgoing tenants, vacancies, HOA issues, and possible evictions. There’s a lot to stay on top of, so typical property managers always have their hands full!
That’s why you need to work with someone who is extremely organized. You shouldn’t necessarily care how they stay organized—whether they record everything on paper or use state-of-the-art software systems—as long as they know what’s going on and everything is under control, that’s a good sign.
There is no right or wrong answer regarding how much experience people need to become property management experts. However, any real estate professional you hire must know how to do their job well and have excellent references and an impressive track record.
Where to Find a Property Manager – Your Best Options
When you start your search for property management experts, you’ll quickly learn that you essentially have just three different options:
- The Internet
- Phone books
We’ve listed these options from the best to the least desirable. So let’s start by discussing why getting referrals is the best way to go.
Option #1: Property Management Referrals
When you’re thinking of a good movie to watch or a restaurant to try, what’s the first thing you do? Probably ask friends or family with similar interests what they would recommend, right?
Throughout history, referrals have been the method we’ve relied upon the most. When talking to someone we like and trust, we know there’s a good chance we’ll like whatever they recommend. As a result, this is the most common (and best) way to go, whether you’re looking for articles of clothing or a roofing contractor.
Keep in mind that it works a little differently with property managers, though. Knowing how to hire a property manager through referrals requires knowing people who have actually used them in the past, right? So that means you need to be talking to the landlords themselves. If your friend or a family member has never rented out houses or apartments, their referrals won’t be as helpful. No matter how much “they’ve heard” about a particular property manager, it just isn’t the same as having worked with them.
If you don’t know any landlords, consider joining a local real estate investing club when you hire a property manager. This will help you get great referrals and give you access to potential deals, business partners, or mentors.
Something else to keep in mind— be extra cautious if the landlord you’re talking to is also friends with or related to the property manager they recommend. That connection may create a bias and hinder their ability to tell whether hiring the property manager is worth the investment!
Option #2: The Internet
The Internet has made almost everything much, much easier for us. From getting the news to finding a new furniture set for the living room, just a few clicks can get you there.
I probably don’t have to explain why this can be so useful when you hire a property manager, either. But knowing how to find one through the Internet is a little different from finding other service providers. That’s because services such as Angie’s List don’t have nearly as many customer reviews for property managers as they do for plumbers, carpenters, or electricians.
Instead, you’ll have to rely on other review systems such as Google or maybe Yelp. They still won’t have tons of reviews, but they’ll have enough to get you started.
Once you do find a few that look good, it’s time to do a quick phone interview. Again, make sure you have a good list of questions to ask a property manager beforehand. It’s best to list them so you can zero in on what matters most.
While doing the interview, pay attention to the attitude and disposition of the person on the other end of the line. Do they sound friendly and knowledgeable? Are they quick and eager to respond to your queries? Or do they come across as someone you (or your tenants) may not feel comfortable working with for years to come?
OPTION #3: The Phone Book
You probably won’t have to pull out the old phone book, but it’s still an option. The only problem is that you’ll have to look up property managers based on their names or how much they paid for in ads in the Yellow Pages, and not based on how good a service they can provide. You cannot also see what other customers think about them, which is why the Internet is generally a much better and more reliable tool.
Best Tips When Hiring a Property Manager
Here are a few things to keep in mind when looking for a property manager to take care of your rentals:
- The best property managers are busy.
It would help if you didn’t have to wait a few months to work with them, but it’s a red flag when a service provider isn’t booked to some extent. They should at least be proactive in the community and have several existing clients.
Does that mean those smaller, lesser-used companies aren’t good? Of course not—but experience means a lot. So if that new kid on the block doesn’t have much experience or reputation, it’s a gamble.
- It will always be a pleasure to talk to a good property manager.
You shouldn’t be calling every company in your town, but 3-5 is a good number to check once you’ve narrowed down your search. Phone calls are preferred over emails or texting because they help you get an idea of the company culture.
Is the person on the other end of the phone friendly? Do they seem genuinely interested in gaining you as a client and taking care of your tenants? Are they OK with answering all of your questions, or do they seem annoyed or rushed?
These are essential things to consider when you hire a property manager. Because if they’re short with you—the paying client—think of how they may treat your tenants.
- You’ll hear great stuff about a good property manager.
Unfortunately, it’s more difficult to find online reviews of property managers. Most don’t have a significant presence, so there are better ways to go than simply searching online.
Instead, getting plugged into a local real estate investor club is better. Besides offering mentorship and networking opportunities, these folks can help you find the best rental management companies in your area. Once you hear the same one repeated several times, you know you’re on the right track.
- A good property manager will have certifications.
First, you should know that every state treats property managers differently. For example, some require the PM to have a real estate license, while others forgo that requirement.
Secondly, there are several certifications for property managers. So even though a property manager may have a real estate license, getting a credential specifically for managing properties shows more dedication to the industry. Even though certifications are not required to take great care of your tenants, they definitely won’t hurt!
- The cost to hire a property manager is reasonable, not cheap.
To be honest, a great property management company is worth its weight in gold. The value they provide will far outweigh their costs.
That said, knowing the industry standard for property management fees doesn’t hurt. That will help you gauge where each company stands against the average and then decide.
For example, why does that “budget” company only charge half of what its competitors do? It may be their service isn’t as thorough.
Hire a property manager if…
Specific scenarios favor landlords hiring a property manager so they can enjoy the benefits of their real estate investment without being burdened by the time and expertise required for effective property management.
- Limited Time or Availability: Property owners with demanding schedules, full-time jobs, or other significant time commitments may find it challenging to manage a rental property effectively. Hiring a property manager allows the owner to focus on their primary responsibilities while ensuring tenant needs are addressed promptly and the property is well-maintained.
- Lack of Expertise or Local Knowledge: Property management involves a comprehensive understanding of local real estate laws, market trends, and effective management practices. Property owners who lack the expertise or familiarity with these aspects may benefit when they hire a property manager.
- Scale of Operations or Multiple Properties: Owners with multiple rental properties or a large-scale real estate portfolio may find it logistically challenging to handle the demands of property management. A property manager can efficiently manage multiple properties, overseeing tenant relations, maintenance, and financial aspects across the portfolio.
Don’t hire a property manager if…
- Hands-On and Available: If a property owner has the time, inclination, and availability to be actively involved in the day-to-day management of their rental property, it may not be necessary to hire a property manager.
- Budget Constraints: Property managers typically charge fees for their services, often a percentage of the rental income. If a property owner is operating on a tight budget and can manage the property effectively without professional assistance, they may opt to self-manage to maximize their rental income.
- Small-Scale Operation: For owners with a single property or a small real estate portfolio, the management workload may be manageable without the need for professional assistance. If the property is in good condition, tenants are cooperative, and the owner is comfortable handling the responsibilities, there really is no need to hire a property manager.
How the RentPost™ Software Simplifies the Rent Process
Keep in mind that effective property management can be challenging. While there are many people in the industry, only a few are top-notch. Thanks to state-of-the-art property management software, managing a rental nowadays isn’t as daunting as it used to be.
While everyone may have their individual preferences when running a business, we strongly encourage you hire a property manager who automates the entire rental process over one who does things manually.
With the benefit of modern technology, tenants can access lease provisions digitally, pay rent, or make non-emergency maintenance requests through an online portal.
On the other hand, property managers can keep all lease agreements and accounting files in one place. Furthermore, they can conduct tenant background checks and communicate with renters and service providers from the same workspace.
We hope this comprehensive guide to hiring the right property manager has helped you with what you need to consider before deciding whether to manage your rental or entrust the job to a property management expert. Either way, state-of-the-art tools such as the RentPost property management software can streamline the whole process for you.
Check out more of RentPost™’s features or sign up for a FREE 30-day trial today.