Pros and Cons of Hiring a Property Management Company
Owning a home requires a lot of work, but owning a rental home brings new challenges. While some people choose to manage the applications, tenants, and maintenance on their own, others don’t really want to be landlords. Instead, they’d prefer to leave the day-to-day responsibilities to a team of professionals like a property management company. Property management companies are a great asset if you’d prefer to earn passive rental income, but are they right for everyone? Here, we’ll explore some of the biggest advantages and disadvantages of allowing a property management company to handle your rental property.
What is a Property Management Company?
Landlords and property managers are not the same. A landlord is the property owner, while the property management company is a third-party professional hired by the property owner. Landlords’ and property managers’ responsibilities are the same; the difference is who does them.
A rental property management company is a third-party professional overseeing your rental properties’ daily operations. They work with property owners to maximize the profitability of investment properties while minimizing your day-to-day workload. There are several components that property managers can help with, including:
Tenant applications
Credit checks
Income verification
Rental history reviews and references
Tenant selection based on screenings
Rent collection
Rent reminders and follow-ups
Tenant communication
Late fee enforcement
Conflict resolution
Lease preparation
Legal compliance
Property inspections
Property maintenance
Necessary repairs
Eviction management
Financial reporting and analysis
Budgeting for future investments
Marketing for vacant properties
Professional photography for listings
Typically, a property management company will have local property managers available when your tenants need them. Property manager responsibilities can also vary based on the company, so it’s important to understand the scope of responsibilities they offer before hiring someone. Now, let’s explore the pros and cons of outsourced property management.
Advantages of Hiring a Property Manager
For many property owners, the benefits of hiring a property manager may be obvious. Based on their responsibilities, you can see how your real estate investment would be in good hands. To better understand, here’s everything you need to know about the pros of hiring a property management company.
Gain Experience with Managing a Rental Property
When you hire property managers, you can access their years of experience managing homes and tenants. This is especially beneficial if you’re a first-time real estate investor who has never had a rental business. In most states, property managers are required to have certifications or licenses coupled with an industry-related education. This gives you peace of mind when navigating the rental market and the variety of tenants who are interested in your property.
Save Time and Energy
Being a landlord means you need to be available 24/7. Property owners may be contacted in the middle of the night for an emergency, which can greatly impact your work-life balance. When you have a professional managing your rental properties, you save both time and energy and allow for the generation of truly passive income. Since property management firms are responsible for collecting rent, scheduling repairs, and dealing with tenant issues, your time and energy can be spent on something else.
Faster Maintenance Response Time
A property manager’s response time to emergencies or maintenance issues is typically faster due to their long-term partnerships with several vendors. This is beneficial both for you and the tenant. Quick repairs reduce the risk of bigger issues developing and keep your tenants happy with their current home.
Shorter Vacancy Between Tenants
Happier tenants usually lead to renewed leases, which makes the rental process easier. Plus, with no vacancy time, you won’t lose money on rent, cleaning, and other routine maintenance that needs to be done between tenants to attract renters. Still, property managers typically handle all of the in-between if a tenant moves out. They know how to make your rental property stand out and will be quick, so you won’t lose sleep over any turnover.
Long-Term Financial Savings
Although property management companies may charge a fee, many owners see long-term financial savings. You’re at greater risk of serious damage from untreated repairs, you may end up having better tenants who stay for longer periods (reducing vacancy and, thus, no rental income), and you don’t have to spend time managing tenants. This gives you more time for your career or another income-generating hobby.
Legal Protection and Compliance
Rental property owners face a lot of potentially complicated legal regulations that need to be followed to avoid fines or penalties. This can be extremely beneficial to owners, especially if you have never dealt with tenants before. Property managers can help you ensure your rental contracts meet all of the local, state, and federal laws while offering you some protection. This reduces your risk of future issues and expensive lawsuits while giving you the peace of mind that your home is being cared for.
Disadvantages of Hiring a Property Manager
Of course, as with any decision, there are also a few cons associated with hiring a property management company. Some of the most notable cons of hiring one include the following:
Paid Property Management Fee
One of the most notable cons of property management is that it costs money. Property management is a paid service that usually requires a monthly fee. The fee depends on your state and city regulations, but it’s typically a percentage of each month’s rent. You may also be required to pay a leasing fee, which helps cover the costs of marketing vacant homes. Property owners should carefully consider the company and their associated fees, as some try to utilize a low “management fee” while increasing extra charges on the side.
Lack of Involvement in Managing the Property
Another downside of property management (for some) is the lack of involvement. You won’t be involved in the management, especially regarding small issues like repairs or maintenance. For some, this is hard to relinquish, and they would prefer to know what’s going on to make more educated investment decisions. If you’d like to have more say, consider hiring a property management firm that communicates and is transparent.
Potential Communication Issues
If you don’t work with a property management firm that communicates with you, it could lead to long-term issues or frustrations. Unfortunately, massive firms with thousands of properties might not be the best with timely communication. Not all companies are like this, so try to ask questions and establish your expectations before signing any contracts.
Dependency On Property Managers
Finally, it’s important to make sure that you find the best property manager for your needs. You’ll become dependent on them to carry out their responsibilities, so you need to trust that they will do their job well. Screen your potential rental management companies like you’d screen tenants. Check their references or experience and see if they have all their licenses and accreditations. While this can be a bit time-consuming, it’s ultimately worth it.
Should You Be Using a Property Management Company?
As a property owner, you can decide whether to hire a property management company or act as the landlord yourself. The primary consideration to make is whether the advantages outweigh the disadvantages. Owning rental properties can take a lot of work, but you may not want to incur the cost of hiring a property management company. However, you do get quite a lot in return. When you look at long-term savings in terms of time, resources, and budget, you may consider hiring someone to help. It’ll likely even save you some money over the years.
That said, it’s important to find a property management company that meets your needs. That’s where First Star Realty comes in. First Star Realty always puts our client’s needs first, and we’re committed to maintaining ongoing communication so you can make informed real estate investment decisions. To learn more about our different property management services, contact us today.
