There tend to be two trains of thought for hiring property management. Those who hate and refuse to hire property management. And those who know when to hire a property manager.
Many landlords self-manage their rental properties and are successful in doing so. But sometimes there are valid reasons why you should consider hiring out the rental management.
Before we dig further into this topic, let us acknowledge that every landlord and property situation is unique. There are landlords with a single-family rental and those with hundreds of units on large multi-family complexes.
Today, we are focusing on the small-to-midsize real estate portfolios. Let’s say 1 to 30 units.
What does a property management company do?
Generally speaking, a property management company can handle every aspect of business it takes to manage your rental property. This includes all leasing, rent collection, handling and coordination maintenance and repairs, as well as handling the tenants and evictions.
For the sake of simplicity, this article goes into a lot more detail about what property management does.
When Should A Landlord Hire a Property Management Company?
Ah, the main question! When should a landlord hire a property management company?
Simple answer: when it becomes valuable.
Seriously, keep that response in the back of your mind. Every landlord assesses value in different ways. Who are we or anybody else to tell you when it’s value based on your current life? If you ask 10 landlords when should landlords hire a property manager, you will get 10 different responses.
These factors are common reasons that fellow landlords consider hiring property management.
- You own a lot of properties or rental units. Common sense says the more properties and rental units you know, the more time it will take to manage. Landlords of a certain portfolio size get stuck in a trap of owning too many units that require a lot of time but not enough income generated to fulfill their retirement desires.
- You don’t live near your rental properties. This generally happens in three ways: you moved and converted your home into a rental, you inherited a home, or you’re an investor that seeks the most affordable and valuable market no matter where. The act of property management does require somebody to be local to look at maintenance, open/lock doors, and even post late rent or eviction notices.
- You simply don’t have the time. There are plenty of events and tasks that take your time throughout the day, week, month, year. More units mean more time. For some landlords, their time is better spent making money elsewhere, such as their own business or finding the next deal. Or, perhaps, you have a family and want to maximize your time spent with them.
- You have no desire or passion for being hands-on. Look, we get it. Not everybody wants to constantly work and be hands-on. Every landlord invests to make additional income but not every landlord invests to create additional work for themselves. For some landlords, they don’t mind the additional work since it means more income. Plenty of landlords also invest and immediately outsource property management because they don’t want to do additional work.
- The property makes enough to cover management costs. Never go into a deal that doesn’t make money. With that said, not every deal makes enough profit to justify hiring property management. For those properties or portfolios that do earn enough profit, then an extra 10-18% of revenue is not a major impact on your bottom line. That figure is a 10% monthly fee and an 8% leasing fee for years you get a new tenant.
Should a landlord hire a Property Manager or Property Management Company?
For property management, bigger is not always better. There is a perfect analogy for this: would you rather be a big fish in a small pond or a small fish in a big pond?
Property management companies are a big bond. In theory, they have more clients, rental units, and tenants. Unfortunately, that means their attention is divided amongst the crowd.
Landlords with a large portfolio that can demand more attention than a landlord with only a few properties. Therefore, property management companies will always put their large portfolio clients as a higher priority. Which is completely understandable.
Yet, hiring an individual property manager is being in the small pond. And regardless of your portfolio size, you are likely to be a big fish to that manager.
Our general suggestion: large portfolios of 20+ units should go with a property management company and portfolios less than 20 units stay consider an individual property manager.
An individual property manager can provide more attention to you and your rental units. As well, with fewer clients, they will provide better customer service. Especially with property management software, individual property managers can be as efficient as larger companies.
How to Find A Good Property Manager
Landlords have several options to find a good property manager. You can ask your realtor if they will or provide you a reference. Ask for references on local Facebook real estate groups but make sure you clarify whether you want an individual or company.
Or, consider using Burbz marketplace to request proposals from property managers in your area. Instead of wasting time calling many property management companies to get no response, you can fill out a Request For Proposal form one time. Any interested property managers will respond to you with their proposed fees.