How to Know if You Need a Property Management Company
If you own a rental property and you're wondering if a property management company might be for you, we can help. Not every rental property owner needs to hire a property management company, but it is worth exploring this option—which can make your life so much easier and stress-free when you find the right fit. Here are some of the most important questions to ask yourself when you need to know if hiring a property management company is right for you.
Is your rental property close to home?
The farther away you live from your rental property, the harder it will be for you to manage. That includes everything from finding tenants, handling complaints, responding to emergency situations, and taking care of maintenance issues. You have to factor in the time it takes you to get to your rental property and the cost of getting there—not to mention the inconvenience factor. The larger the distance the more temptation there is to not keep a close eye on things, so you should at least plan on making monthly scheduled visits. In the long run, is this feasible for you?
How many rentals do you own?
As the number of units you own increases, so do your responsibilities. The more tenants you have, the more maintenance issues, complaints, and vacancies you will have to deal with. In addition, if your units are spread across multiple properties in multiple locations, you will spend even more time managing the cash flow of each individual property, as well as physically commuting from property to property to handle issues. As your portfolio grows so do the management challenges, and it becomes easier for things to fall through the cracks. Investors with large portfolios stand to reap significant benefits by leveraging the efficiencies a property manager can provide.
How much experience do you have with repairs and maintenance?
If you can't do it yourself, do you know who to call? Finding reliable handymen and contractors can take a while and in the meantime you may unknowingly hire people that are unethical, uninsured, do poor quality work, or over charge. Maintenance and repairs are a significant component of land lording and if you question your ability to ensure the work is done well and in a timely manner, you might want to consider hiring a property management company.
Can you afford a property manager?
Before you hire a property manager, you need to assess your finances. Obviously, property managers are not free. Managers will charge a fee on average between 4% and 10% of the monthly gross income for the property. These fees can be even higher depending on the additional factors of the location, size and amenities of the rental property. You definitely want to make sure you can afford to pay that percentage of your rental income out to someone else and that it's a worthwhile investment for you.
Do you have time to manage a property?
You know the saying: Time is money. That definitely rings true in a property management situation since managing an investment property can take a lot of your time. If you have a full-time job while you are investing in property and simply cannot give your property the attention it needs, the success of your investment could depend on hiring a good property manager. If you feel like the daily obligations of property management are taking away time that could be better spent making more money at your other job, or looking for other investments—hiring an outside manager may be the right move for you.
Are you able to handle the accounting and bookkeeping?
From profit and loss statements to tax deductions, this area needs special attention and becomes an increasingly larger burden for larger portfolios. Some owners (especially those with a background in finance or experience elsewhere) will do just fine, others may opt to hire an accountant to help with the bookkeeping. If you feel like this might be a weak point you might want to consider hiring a property management company.
Are you willing to be on call 24/7?
It's important to answer this question honestly, because when an emergency happens at your property you can't ignore it. And the reality is it can interrupt everything in your life, since land lording takes top priority. Your special event, important meeting, vacation, or personal crisis doesn't relieve you of your obligation to your tenant. These emergencies don’t happen all the time, but when they do you have to be willing to handle them immediately. Are you willing and able?
How do you deal with stress and confrontation?
Is the stress of dealing with evictions, complaints and maintenance issues taking a toll on you? Many new owners dislike feeling like the bad guy and try to be understanding by making exceptions. The problem is that this only invites additional abuses and excuses by tenants. Property managers are skilled in handling landlord-tenant conflict. They have an understanding of the landlord-tenant law and can serve as the middle-man, or buffer, for problems. In addition, if the tenant knows they are dealing with a third party, they may act more professional as well.
How well do you understand rental laws?
Ensuring the property is run in accordance with the law is critical in both preventing lawsuits and shielding yourself from liability if you are sued. Familiarity with contracts is also very important as your rental agreement is the only binding agreement between you and the tenant.
You also have to realize that just as property managers have the ability to make decisions on your behalf, they can also make mistakes on your behalf—and the mistakes can cost you dearly. Property management contracts often have something called a “hold harmless” clause which is meant to protect the manager, except in instances of gross negligence, by placing the responsibility on the property owner. For example, the property manager violates Fair Housing laws when looking for tenants and has a complaint filed against them. As the property owner, even though you did not commit the violation, you hired the person who did, so you could be liable. That's why it's important to do your research and choose a property management company with a good reputation and a lot of experience.
More on Managing Rental Property
When it comes down to it, the decision to hire or not hire a management company should hinge on whether or not it is a good fit with your lifestyle and makes sense financially. Individual investors have to assess the opportunity cost of both options based on their unique circumstances. Don't be afraid to talk to others with experience in investment properties and to research your options before making a decision.
We wish you success whichever way you go. If you'd like more information, read more at the links below.
Are you in search of a property management company in Topsail, NC? Century 21 Action Topsail can help!
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