For many first-time landlords, managing an investment property can be quite a learning experience. If you’re knowledgeable about real estate, and you’re comfortable doing research, managing your own property might be the perfect fit for you. However, if you live far away from your rental property, or you aren’t sure you have the time or skill to manage it, a property manager may be your best option.
In this post, we’ll take a look at what a property manager does, what they charge, and if you should consider hiring one to take care of your investment property.
What is a Property Manager?
A property manager is someone who handles the business side of an investment property for the owner. Their tasks typically include:
- Setting, collecting, and adjusting rent payments.
- Advertising the property, and screening and placing tenants.
- Pre- and post- renting walkthroughs with tenants.
- Lease negotiation and signing.
- Maintenance and repairs.
- Tenant complaints and emergencies.
- Eviction processes.
A property manager basically takes control of the rental property, only requiring your input for things like large repairs or extensive maintenance.
Good property managers also stay on top tenant/landlord laws to make sure that your property is up to code, and that any dealings with tenants are lawful and meet any required standards. They should know what the proper notice periods are for entering the property, and what needs to happen in order to evict a tenant.
Some states even require that a property manager have a real estate license, which means that they have gone through a certification process allowing them to conduct real estate transactions.
Property managers should also keep track of all payments, invoices, receipts, and rent increases for your property. It’s up to them to keep a record of your property’s financial history while they are in your employ, which can help when completing your taxes or assessing the viability of your property.
What do Property Managers Charge?
What a property manager charges, and how they determine their rates, depends largely on the property itself. If the home is located in a nice area, and it will be easy to fill, their rates may be lower as less work will be required to run the property.
If your home is located in a less popular neighborhood, and the chances of finding a tenant are slimmer, with more likelihood of repairs, rent collection issues, or other problems, they may charge more to reflect the amount of work involved.
Property managers generally charge in one of two ways:
- As a percentage of the rent.
- As a yearly fee.
Rent percentages can run anywhere from 6-14%, and are influenced by various factors.
Yearly fees are often just the first month’s rent.
This likely won’t be the only amount that they receive from you, though. Some charge what is called a “placement fee”, which is what they use to fill the property, and it includes advertising, photographing the property, screening tenants, and more.
Often, when a repair or maintenance is required, they will also charge you a percent of the bill for managing the tenant and the repair company. That fee is usually somewhere between 10-15%.
The number of properties that you own can also influence the fee. If you only have one property that you would like them to manage, your fee will be higher on the scale. If you need them to manage multiple properties, they’ll likely give you a discount.
Should I Have a Property Manager?
- Whether or not you need a property manager is entirely up to you. Many people who choose to enlist one tend to do so for one of the following reasons:
- They live far from the property and are unable to conduct day-to-day property management tasks.
- They have multiple rental properties, or apartment/condo buildings that they need a professional to manage.
- They don’t have the time to manage a property.
- They are inexperienced in being a landlord, but enjoy owning investment property.
- The property yields a high return and the cost for a property manager still leaves room for profit.
- They have a history of being unable to find tenants.
Of course, not everyone in these situations chooses to have a professional manage the property. Whether or not you have one has a lot to do with how much you want to be involved with your property personally.
Are you available to respond to tenant complaints and questions? Do you have maintenance contacts that you trust to complete repairs? These are some of the questions that you need to ask before deciding whether or not you should take care of your property yourself.
Property Managers and Property Types
Often, a property manager will take on single properties, while property management companies are more apt to handle apartment complexes and condo buildings.
There aren’t just property managers for residential homes, some also specialize in managing commercial properties. They’ll still provide the same services, but the type of tenant, the building requirements, and the leasing stipulations will be different.
Sometimes, property managers are specific to the type of property, so if you have a single residential investment property, you may want to look for someone who has experience in handling smaller properties for single-families.
Alternatively, if you own an apartment or office building, you should look for a property management company that currently offers those services.
Since the amount of responsibility differs between property types, you should make sure that anyone that you hire is knowledgeable about that property type, and the ways to maximize your experience as an investor.
To Hire or not to Hire
As mentioned, the decision to hire a property manager is completely up to you. If you foresee that it will reduce stress for you, and give you some more free time, while still netting you a profit, it’s something you should explore.
If you are confident that you have the time, skills, and patience to manage your properties, then perhaps it’s not the right choice for you.
Property managers can help to ensure that you are renting your property in the right way, and that your tenants are well-cared for. But remember, you will still be liable for any mistakes that your property manager makes. Therefore, do your research, ask for references, and talk to other investors to find one that you can trust.
Have you ever had a property manager? Would you recommend having one to other real estate investors?