Buying and owning real estate is still a smart and potentially lucrative investment strategy. But managing your properties? Often easier said than done.
Whether you are a first-time buyer or own several properties already, it’s likely you have your hands full keeping up with maintenance, listing your properties, or dealing with existing tenants. You dream of a hands-off solution that allows you to manage your investments without sucking up all of your time.
Enter: Property Management.
In reality, there is a way to manage your properties without the stress. In this guide, we’re covering what property management is and how to find a solution to your real estate woes.
Table of Contents:
- What is Property Management?
- Is Owning a Rental Property a Hassle?
- What is “Self-Management”?
- How to Manage Multiple Real Estate Properties
- Why Every Landlord Should Hire a Property Manager
- What Does a Property Management Company Do?
- Are Property Management Companies Worth it?
- How to Choose a Property Management Company
What is Property Management?
Property management refers to the overseeing of commercial, residential, or industrial real estate properties. These properties can include rental homes, apartments, condominiums, hotels, manufacturing buildings, office buildings, warehouses, or shopping centers.
The “property manager” of a building or complex is someone who manages the property on the owner’s behalf. The goal is for the property to generate income while the management of the property is relatively “hands-off” for the owner.
Is Owning a Rental Property a Hassle?
Property owners often decide to hire a property manager or rental property management company because the process of managing a rental property can be such a hassle.
Rather than being a source of passive income, a rental property can easily become a time suck if the owner/landlord is consumed by maintenance requests, tenant grievances, and having to re-list their property.
Property management can relieve some of these headaches for you. The right company will oversee your property or properties on your behalf while you pay for the service.
Taking this route can make sense economically if the cost of hiring a real estate management company doesn’t significantly cut into your profits. Plus, what you’re paying for is peace of mind, less stress, and the freedom of having a relatively passive income stream.
What is “Self-Management”?
You really have two options when it comes to managing your property: Self-management or hiring a property manager.
Self-management, as the name implies, is when you manage your real estate properties yourself – without the help of a property manager. This DIY route can save you some money, but it’s not without its fair share of headaches.
It’s worth it to weigh the pros and cons of self-management so you can avoid some stressful (and costly) management mistakes.
Pros of Self-Management
- You save money on property management fees.
- You have more say over tenant selection and can personally evaluate applications.
- You have more control over the changes made on your property and know that you always have your own best interests in mind.
- Your property is your top priority, whereas property managers may be managing many properties at once.
Cons of Self-Management
- You may save some money but at the cost of having to deal with the stress of managing the property on your own.
- You may not have the real estate market know-how that a professional property management company has, which means you may not always be getting the best return on your investment.
- You’re more likely to get heated when conflict arises, whereas property managers can take a diplomatic approach and de-escalate conflict when tenants get out of hand.
- You may not have much experience managing properties, which means you could make time-wasting or expensive mistakes when it comes to repairs or time to find quality tenants.
- You’re unlikely to have the professional resources that a property management company has. They are experienced in cutting down on costs and finding the right maintenance crew for the job.
How to Manage Multiple Real Estate Properties
Self-management may be a reasonable option if you are managing a single property, but what about managing multiple properties?
You can’t be many places at once, and dealing with multiple tenants can get stressful, fast. However, a property management company is well-versed in managing multiple properties at once and has the resources on-hand to take care of your investments effectively.
For these reasons, the best way to manage multiple real estate properties is to hire a property manager or property management company.
Why Every Landlord Should Hire a Property Manager
If you have real estate investments that involve housing tenants or leasing space to businesses, then you’re essentially a landlord who could definitely benefit from hiring a property manager.
There are many reasons why you, as a landlord, should hire a property manager:
- You have many rental properties but don’t have time to manage them all.
- You don’t have the resources/expertise to maintain the properties.
- You don’t have the time or patience to deal with deviant tenants.
- You’re just in the real estate business to earn a profit and don’t want to spend time managing the property yourself.
- You participate in affordable housing programs but aren’t familiar with how to adhere to the federal guidelines.
- You’re an absentee landlord who doesn’t live at or near the property and so it isn’t convenient for you to manage it yourself.
- You’re an absentee owner who doesn’t live in the local area and would prefer to hire someone local to manage your properties.
- You struggle with tenant turnover and would prefer to hire someone to fill your properties for you.
Whatever the reason, it’s clear that hiring a property management company is the smart choice if you don’t have the time, patience, or resources to manage the properties yourself.
There’s no shame in taking this route, though. Hiring a property manager is often the best way to maximize the return on your real estate investments and manage your properties stress-free.
Leasing Agent vs Property Manager: What’s the Difference?
But what about a “leasing agent”? Is this different from a “property manager”?
Many people use both terms interchangeably to describe someone who leases rental properties, maintains the properties, and manages tenants. But, there are a few key differences.
Rental property owners may choose to hire a leasing agent for the sole purpose of leasing out the property. In this case, the leasing agent is simply responsible for listing the property and finding new tenants. They may be particularly skilled in marketing properties, showing them, and drafting up lease agreements.
A property manager, on the other hand, often handles leasing plus the other responsibilities associated with managing the property. These other responsibilities typically include building relationships with tenants, managing maintenance requests, dealing with conflict, and collecting late payments.
If finding tenants is what you need, a leasing agent may be the way to go. But if you are looking for an all-in-one property management solution, then you’ll want to hire a professional property manager or management company.
What Does a Property Management Company Do?
A property management company will take a lot of management responsibilities off your plate. As a property owner, you’ll be relieved to find how much time (and headache) you’ll save by outsourcing the management of your real estate investments.
Beyond finding new tenants for your properties, you can expect a property management company to:
- Draft up lease agreements
- Collect payment when it’s time for tenants to pay rent
- Respond to maintenance requests and handle repairs
- Deal with tenants who are defaulting on their rental payments
- Market your properties ahead of vacancies to prevent empty properties
- Track the market and increase rent prices as needed
- Keep records of what’s happening at the properties
With all of these perks of hiring a management company, the question then becomes: is it worth it?
Are Property Management Companies Worth it?
The cost of hiring a property management company is a valid concern, so it really comes down to whether the benefits outweigh the cost.
In actuality, a property owner can often make a higher return on their investment if they hire a skilled property management company.
Though the cost may cut into your bottom line initially, a management company will be skilled in tracking the market to help you maximize the return on your investment. Plus, they can help reduce tenant turnover and keep your investment properties in top-notch condition by responding by repairing damages faster.
Smart real estate investors often see hiring a property management company as yet another investment, due to the fact that a good manager can often return more than their initial cost.
At the same time, some owners simply revel in the freedom of being able to maintain their investments without the hassle.
How to Choose a Property Management Company
Whether you’re looking for a Phoenix property management company or a company in a different city or state, you’ll want to take the time to carefully weigh your options.
Not all property management companies are created equal, and you’ll want to find one that’s worth the investment. We even recommend interviewing several property managers before choosing the right one for you.
Here are some things to consider when choosing a property management company.
What to Look for in a Property Management Company:
- Management Fee: How much does the company charge in management fees? Is it a flat fee or based on a percentage of the rent cost?
- Other Fees: Does the property management company charge vacancy fees, set-up fees, or leasing fees? If so, how much do these cost?
- Tenants and Owner Funds: When does the company send you (the owner) your payment? Do they advise on tax deductions? Do they keep detailed accounting reports? Can you access these reports yourself (preferably, online)?
- Collecting Rent: How do they determine the rent costs? How often will they raise the rent? How is rent collected? How do they handle late payments? How do they handle evictions?
- Maintenance and Repairs: How do they track maintenance requests? Who makes the repairs? Do they offer preventative maintenance? Are tenants allowed to perform repairs? What repairs/cleanings are made after a tenant moves out?
- Tenant Marketing: How do they go about finding new tenants? How do they prevent prolonged vacancies? Where will they market your properties?
- Tenant Screening: What does the screening process look like? Will you be able to review applications? Will new tenants undergo a background check?
- Organization: Does the company have positive reviews? How is their customer service? What is the best way to reach them? How do they handle emergencies?
Are you considering hiring a property management company? Check out our additional resources regarding property management below:
Table of Contents:
Intro: What is Property Management
Chapter 1: Property Management Services
Chapter 3: Property Management Tools
Chapter 4: Rental Property Taxes
Chapter 5: Selling Rental Property
Chapter 6: Buying Rental Property in the Phoenix Market