WHEN TO HIRE A PROPERTY MANAGEMENT COMPANY
As a landlord, you have your hands full when it comes to listing your properties, finding tenants, collecting rent payments, and handling repairs. And if you happen to manage multiple rental properties, it may seem like there aren’t enough hours in a day to stay on top of all of these tasks.
Fortunately, you can outsource the management for your properties to a property management company. Hiring a management company is a smart option if you want to cut down on stress and maximize the profit potential on your properties.
Not sure if hiring a property manager is the right choice for you? Here’s what to expect in hiring a management company – and whether doing so is worth the cost.
What is a Property Management Company?
A property management company is a company that oversees the marketing, management, and maintenance of residential or commercial properties.
The property management services these companies offer help landlords and real estate investors manage their properties without the stress. Going this route is a smart choice if you live outside the area, don’t have the patience to deal with day-to-day property management, or don’t have the capacity to manage multiple properties at once.
Why Hire Property Management Services?
You may choose to pay for property management services if the benefits of doing so outweigh the mental or financial costs of managing the properties yourself.
For example, you may choose to hire a property manager if you already work full-time and can’t oversee the management of tenants. In fact, in the state of Arizona, a statutory agent must be appointed in-state who can manage the property on your behalf.
There are many advantages (and some disadvantages) to hiring out for property management services. Here are a few things for you to consider…
Advantages of Hiring a Property Management Company
The advantages of hiring a property management company far outweigh the costs when you consider the stress you save and the sheer benefit of having a professional manage your property.
Some advantages of hiring a property management company include:
- Be able to manage and oversee multiple real estate investment properties
- Having a professional market your listing and find new tenants for you
- Having a streamlined process for screening prospective tenants
- Hiring someone to collect rent and late payments, and handle evictions
- Having a property manager available to handle repairs and preventative maintenance
- Hiring an expert who knows the market and can generate a higher return on your investments
- Having someone handle conflict and make hard decisions for you – where you might be more sympathetic and make decisions that go against your best interests
- Hiring a property management company with experience in the Landlord-Tenant Act and other laws that you may not know as a property owner
Disadvantages of Hiring a Property Management Company
With the above advantages in mind, it’s important to consider the disadvantages as well – mainly, the financial cost.
In hiring a property management company, you are essentially paying for a peace of mind. But, you’ll also have a professional on-hand who’s able to maximize the earning potential on your real estate investments.
The possible disadvantages of hiring a property management company include:
- Affecting your bottom line by paying for management services
- Possible miscommunications between you and your property manager and tenants
- Having less freedom when it comes to marketing your listings or screening tenants
- A property management company showing less personal care than you would if you were managing your own property
The disadvantages of hiring a property management company are minimal when you consider how much time and energy you’ll save in hiring someone to oversee your properties for you.
Plus, hiring out can actually generate a better return on your investment because they set fair market rates and reduce the amount of time your properties are vacant. And, they are more likely to stay ahead of repairs – especially for multiple properties.
What Do Property Management Companies Do?
Property management companies offer a wide range of rental property management services to help you manage your properties and keep them in tip-top shape.
Here are some of the services you can expect from working with a property management company:
Marketing Your Rental Property
A property management company will have a slew of marketing tools at their disposal to help you market your listings. While many landlords resort to Craigslist (not recommended), property management companies use more effective, reputable tools to find tenants.
One such option is Multiple Listing Services (MLS), which allows companies to market one or many listings across multiple platforms. This ensures that your properties will get filled quickly so you can earn an income as quickly as possible.
Do you get stressed when it comes time to find new tenants? You don’t have to when you outsource property management.
Your property manager will find eligible tenants for you so you never have to lift a finger. This means your properties are likely to stay filled so you can keep earning a profit.
Tenant Screening Services
You want good tenants and companies leasing your properties. A property management company will screen tenants according to your specifications so you always hand stand-up renters.
Your company will likely run background checks, check for credit history, assess tenant income, and ask essential move-in questions on your behalf. Companies typically provide all-in-one tenant screening solutions so you don’t have to worry about who is staying at your properties.
Drafting up a detailed lease is important when it comes to protecting your assets. That’s why most property management companies offer this as a service – outlining all the essential terms and details of the agreement.
Never worry about collecting rent again. Your property manager will chase down payment for you so you always get that deposit in your bank account every month. Plus, they’ll follow up with delinquent tenants and deal with conflict on your behalf.
Property management companies also handle payment of important property-related bills, including HOA fees, mortgage payments, repairs and maintenance, and even your property taxes.
Your property manager will likely have a crew that tracks maintenance requests, handles repairs, and keeps up with preventative maintenance of your properties. That way, repairs are taken care of quickly, your property stays well-maintained and in compliance with local and federal laws, and that your tenants remain happy.
Move Out Process
When it’s time for a tenant to move out, a rental property management company will assess the property for damages, handle cleaning, allocate the damage deposit (if needed), and take care of all of the remaining details. Then, the property will be clean and ready for the next showing or tenant.
Accounting and Taxes
If accounting isn’t your forte, you can be confident knowing that a property management company will stay on top of the numbers. They’ll handle tenant statements, landlord statements, taxes, and owner balances. You can then request these reports so you have them for your own records.
How Much Do Property Managers Charge?
Residential property management companies typically charge between 8 – 12% of the monthly rental value of your property, whereas others may charge a monthly flat rate (which varies).
These costs can vary widely, so your best bet is to compare different options and ask for a quote for property management services.
Are Property Management Services Worth it?
Whether hiring a property manager is worth it depends on your needs and goals. If you want to ditch the hassle, then paying for management services will definitely be worth it.
If you only manage a single property and can stay on top of the required responsibilities yourself, it may be worth it to save your money for now.
Just keep in mind that hiring a company is an investment itself – as they will help you get more bang for your buck by optimizing your rent costs and keeping your properties occupied as long as possible.
Frequently Asked Questions
Choosing to hire a property management company is an important decision. If you have more questions about what a property management firm does or whether hiring one is the best option for you, feel free to check out our FAQ section below to get all your questions answered.
What set of services does a property manager offer?
A property manager is typically in charge of marketing the property, finding new tenants, screening tenants, handling repairs, collecting rent payments, managing your rental accounts, and handling any conflicts that may arise with tenants.
How is a person’s rental history checked in the US?
In screening tenants, your property manager will likely run a rental history check to see where applicants have lived in the past, for how long, whether they have ever been evicted, and whether their past landlords would describe them as good tenants.
What’s the best way to evaluate potential tenants?
The best way to evaluate potential tenants is to run a background check, run a credit check, call their past landlords and references, and ask for income statements to prove that they can make their regular rental payments. Typically, you want a tenant who has a strong credit history and is known to make their rent payments on time, with no indication of criminal activity.
What comes up on a background check?
A background check typically verifying an applicant’s identity, verifies their place of employment, checks their credit history, check for a criminal record, and assesses their driver’s history.
How do property management companies verify income?
Property management companies can verify tenant income by asking for income/bank statements or by calling the applicant’s place of employment if that contact information has been provided.
What are the essential elements of a lease?
The lease needs to list the name(s) of the tenant(s), the length of the tenancy, the amount of rent due, the date that the rent is due, how rent payment should be made, the late rent policy, details regarding the security deposit, how repair requests and maintenance will be handled, any restrictions regarding additional occupants or illegal activities, and the terms of termination.
Does property management include maintenance?
Every property management company is different, so we recommend asking your preferred management company what (if any) repair services are included in their management services. Typically, property managers partner with contractors to cover repairs and preventative maintenance.
How do you collect rent from tenants?
Most property management companies today collect payment through an online portal. Tenants can sign up for autopay or make manual deposits online. Or, they can pay through traditional methods like a cashier’s check, cash, or money order.
How can a property manager evict a tenant?
There are different rules regarding when a landlord or property manager can evict a tenant and they vary state by state. Typically, a written notice is required before you can evict a tenant. Review Arizona state eviction laws for more details or search for eviction laws in your state.