If you own a rental property, you’re already familiar with the pros and cons of rental property management. You’ll be able to collect rental income exceeding your total monthly expenses, resulting in a short-term profit, and long-term, you can expect a profit when it comes time to sell the property. But in the meantime, you’ll have to spend lots of time and money with regular upkeep; you’ll be responsible for finding and screening tenants, conducting repairs, collecting rent, and making improvements to the property.
One solution is to hire a property management firm to handle most of these responsibilities on your behalf, but is this the right move for your property?
The Benefits of Hiring a Property Management Firm
Let’s start by looking at some of the most important benefits of hiring a property management firm:
· Saving time. The biggest advantage is that a management firm will save you time. Between collecting rent, filling vacancies, screening tenants, fixing damage, and making improvements to the property, you could easily spend several hours a week on a single rental property. If you have lots of other professional and personal responsibilities, this quickly becomes untenable—especially as you add more properties to your portfolio.
· Improving tenant quality. Working with a property management company also allows you to improve your tenant quality. Management firms understand what makes a good tenant, and they’ll work relentlessly on your behalf to make sure your property is filled with reliable, long-term renters.
· Minimizing tenant interactions. Speaking of tenants, working with a property management company reduces your need to interact with tenants directly—and in many cases, you won’t have to speak with them at all. This will help you remain objective when making decisions about the property, and can reduce stress when you’re dealing with a property or tenant issue. It’s also great for the tenant screening process, which many landlords find stressful.
· Property condition reliability. Are you certain your property is in good shape? If you leave it in the hands of a property management firm, you can rest assured it will be. You won’t have to worry about the quality of your work, nor will you have to wonder whether your cursory inspection was enough to proactively detect problems with the property; you’re essentially delegating your accountability.
· Legal consistency. There are many laws to consider as a landlord. It’s your responsibility to ensure the property is safely habitable, and you’ll need to follow anti-discrimination laws closely. A property management firm will have a thorough understanding of tenant and landlord laws in your area, and will make sure you’re following them precisely.
· Expert advice. In many situations, a property management firm will be able to provide you with expert advice along the way. They may recommend the best way to move forward with a tenant, or recommend an improvement that can increase the value of your property. In some cases, they may even help you identify new investment opportunities in the neighborhood or in neighborhoods nearby.
· Streamlining evictions. Tenant evictions aren’t fun, and every landlord hopes they never have to deal with one. But if you find yourself with a particularly stubborn, unreliable, or dangerous tenant, you’ll have to evict them. A property management firm can streamline the process on your behalf.
The Downsides of Hiring a Property Management Firm
Those benefits look attractive, but are there any downsides to consider?
· Expenses and profitability. Property management firms aren’t free; they usually charge you a fee based on how much revenue the property is generating. You’ll still be cash flow positive in many situations, but this could eat into your profitability. The true economic impact of this move will depend on the specific property.
· Less transparency and hands-on work. If someone else is doing work on your property, you’ll have less transparency into how that work is handled. You also won’t get to do it yourself—so if you love the idea of DIY projects on your own rental property, a management firm may reduce your opportunities.
· Choosing the right partner. Much of your success with a property management firm will depend on the quality of the firm. Not all firms do work with the same attention to quality, and not all firms will charge the same amount. You’ll need to do your research before choosing a long-term partner for such an important purpose.
As you might have guessed, there are pros and cons to hiring a property management company, so it’s not a definitively “good” or “bad” move. Instead, you’ll need to think carefully about the strengths and weaknesses of your property, your personal preferences when it comes to property management, and your ultimate goals as a property investor.