People frequently ask me: “Is property management really worth the cost?” My short but immediate answer is: “What is your time worth?”
My longer answer is: “It depends principally on your property manager.” If you’ve hired the right firm and compensate them such that their goals align with yours, then yes, it is worth every penny of the cost. On the other hand, if they make money by taking advantage of you – for instance, if they upcharge on maintenance – then you need to run. Below are several important questions to consider when deciding if managing property is right for you.
8 Questions About Property Management
- How would you deal with midnight maintenance calls? Do you know how to fix a leaky sink or what the cost of a furnace replacement should be? What about fixing a clogged toilet at 1 a.m.? Do you have vendors that give discounts on services like these?
- How will you vet and place new renters into your property? Do you know how to interview and select tenants? How do you vet them? Have you talked to their past landlords? Do they have sufficient income to be able to cover rent? What about credit? Criminal record? Prior evictions? Do you know how to read or order a background check? Are you just making decisions based on gut feelings?
- Would you rather collect rent, or just have it arrive in your mailbox? How do you collect from a tenant that has not paid rent? How do you handle evictions? What are your rights as a landlord? (For related reading, see: 5 Mistakes Real Estate Investors Should Avoid.)
- How will you deal with legal issues? What are you legally responsible for? Good property managers are experts on legal issues: liability protection, fair housing, timelines (doing repairs quickly), serving notices, mold, flooding, sewage, fire, harassment, money disputes, security deposit disputes, etc.
- Will you be able to keep up with market trends? Are you charging the appropriate rent? What is the current range for rentals in your market?
- How will your emotions impact your decisions as a landlord? A good property manager will relieve you of emotional involvement and treat you and your property as a business, not a charity. What happens when tenants call to inform you they got fired, their mom died, or they have cancer and can’t pay? There is a fine line between being empathetic and ensuring you don’t go in the red. Are you going to be able to pay your mortgage if your tenant’s situation doesn’t allow you to collect rent?
- How will you market your property, and deal with vacancies? How and where should you market your property? Vacancy is your biggest expense when owning rental properties. A good property manager will successfully market your property so that it is not vacant, which is tantamount to making profit.
- How do you want to spend your time? What is your time worth? $15/hour to deal with tenants? $30/hr to deal with tenants? More?
While property management may seem like a big expense up front, it can help reduce vacancy, save money on maintenance, and most importantly, save yourself time and headaches. Hard to put a true price tag on that last point.
Choosing a Property Management Firm
If you’ve decided you want to hire a property management firm, how do you decide if the firm you’re interviewing is a good fit for you and your needs? We recommend starting with some interview questions. They will help you weed out bad property management firms. One of the primary goals of the interview should be to determine whether the property manager’s contract and payment structure aligns with your goals for your property. Finally, find a property manager that actually owns substantial real estate themselves. It is hard to be an expert in management if you have never gone through the experience of actually owning and making decisions from the owner’s perspective first. (For more from this author, see: Seasons Impact Real Estate More Than You Think.)
Please note that recommendations are based on property management for owners of single family housing. Multi-family housing is entirely different. Ryan Boykin is co-founder of Atlas Real Estate Group, a Denver-based full-service realty firm.