9 Questions to Ask Yourself Before Hiring a Property Manager
This is a question you should ask yourself if you have more than one property in your portfolio. Although, even if you have more than one property under your belt, you may not need to hire a property manager: But hiring one may be helpful! The following 9 questions will help you determine if hiring a property manager is in your best interest.
1. Is Your Rental Nearby?
When your rental property is nearby, it’s easier to respond to emergencies in the property, maintenance issues, tenant complaints, collect rental payments, etc, than if you lived out of the area or even in a different state, and possible even a different country. For instance, if it takes you one hour both coming and going to get to your rental property, it’s probably worth it hiring a good property manager, because in the end, you will save on both time and money.
2. How Many Rentals Do You Own?
Mo rentals, mo problems!! The more rentals you own, the more tenant complaints, maintenance issues, and vacancies you have to deal with. Also, if your units are spread across multiple properties, you will spend even more time managing the cash flow of each individual property, as well as physically commuting from property to property to handle issues.
3. Do you Have Experience Managing Property?
If you don’t have experience managing property, getting on the job experience can be costly. Although, hiring the wrong property manager can also be equally as expensive. It’s important to do your due diligence when hiring the right property manager-find some reviews, possibly get a referral, and be picky when interviewing.
Remember, its your investment, and you want to see a return on it. When starting out as a real estate investor, hiring a bad vendor or taking too long to fill a vacancy can quickly eat into your potential income. Mistakes such as being accused of discrimination because you did not understand the fair housing laws, or getting housing complaints, can lead to loss on your investment.
4. Can I Afford it?
Property managers aren’t free so you have to incorporate those fees into your return on investment. Property managers normally charge between 4% to 10% of the monthly gross income of the property. The typical fee for a single-family rental property is closer to 10%, and the fee for a property of 10 units or more is typically between 4% and 7%, but fees can vary. For example, a single-family home with a gross income of $2,000 per month might have a management fee of 10%, or $200. Some property managers will also charge tenant placement fees, which is a bonus for finding a tenant. These fees will vary from a few hundred dollars to as much as one month’s rent.
5. Do You Have the Time to Manage Your Property?
Managing a property takes time, and sometimes you can’t fully commit to managing your property due to other obligations. For instance, you may already have a full-time job, or self-employed. If you already have full schedule, you may not be able to give your property the attention it needs, so you may have to start thinking about hiring a property manager.
However, if real estate investing is your full-time business, then perhaps you can incorporate time to manage it, or have funds to hire employees, since it’s a part of your business. If you feel like the daily obligations of property management are taking away time that could be better spent making more money at your other job, or looking for other investments, hiring an outside manager may be the right move for you.
6. Can You Give Up Control?
Property managers are pretty much running the show in regard to all things concerning the property. If a tenant has an issue, they call the property manager. When the tenant pays rent, they go to the property manager, when taxes and insurance need to be paid-You guessed it; who else but the property manager. You as an owner need to ask yourself if you’re willing to give up that control. As an investor, I know this is your baby, or babies if you have more than one, so make sure you choose the right property manager. Although the property manager won’t have the same passion for your investment as you do, that shouldn’t stop them doing their part to keep up with your investment.
7. Are You Willing to Take on the Liability of a Property Manager?
When you hire a property manager, sometimes they can act in what they believe is your best interest, and sometimes they don’t. Property management contracts often have something called a “hold harmless” clause which is meant to protect the property manager, except in instances of gross negligence, by placing the responsibility on the property owner.
For example, if the property manager violates Fair Housing laws when looking for tenants, they may get a complaint filed against them. As the property owner, even though you did not commit the violation, you hired the person who did, so you could be liable. Fair housing laws are supposed to ensure everyone the opportunity to live where they choose, which is a right for all Americans. Be sure that the property manager is on top of this, especially with how they market the property for advertising if you choose to hire one.
8. Do You Have a High Vacancy Rate or Problems with Your Cash Flow?
Good property managers are skilled at quickly finding and screening tenant. They will also have a network of reliable and cost-effective vendors to handle emergencies, such as plumbers and repairmen. In addition, most professional property managers will also understand the landlord-tenant law, thereby reducing the risk of a lawsuit.
9. What Is Your Tolerance for Dealing with Tenants?
Do you enjoy dealing with your problem tenants (I mean this in the kindest way possible), evicting them, leaky faucet and roofs, complaints, maintenance issues, and more complaints? Property managers are skilled in handling landlord-tenant conflict, and overall handling all things related to the tenant. They also have an understanding of the landlord-tenant law and have experience serving as the middle-man.
After asking yourself these 9 questions and you still think you don’t need a property manager, then more power to you!! To be honest, you really don’t have to hire a property manager just because you are new to property investing, have many units or are having trouble filling vacancies. This is where the mantra “Practice makes perfect” comes into play.
Personal experience is often the best teacher and everyone has to start learning somewhere. If you educate yourself about property investing, get professional advice from industry veterans, join real estate groups, and have a strong desire to manage your property well, chances are, you will succeed, even if you fail at first. We’ll end on this note, if at first you don’t succeed, try, try again.