We’re discussing property managers today. They are some of the most hard-working and unappreciated people in our industry, in my opinion.
We’re going to go in-depth. The video below or the text that follows will teach you how to hire the right manager for your rental properties and the reasons why you’ll be glad you did.
Would you agree that property managers have some of the most difficult jobs? They don’t receive any recognition for their work.
It’s pretty uncommon that you would call someone just to tell them they’re doing a good job with no ulterior motive.
Communicating with your property manager is usually because there is a problem that needs to be fixed.
It’s pretty obvious that property managers differ in their quality. There are a lot of great, fantastic property managers out there. And there are some that are just… not so much.
Some advantages of hiring a property manager are that they can help to screen tenants, collect rent, and handle maintenance and repairs. A downside to hiring a manager is that they can be expensive and may not be available 24/7. When hiring a manager, be sure to check their references and credentials.
Are rental property managers worth it?
The big question is whether to hire a property manager. Let’s look at the benefits of doing so to help you make a decision.
Our latest post examines the question of whether rental management companies are worth the cost.
We think the answer is yes!
A property manager’s job is to make sure the property owner’s goals are met in regards to their real estate.
What to Look for When Hiring a Property Manager
The first thing you need for this job is integrity. You can’t really screen for it on a job application, but you can get referrals from other people.
Always interview multiple property managers when looking for one in a given area. It’s not to be pedantic or annoying. You are legitimately trying to find somebody I gel with.
If you’re looking to hire a property management company to take care of your investment property, there are some key questions you’ll want to ask them first. Here are 10 of the most important:
- How long have you been in business?
- How many properties do you manage?
- What type of properties do you manage?
- Do you have a good working relationship with local law enforcement and code enforcement?
- What are your policies for dealing with problem tenants?
- How do you handle maintenance and repair issues?
- What type of accounting and reporting do you provide?
- How do you collect rent?
- What is your policy for evicting tenants?
- Do you have any references I can contact?
You might find a manager who is a great manager, but if you don’t get along with them or your personalities don’t mesh well, that might not be the right property manager for you.
It is important to try and talk to a few different real estate agents to find one that you connect with and that others say is honest. This person will be managing your most expensive asset, so it is important that they are honest.
2. Familiarity With Property Type
Do they have experience with the type of property you have? If you have managers who only do student rental investing and you’re asking them to manage a retail strip plaza or you’re asking them to manage an office building, it might not be the best fit. See what their area of expertise is and make sure they’re familiar with the type of asset you have.
The business of student rentals is different from regular apartments, so its important to hire a manager who specializes in that area and knows how to deal with students.
I’ve had a lot of managers who have been resistant to adopting the systems I want them to use to manage my properties. I asked them to upload the financial statements into a cloud drive so they would be fed into my accounting system.
You may not like the idea of one person having primary control over all of your finances. You may want your manager to deposit all the rent money into a shared business account and give him access to a smaller management account from there.
Your manager would need permission to spend anything over a certain amount on repairs, but could spend less than that without permission. This tends to work out well.
So if it is important to have a manager who was flexible and they are not, find someone else.
You will want to feel comfortable with the person who is managing your most expensive asset and feel confident that they are working in your best interest.
The three things that the speaker looks for in a property manager are:
- The ability to communicate well
- Being able to take charge and be decisive
- The ability to stay calm under pressure
Pros of Hiring a Property Manager
A property manager can be beneficial because they can manage repairs, deal with tenant complaints, and collect rent.
1. Save Time and Preserve Energy
Although a manager may cost you money, they will save you time and energy in the long run. If you feel that you would be able to add the most value to the company by finding properties or acquiring them, then it would be beneficial for you to have a manager.
2. Avoid Headaches
Managing properties is a very stressful business, which is why people who do it are in the business.
People who are not used to investing can find it very tough. They may get anxiety from worrying about their properties and may get calls in the middle of the night about problems.
Instead of doing everything yourself, it might be better to hire a manager and delegate the work to professionals.
3. Enable Growth
When you hire a property management company, you might be able to utilize the manager to look after multiple properties. If they’re looking after multiple properties, you can start having economies of scale, where the percentage that you’re paying in management goes down.
4. Get the Inside Scoop
You may like working with property managers because they are always aware of what is happening with your building and your market. If you try to manage my property yourself, you would not be able to keep track of everything that is going on. Having a manager helps you to stay on top of things.
If something is wrong, the tenants will let you know. It is important to be informed about what is happening in the building.
Property managers have a lot of useful knowledge that people don’t always take advantage of. If I’m interested in buying a property in an area I’m not familiar with, I’ll talk to the property managers there to get more information about the market.
The agent will usually say, “Oh, that’s a great property. It’ll cash flow $200, $300.” I plan to say “Hi, I am considering buying this property. The kind of rent I would be looking at is …. Would you happen to know how much it would cash flow?” The agent will probably say something like “That property is great! It would cash flow $200-$300.”
Oftentimes, real estate agents will tell you right away if they think the price is too high or too low. They may also suggest that you could get a few hundred more for each suite.
The reason real estate agents are so valuable is that they have first-hand knowledge of what is happening in the market. They know even better than some brokers because they directly interact with tenants. They can see which deals are falling through from the perspective of someone who is trying to lease a property. This is extremely useful information, so you should definitely make use of it!
Cons of Hiring a Property Manager
If you hire a property manager properly and maintain a good relationship with them, they can be a real asset. But there are some drawbacks to management outsourcing as well.
The first downside is the cost. It can be as low as 4 percent of the gross income of the property (the gross rent) or as high as 12 percent, depending on the market. So you need to take that into consideration.
While many people remember the percentage management fee, they oftentimes forget about the leasing up costs. If the property manager has to find new tenants, it could cost up to a month’s rent or half a month’s rent. And those numbers can actually really start adding up—that 4 percent all of a sudden is 7 percent if you do the calculation over the year.
This is something you should seriously consider. If you can afford it, it’s just another business expense. It’s a tax write-off, and in my opinion, it’s worth the cost.
The only potential downside to this arrangement is that your baby’s other parent may not love them as much as you do.
When you own something, it’s your property and you have a different type of relationship with it than when you simply manage it. Even if the person managing it is good at their job, they still won’t have the same level of care or investment in it as you do.
The key thing to remember is that you’re responsible for managing the property manager. You need to make sure that the working relationship between you is good.
If you don’t have a good working relationship, you get lots of what can be considered “crap”, you don’t need to lie to that person to be respectful. If you have a good working relationship then good things will happen, but if you don’t have a good working relationship then you’ll just get a bunch of crap.
Many property managers can offer great tips in the market. They find out when an owner is planning to sell or if there’s some issue with ownership, and you get rewarded for having good relationships with them. You get little pieces of market information over time that could lead to buying a property for yourself.
Why own a rental property?
There are many benefits to owning investment property assets.
Several factors make property a more attractive investment than shares for many people. One is that property is more tangible than shares–you can see and touch it, whereas shares represent ownership in a company that may be headquartered in another city, state, or country. Additionally, property is often seen as more stable than shares, meaning it doesn’t experience the same wild price swings that stocks do. Finally, historically, property has delivered better returns than shares over the long term.
Negative gearing can help young people repay their loans by allowing them to deduct all of their outgoing costs from their total taxable income. “Rent-vesting” is a popular strategy among first home buyers because it allows them to keep renting where they want while still having an investment in the property market. Ideally, they can sell their investment property or use the equity to buy their forever home when the time is right.
Property investment can help you prepare for retirement in several ways. For example, it can provide you with a stream of rental income. Additionally, you can sell your current property when you retire and use the proceeds to buy a new home.