Owning rental property can be a great way to diversify your investment portfolio or create a passive income stream for the longer term. But being a landlord isn’t always all it’s cracked up to be. There’s a lot of work that can go into that “passive” income, depending on your business model and how many units you own.
If you’re feeling the strain of owning a rental unit (or a dozen), it might be time to consider a property manager.
What Is a Property Manager?
For many property owners, handling the day-to-day of rental management goes with the territory, even if they have other jobs and things they need to do. Fortunately, there’s a real estate professional who does nothing but handle most aspects of acquiring and tending to renters: a property manager. There are a lot of things a property manager can do on behalf of the owner of any given property to make owning rental units that much easier.
“As a property manager you oversee the entire operations of rentals, sometimes only a few, sometimes an entire community,” says Denise Supplee, Realtor and founder of SparkRental.com in Hatboro, Pennsylvania. “This includes managing staff, maintenance and repairs, capital improvements, leasing, finances, insurance, property inspections, and tenant relations, sending notices and in some cases, handling eviction and going to court. However, a property manager usually will not handle purchases and sales of properties.”
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When Should You Hire a Property Manager?
Landlords with just one or two units for rent may find that they can easily handle the job themselves, but as their rental portfolios expand, it can get a lot harder for one person to do everything. While there are benefits to being a hands-on owner, and doing so teaches you a lot about how the business works, most people can’t scale their rentals alone.
“For many investors, real estate is ideal for passive income,” says Samantha Skrobot, Director of Integration Partnerships at Rent., in Detroit, Michigan. “There is nothing passive about 2 a.m. maintenance calls or stressing about how to build an online advertising campaign for your vacant units. And if you are looking to expand your portfolio you want to spend time looking at new properties, not servicing the ones you already have.”
It gets even more difficult if you’re trying to expand your rental business into additional regions, such as the currently hot Sun Belt.
“If you are looking to diversify your portfolio, and geographically balance your real estate holdings, then expanding to new markets is likely top of mind,” Skrobot says. “Hiring a skilled local property manager can aid you in not only operating that property from a distance but helping you understand that new market and identify new acquisition opportunities.”
What’s Included in a Property Management Contract?
Like with any real estate professional, hiring a property manager requires a contract that stipulates exactly what duties the property manager will and will not be required to perform, as well as their compensation.
Although these fees are usually negotiable, don’t expect property managers to be willing to work solely for free rent. Being a property manager generally includes a long list of tasks, from marketing to and qualifying renters, collecting rents, dealing with repairs, handling evictions, interfacing with the local municipality, and even supervising updates to units. They’re essentially on call 24/7.
Typical fees can easily range from 3% to 10% of your monthly rents for ongoing management, but additional fees may apply for specific tasks or situations. Be certain that these fees are spelled out in their entirety, that you read your agreement completely, and that both parties sign showing their acknowledgement of the terms before you hand over the reins.
[READ: What You Should Know About Rising Average Apartment Rents]
How Do You Choose a Property Manager?
Once you’ve decided you need a property manager, and you’re ready with a list of duties you’d like them to perform on your behalf, it’s time to actually choose the person for the job. It can be absolutely gut-wrenching to select the person or company that will represent you to your tenants, but if you carefully interview and vet your candidates, standouts will make themselves known.
“First, look for professional memberships (i.e. a Realtor who is also a member of the National Association of Residential Property Managers ),” suggests Bruce Ailion, broker/attorney at RE/MAX Town and Country in Atlanta, Georgia. “Look for experience. Does this person or firm have the ability to do an exceptional job? Consider the proximity to the property. Visits are necessary, and a property 10 minutes from the property manager will get more visits than one 60 miles from the office.”
Ailion’s best piece of advice to would-be employers of property managers? “Do not focus on how much the property manager charges, focus on how much it costs you by not employing one.”
Is a Property Manager a Good Investment?
Whether or not a property manager makes sense for your rental empire really depends on how you define “empire.” If you just own a few properties and you really like being hands-on with them, from choosing tenants to the sometimes stressful task of also evicting them, it might not make sense for you to invest the additional dollars in a person to do those jobs.
But, if you envision an empire that’s more than a few roofs, you’re going to need help sooner rather than later. A property manager makes a lot of sense for anyone with more than a few units and who doesn’t want their entire life to be about handling day-to-day rental business.
Owning a rental empire can be a passive source of income with the right help, or it can be akin to owning a dairy farm if you insist on doing all the heavy lifting on your own.
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Should You Hire a Property Manager? originally appeared on usnews.com
