When you own rental property, you need to determine whether you should use some of your budget to hire a property manager. Hiring a property manager is advantageous if it takes a long time to get to your rental property, if the cost isn’t too high, and if you want to spend your time doing things other than maintaining your property. However, there are also some situations where doing it yourself could be beneficial.
What Does a Property Manager Do?
A property manager oversees, maintains, and manages properties for real estate investors or other owners. A property manager usually handles tenant affairs (i.e., screening tenants, handling evictions).
- Handling property maintenance tasks
- Collecting rent
- Handling evictions
- Contracting expert maintenance staff
- Marketing the property and showing units
- Interviewing tenants
- Ensuring the property adheres to legal requirements
- Helping with taxes
- Handling tenant complaints
- Maintaining property quality
What Does a Property Manager Cost?
The majority of property managers charge between 8% and 12% of monthly rent. For example, if your monthly rent for a property is $1,000, your property manager may charge between $80 and $120 depending on your contract.
However, property managers may operate with two different payment systems:
- Flat rate payment systems – With such systems, property managers charge a flat weekly, monthly, or yearly rate to their clients. This is more common among property managers who oversee small or few properties.
- Percentage-based payment systems – With such systems, property managers charge a percentage of a property’s total monthly rental income. This is usually anywhere between 8% and 12%. For instance, if a property brings in $10,000 of rental income per month, and the property management company charges 10% of that income for its fee, it receives $1,000 per month.
The more properties a management company oversees, the more money it charges (on average). Larger management companies have to employ more people, oftentimes have to do more work, and have to spend more time interviewing, screening, and collecting rent from tenants.
Benefits of Hiring a Property Manager
The advantages of hiring a property manager include being able to take time off, not having to maintain your property, and not having to deal with difficult tenants.
Here’s a more detailed breakdown of these benefits:
- Being able to spend more time on other things, like another job, expanding your portfolio, or simply taking time off – As a property owner, you can expect to spend 2-4 hours per month per rental property handling management and operations tasks, or around 48 hours per year per property. That number skyrockets without a property manager to oversee maintenance, tenant interviews, and rent collection.
- Being able to invest in different areas – With a property management company, you can own properties in different areas or different cities without having to drive between them and take care of management tasks yourself. For example, if you have one property in your hometown, but another property in a city 45 minutes away, having a property manager oversee at least one property means you don’t have to spend 90 minutes every week driving back and forth.
- Freedom from having to take care of problematic tenants – Most property management companies issue warnings to tenants who are behind on rent, evict problematic tenants, and handle similar tasks.
- Freedom from having to interview, screen, and extend offers to tenants – Interviewing and screening tenants takes many hours, especially if you own properties with more than one unit.
- Freedom from having to market a property aggressively to fill up rental units – Coming up with marketing campaigns, distributing marketing materials, and responding to tenant inquiries also takes a ton of time and marketing expertise.
- Freedom from having to perform maintenance tasks, such as repairing refrigerators, trimming hedges, mowing lawns, and picking up trash – Without a property manager handling these things, your 48 hours per year per property average will surely be much higher!
The main benefit of hiring a property manager is not needing to do any of the hard work involved with owning property.
Benefits of Doing it All Yourself
The advantages of taking care of property maintenance and management personally include having greater control, not having to divert some of revenue to pay a property manager, and being able to screen every tenant yourself.
Take a deeper dive into the advantages of maintaining your property yourself:
- Increased control – When you take care of everything for your own property, you don’t have to delegate tasks to others or settle for decisions you wouldn’t have made.
- Take home all rental income – Note, however, that this may or may not result in overall saved money. Depending on how much you spend on maintenance fees and other costs, it could end up costing more to manage a property by yourself than by hiring a property manager. If you only spend $50 per month on maintenance fees and associated costs to manage a single-family home, but a property manager will cost over $100, they’re not worth the fee.
- Complete control over marketing, tenant screening, rent collection – If you want to have 100% control over how your property is marketed and who lives in it, for instance, you can only have that control if you don’t use a property manager for those tasks.
The main benefits of doing it all by yourself are having increased control and not having to share your rental profits with others.
When to Hire a Property Manager
Common situations where you should hire a property manager include:
- When you own multiple rental properties – The more properties you own, the harder it is to effectively maintain and manage them, especially as they fill up with dozens or eventually hundreds of tenants.
- When you own rental properties in different locations – It’s very difficult to oversee and effectively maintain copies on opposite sides of a city, for example.
- When you have enough rental income to justify spending some of it on a property manager – Earning more money from more rental tenants doesn’t mean much if you can’t enjoy that income. A property manager allows you to enjoy your passive income for a small fee.
- When you have limited time – If you need to expand their portfolio or work another job, you may not have enough time to manage your properties; a property manager can solve this problem neatly.
- When you don’t want to be inundated with tenant-related or management tasks – Many investors get into this industry out of desire for profit alone. If that’s the case for you, you may not want to handle tenants or fix broken appliances.
When to Do it Yourself
It might be wiser to handle property management yourself when:
- When you don’t have many rental properties – If, for instance, you only own one single-family home, a property manager is likely unnecessary for the occasional maintenance and rent collection duties imposed on the owner.
- When the property managers in the area follow old-school marketing techniques or don’t know how to advertise effectively to modern tenants – In such cases, you might be better equipped to fill your rental properties before hiring a property manager.
- When you live near your rental property(s) – If it only takes you 5 to 10 minutes to reach a rental property, like a single-family home in the same neighborhood as your live-in residents, it makes more sense to handle property management tasks yourself as opposed to hiring a manager.
- When you can’t afford the cost – Any property manager will take a bite out of your bottom line. If that bite is too much to bear, save the cash and handle management DIY-style
- When you’re handy – Most property managers take care of everyday maintenance and appliance repair duties. If you have some experience in this area, you can do it yourself, save money, and even look like a hero to your tenants!
Is it Better to Hire a Property Manager or Do it All Yourself?
Hiring a property manager can be best if you have multiple properties in your portfolio, if you have the money to spare, and if you value your free time. Doing it yourself might be better if you don’t have extra revenue or if you value personal control over your properties.
When you only have a single property to oversee, you can feasibly maintain that property, collect rent, and screen tenants as your “job.” In exchange, you receive income from your rental tenants.
However, as you acquire more property and expand your portfolio, it becomes much harder for you to oversee and effectively manage all those properties. Managing just one single-family home is very difficult. Managing multiple homes – in different locations – is impossible to do by yourself.
Therefore, a property manager can be better some of the time, but not all the time.