45% of landlords own and manage their property, while 44% own the property but don’t manage it. So, how do property owners decide whether it’s better to hire a property manager or DIY? Here’s what you need to know.
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, and handling evictions).
Common property manager responsibilities include:
- 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, handle tenant disagreements, and 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. It can also open you up to legal issues if you aren’t knowledgeable about The Fair Housing Act or The Fair Credit Reporting Act.
- 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 – Without a property manager handling repairs (such as fixing standing water in a dishwasher), your 48 hours per year per property average will surely be much higher! You will have connections to qualified handymen and staff to help keep your property in top shape.
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 personally taking care of property maintenance and management include having greater control, not having to divert some of the 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 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, and 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 your 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?
That depends on your situation. Ask yourself a few questions before making a decision:
- Do you have time to oversee the day-to-day operations of your property or properties?
- Are you handy or capable of hiring an effective handyman for maintenance tasks?
- Do you want to be the person a tenant calls for emergency and non-emergency situations?
- Are you knowledgeable about landlord-tenant laws?
- Are you confident in your tenant screening skills?
- Do you have enough experience marketing properties to ensure you can keep them filled?
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, have experience, 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 effectively manage your properties. Managing just one single-family home is very difficult. Managing multiple homes – in different locations – is impossible to do by yourself.
