Many investment property owners cringe at the thought of hiring a property manager. First there is the cost — the management fees paid to a property manager take away from the bottom line. Second, no one manages your property better than you. Giving your property over to management is losing control over its operation. On the surface, neither of these scenarios is attractive. But let’s looks a little closer.
Management fees. No one likes to pay someone else to do what they can do themselves. But property managers can often add value,not take it away.
- Rent. In many cases, owners are reluctant to lift rents and thus rent their property below market. A property manager can often optimize rents in such a way as to pay for his/her management fee.
- Turnover. Often an owner lacks the tenant screening skills necessary for good screening. Consequently at turnover the owner is stuck with thousands of dollars in repair/utility costs. A good property manager can avoid bad tenants and reduce turnover by thousands of dollars. Amortized over the term of tenancy, this alone will pay for the manager’s fees.
- Taxes. The fees paid to a property manager are tax deductible. So his/her ‘effective’ percentage fee should be reduced by your tax rate.
No one manages it better than you. If you’ve been a landlord for more than 15 years this is probably true. But if you are still in “the learning phase” (and those lessons can be expensive!), here’s where a property manager can manage it better.
- Rent. Many DIY landlords buy into tenant stories of hardship and let rent slip, often by many, many months. A property manager has a fiduciary responsibility to collect the rent or evict. A property manager won’t allow a tenant to get behind on rent by 3-4-5 months.
- Legal. Owners often stub their toe in this expensive arena and cost themselves a bunch of time and money needlessly. A property manager knows the law and how to navigate through troubled waters.
- Personal. Sometimes things get personal between a landlord and a tenant. This causes stress and clouds effective solution-making. A property manager is accustomed to getting past the emotion and focusing on the issues.
There are a number of other reasons why a property manager makes sense, but these are the biggest. The common myth that a property manager costs money should be easily debunked. Sometimes, but a lot less than most people think. A good property manager will actually save money!