Self-managing a property is the ‘cheaper’ route, but enlisting the services of a property manager can be a massive help to the first-time investor. With that said, is hiring a property management company really worth the cost?
One of the best ways to build wealth is to operate residential rental properties. Some real estate investors manage their rental properties themselves, while others leave the heavy lifting to a property management agent. Those who do self-manage save a lot of property management fees, however, the downside is that they assume all of the duties of a landlord. That’s why most of them end up employing a property management company.
By hiring a property management company, you can ensure that your property is occupied year-round. You can also improve your return on investment (ROI) and have more time to focus on building your real estate business. But before you hire a South Florida property manager, it’s extremely important to fully understand what exactly you’ll be getting out of a property management agent.
What Does a Property Management Company Do?
To decide whether or not employing a property management company is worth the cost, you need to understand what they do and don’t do.
#1 Fill Unoccupied Units
The bulk of the real estate investor’s headaches involves tenant turnovers. If you self-manage your property, you’ll have to oversee everything, including advertising the unit, preparing the property for the new tenant, and signing the rental agreement. Turnover can be incredibly laborious and time-consuming, which is why many investors outsource it to a property management agent.
#2 Screen Potential Tenants
Property management companies have a strict tenant screening process in place, that includes credit checks, background checks, and criminal record checks. These critical parts of the tenant screening process are likely to be overlooked by a self-managing investor. By hiring a property management agent, you’ll be able to save yourself from a lot of tenant-related troubles in the future.
#3 Collect Rent
Property managers are the point of contact for all tenant-related concerns and communication. Aside from collecting rent, they’re also in charge of responding to concerns, coordinating repairs, listening to complaints, and more. They wear a smile on their faces and act professionally at all times, even when they’re confronted by the rudest of renters. As you can see, property management entails customer service, so if you don’t think you can provide that, you should look into employing a third-party contractor.
#4 Follow Rental Laws
It can be a challenge to keep abreast with all the landlord-tenant laws, especially since they vary by state and they’re constantly being revised and revoked. A South Florida property management company can help you steer clear of legal trouble by staying up-to-date on these laws for you. They’re pros in their field, and they’re more likely to know the relevant laws since they’re familiar with the market where they work.
#5 Out-of-State Landlords Point of Contact
A property manager is an out-of-state landlord’s on-site point of contact. If an investor purchases a property in a state that they’re not familiar with, they may not know how to operate an investment in that market. For instance, if you’re from California but you buy a rental in South Florida, you won’t know how to deal with Florida’s market since it’s different from California.
A property manager is a specialist in that specific state, hence, they’re familiar with what tenants want. Plus, they can oversee issues that may arise, such as maintenance, repairs, and more – these would all be difficult to deal with remotely.
#6 Coordinate Repairs and Maintenance
Repairs and maintenance are also handled by a reliable property management agent. It’s crucial to respond to maintenance issues immediately, otherwise, you will end up with disgruntled tenants – especially if the matter is so urgent, such as no heat in the rental unit. It’s helpful to have an investment property manager on-site to deal with concerns – and complaints – the moment they arise.
Tenants are known to raise concerns at any time, and a lack of support from the real estate investor (aka you) can cause them to move elsewhere. If you can’t deal with their concerns, it’s crucial to maintain a local presence that can.
Besides, a property management company has been in the business for decades. They’ve likely established a network of vetted vendors that can provide their services at more competitive rates. In short, they can save you a significant amount of money.
What Fees Do Property Management Companies Charge?
Let’s take a look at the different property management fees you can expect:
#1 Tenant Placement Fees
Tenant screenings are time-consuming and tedious, so it makes sense that a property management company would demand a hefty fee for its services. It’s typical for property managers to collect a fee worth one month’s rent for filling an unoccupied unit. Don’t try to negotiate, though – it takes a lot of work to find good tenants. Keep in mind that they’re helping you avoid various risks.
#2 Rent Collection Fees
Property management companies commonly charge a minimal percentage of the rent. This is the ongoing fee that they charge for continuing to monitor your rental property. Generally, this fee ranges from 6 to 10 percent of the total rent collected, but if you own an upscale property, be prepared to pay double that amount.
Some property management companies collect a fixed fee instead of one that’s dependent on the rent. A single-family home, for example, typically has a fixed fee of $100 per month.
#3 Other Property Management Fees
Since property management services vary by company, your agent may collect more fees for certain services, such as:
- Overseeing an unoccupied property
- Listing a property on websites such as Zillow, Rentals.com, and Zumper
- Following up rent late payments
- Conducting routine inspections
- Overseeing evictions
- …and more
Be sure to ask your property management company for a detailed breakdown of their fees. Ideally, these “miscellaneous” fees should already be covered by the ongoing fee that they collect every month. In short, your property management company shouldn’t charge a fee for every little thing. You should not be made to pay separately for every service.
Looking For a Property Manager You Can Trust?
At Luxury Property Care, one of our core values is integrity. We believe that you deserve value, which is why we provide honest services that put your property’s best interests on priority. We never consider our clients’ properties as a way to earn a quick buck, but instead, as investments that we’re obligated to grow. When you partner with us, we promise to make every penny that you spend worth it.