Rental Property Management

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Rental real estate is an investment that requires proper management to maximize its profit potential. While some choose to manage these assets themselves, others choose to outsource management duties to professional third party companies. Either method can be effective but both have pros and cons, and should be based on your desired lifestyle. Rental real estate property management requires constant attention and management companies can charge anywhere between 5-15% of rent revenues for their services, so it is best to evaluate beforehand whether you can manage the responsibilities yourself or outsource.

Property Management Definition

Property management is the daily oversight of rental real estate by a third-party which includes tasks such as maintenance, operations, and marketing.

What is a Property Manager (PM)?

A Property Manager (PM) is a person whose job is to manage the daily routines of rental properties and preserve the value of the properties while generating income. Generally, property managers oversee management activities such as rent payments, repairs and maintenance, security, and general property upkeep.

Should I Self-Manage or Hire a Property Manager?

The biggest question in rental property management is “Should I Self Manage my property or hire a Property Management Company?”

While single family rental properties may be manageable for newly starting our investors, large multifamily apartments and commercial shopping centers almost always require professional management services. 

Deciding whether to self manage or outsource to a third party management company usually comes down to what type of responsibilities can you handle. Some have full time careers and may not have time to self manage. Some may be an aspiring full time real estate entrepreneur and don’t mind putting in the daily time and effort. 

Perhaps the most effective strategy is to be a hybrid – those who start out self managing to learn the ins-and-outs of property management and eventually switch over the third-party management once the time commitment is no longer beneficial. These types of owners understand the operations of management but chose to outsource to maybe pursue other ventures or just enjoy their life less interrupted.

Partial Service vs Full Service

Partial Service Property Management

Partial Service Property Management is when a property management company facilitates one or limited amount of management tasks. This may include only overseeing marketing and leasing the rental property, in which the property owner then actively takes over management after that. In partial service property management, additional services can be incrementally added on as desired by the property owner.

Full Service Property Management

Full Service Property Management is when a property management company takes care of every aspect of management. From leasing, to rent collection, maintenance, and sometimes even mortgage payments. Full Service Property Management is designed to perform all tasks required by a property owner or self-managing landlord. Full service property management is the most costly, yet also the most hands-off type of property management for real estate investors.

Pros and Cons of Self Managing Rental Real Estate

Self Managing Pros

  1. More Cost Effective – Probably the most common reason for choosing to self-manage a rental real investment is due to cost. With third-party management companies charge between 5% -15% it makes more economic sense for some investors to self-manage. For example, if a local property management company charges 10% of the monthly income, that means that by the end of the year they’ll have charged you more than 1 month’s rent, and that’s 10% X 12 months = 120%.
  2. Greater Control of the Property – Unfortunately, owners and property managers do not always entirely see eye-to-eye. Whether it is a design decision or selecting the most qualified tenant, self managing allows you to have the final call. This usually results in quick and decisive decision making since you naturally only want to make decisions that you believe are best for your business.
  3. Opportunity to Learn – Self managing your investment allows you to learn about your property and also the general business of managing investment rental real estate. From annoying maintenance requests, to properly screening prospective tenants, you will have to deal with it all. The good news is that the more you learn about your business, the easier it will be for you to grow it.

Self Managing Cons

  1. Very Time Consuming – Even if you enjoy taking care of your investment property, unless you have a lot of spare time, you may find it difficult to properly give your investment property the time it requires of you. From maintenance requests to paying bills, and properly screening prospective tenants, there is a lot of oversight required which all needs to be addressed promptly (Yes, even the 3am overflowing toilet floods).
  2. Lacking Professional Expertise & Presence – You may have a lot of hands on experience, but property management is such a vast field of topics that it is nearly impossible to stay on top of all the changing laws and regulations. Furthermore, maybe it’s human nature, but tenants seem to respect actual companies more, even if its just a DBA and Google Voice phone number.
  3. Rent Collection and Handling Evictions – We may plan for everyone to promptly pay their rent on the 1st of every month, but that is just not the case in rental real estate. This means you may end up needing to follow up with some renters every month to get them to pay on time. In the unfortunate event a tenant decides they’re simply not going to pay, you will then have to start and see-through the legal process of eviction.

Pros and Cons of Hiring a Property Manager

Property Manager Pros

  1. Ease of Mind – Property management can be very stressful, regardless of how great your tenants are. Outsourcing this obligation to a property manager frees up your time to either continue growing your business by focusing on new acquisitions, or just enjoying life without worrying about getting a late night maintenance phone call.
  2. Maintenance Response – Depending on the size, larger property management companies have dedicated 24-hour phone lines and available tradesmen to handle emergencies no matter the time. Even if they do not have maintenance staff directly employed, all property management companies  have relationships with local vendors to get any job done quickly and effectively.
  3. Enabling Growth and Scaling Up – If you’ve already gotten your feet wet self-managing, hiring a property manager might be a wise decision to help you scale up your business. Nobody knows the ins and outs of the rental industry more than property managers, and a good one can help you handle the mundane tasks and also pass along valuable market knowledge and insights.

Property Manager Cons

  1. Cost of Services – The most common complaint of hiring a property management company is the cost. Fees vary depending on the services offered, but are usually a percentage or monthly rent. On top of the recurring base monthly charge, they may also charge a leasing fee, setup fee, cancellation fee, extra maintenance fees, renewals fees, etc.
  2. Giving up Control of Your Property – Hiring a property management company means you are willing to hand over the day-to-day operations of your rental property. Should you choose to do so, you will need to accept the fact that they may not approach every issue the same way you would. For example, some property managers may work remotely, where you are a hands-on type of owner.
  3. More Expensive Maintenance – Maybe you have a cousin who could unclog a drain for $20 and free lunch, however, the property manager is going to call a licensed plumber for that same job. Should you choose to have the property management company handle maintenance, you will need to be comfortable paying marked up prices for professional tradesmen to perform maintenance.

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Property Management News

Property Management Fees

Property management fees vary depending on the services offered, but property management companies will either charge a fixed price, or charge on a percentage basis. Fixed prices are usually based on the local market and can be price-per-door, flat rate, or a combination thereof. Percentage basis fees are calculated as a percentage of the gross-rent collected each month. Most property management companies require a contract period to start (e.g. 1 year term) and will add on a la carte fees for each additional service performed such as a setup fee, cancellation fee, extra maintenance fees, renewals fees, etc.

Fixed RatePercentage (%)
Pros• Easier to Understand Pricing
•Consistent for Budgeting Purposes
•Increased Motivation to Increase Rents
• Paid Based Off of Performance
Cons• Less Incentive to Increase Rents
• Can Overpay During Vacancies
• Amount Can Fluctuate With Vacancies

Tenant Screening

Proper tenant screening is the force behind every successful rental property. When done correctly, tenant screening ensures that the landlord is getting the right tenant and the tenant is entering into a long-term relationship with a landlord who matches their expectations. The tenant screening process is usually done through a third-party service provider that provides reports such as credit checks and criminal history.

What Does a Property Management Company Do?

The job duties of a property manager can seem both simple yet complicated at the same time. While some duties vary by property type (e.g. Multifamily Apartments vs Commercial Office Rental Properties) there are many duties that are common among all property managers:

  • Rent Collection and Deposits
  • Leasing and Marketing
  • Prepare & Manage Budgets
  • Eviction – Posting 3-Day Notices and/or Legal Proceedings
  • Delegate Maintenance Requests
  • Enforce Property Rules Among Tenants
  • Third-Party Vendor Management
  • Oversee Property Improvement Projects
  • Handle Impromptu Legal Issues
  • Interview Tenants & Checking Credit Profiles
  • Coordinate Vacancy Unit-Turning
  • Resolve Tenant Disputes

Property Management Software

Property management software helps property owners, property managers, and tenants handle various aspects of administration such as rent payment, scheduling property maintenance, and owner reporting. Below we explore a few of the top property management softwares:

Explore Types of Property Management