Owning real estate can be an exciting investment that grows at a steady rate and generates passive income. However, leasing real estate can be a headache that grows faster than your equity or cash flow. How can you maintain an investment effortlessly while netting positive cash flow? Hiring property management services may be the answer.
Hiring a quality property management company can help you maintain and improve the worth of your investments. You should consider hiring property management services if your personal efforts are lacking in time, skill, and interest in property management. It’s exhausting if your property management responsibilities increase exponentially, while your profits only increase marginally. Read on to see if using property management services is right for you and your investments.
When You Should Use Property Management Services
A property management service should enrich your real estate leasing experience by taking over the management tasks. A thorough management company can alleviate your investment responsibilities by reducing the effort needed on your part to maintain a valuable property.
Hire Property Management Services When You Need to Save Time
How you spend your time is a powerful evaluation of your money. It may not be worth your time to manage your real estate if you have a lot on your plate. For example, if you live far away from your property, it can take a great deal of time to travel to your properties. For many landlords, this can be a full-time job. A property manager can visit your property for you to save you the time traveling. Also, if you have multiple properties, they can save you even more time as you don’t need to travel to them.
Another way investing in property management services can save you time is through maintenance. Tenants often need full-time maintenance services. If you have another job outside of being a landlord, this can be a stressful task. However, your tenants do come first, so a property manager is important so they can get the repairs they need.
Maybe there are better ways you can allocate your time in real estate. Think about where you can be most impactful in your investment strategy. Is it in buying undervalued properties, renovations, or refinancing? Wherever it is, put your time and effort there!
To get the most value out of your real estate investments, Brandon Turner from Bigger Pockets says, “Unless property management is your core business, focus on the stuff you do best, and stop trying to save money in the wrong (time-consuming) areas.” When it comes to managing your investments, you need to decide what’s the best use of your time. Think about where you can be the most impactful in your investment strategy, and pursue that route.
Hire a Property Manager if You Lack Management Skills
You may learn managing your own property is not as easy as it’s made out to be. Being a landlord comes with a lot of administrative overhead. Plus, the time it takes to perform your administrative tasks increases as the number and value of your investments grow.
Consider contracting the help of a property management service if you need help with screening tenants, addressing tenant issues, and bookkeeping. These are important management skills to ensure your properties are successful. Also, advertising your properties is a helpful duty of property managers. This way, you are more likely to always have a tenant in your property. If you are unaware of landlord laws, you will find your property management service helpful in this area as well.
Disorganization in your management can ruin the profitability of your investment. A skilled property manager can implement an efficient administrative system that allows your investment to operate autonomously from your daily life.
Hire a Property Manager if You Lack Interest in Property Management
There’s no hard and fast rule that says because you own property, you have to do everything yourself. While real estate may excite you as a venture, you may find being a landlord does not. Being a landlord requires assuming many roles, like a:
- Property marketer,
- Leasing agent,
- Contract negotiator,
- Tenant customer service representative,
- Accountant, and
- Legal advisor.
Many people prefer being hands-off with their investments. So, if you can afford the cost, consider using a property management company to take care of your property.
Know the Price: How Much Property Management Services Cost
The most common reason anyone invests in real estate is to generate passive income. Before you research property management services in your area, you should know not all management companies are the same; they are independent contracting services that often operate on unique terms.
The average price of using property management services costs between eight to 12 percent of the property’s rental value. Some companies charge a flat fee for their services, while others charge a percentage. It is also common for property management companies to charge additional fees associated with maintenance, tenancy occupation, tenancy placement, evictions, and more.
Charges may also vary based on the type of property you own. Different types of properties require various levels of management. For example, management charges will likely differ if you own:
- A single-family home with a one year lease
- A four-unit apartment building with one-year leases
- Two vacation condos with one-month leases
- 8 AirBnB apartment units with varying daily leases
You can expect to have a long-term contract with property management companies, usually for 12 to 24 months. Property management services sometimes have automatic contract renewals, early termination terms, and other tenant legalities. Furthermore, they can help with price negotiations and service specifications.
Assessing Value: When are Property Management Services Worth Your Money?
Before purchasing an investment, you should have already performed a cash flow analysis on the property in question, with and without the inclusion of property management fees.
A profitable investment should adhere to the two percent and 50 percent rules of investment, with or without property management intervention. Ultimately the decision is up to you to employ a property manager. You must decide if it is worth the eight to 12 percent of your rent plus fees to outsource your management, or if it is better to do the management work for yourself (at least for now).
What to Expect: What Services Property Management Companies Provide
If you’re not convinced that utilizing a property management service can save you on time, skill, and interest, take a look at the list of services they provide. Contracting with a quality manager to work on your behalf can streamline your responsibilities. They can save you time by the points below.
Read on to further explore how a property management firm can benefit your real estate investment.
Competitively Evaluate Your Property
A skilled property manager can perform an accurate comparative analysis of your investments to similar properties in the area. Using this information will allow you or your property manager to rent your units for a competitive yet reasonable rate. Your property manager may also be able to advise you on rental trends and policies, according to the demographics of renters in your area.
Market Your Property
A property management company will handle the advertising and showing of your property in the shortest amount of time possible. So, they help you keep your vacancy costs to a minimum. A savvy property management firm will advertise your vacant units by using various media, sites, and salespeople.
Manage Financial Obligations
A financially sound property management company will be active in the financial stakes of your investment. They will manage all documents and forms pertaining to deposits, service invoices, and tenant payments. Furthermore, they will keep track of taxes, cash flows, and your payments.
Screen and Lease New Tenants
There are a lot of variables when it comes to choosing a new tenant. A qualified property manager can perform thorough interviews of prospective tenants. They can also retrieve reliable credit reports and background checks. Additionally, they can draft expert leases and manage move-in dates. This will take a significant amount of stress off your shoulders with new tenants.
Reduce Tenant Turnover
Client turnover is perhaps the most costly expenditure in owning an investment property. However, a property management company can help save you the costs associated with relinquishing and finding new tenants. This is done by establishing a responsive system for client needs. An efficient system for such responsiveness often includes:
- Empathetic representatives that listen to tenant complaints and handle them promptly.
- Resources and procedures for property and tenant emergencies.
- Easy-to-follow routines for collecting rent and bill payments.
Pursue Tenant Late Payments and Evictions
If a situation with a tenant turns sour, a skilled property management company has firm, reliable methods for collecting late rents and handling evictions. A cautious property manager will inform tenants with upcoming notices of upcoming rent, late fees, evictions, and more. Additionally, they can help protect you from lawsuits thanks to their due diligence.
The manager’s notices can create a body of evidence of your due diligence to work with your tenant. You can also elect in your service contract for your property management company to represent you in court if you are faced with evicting a tenant.
Scheduling Maintenance and Repairs
A good property management company will have licensed and bonded resources for on-call and scheduled repairs. In addition to performing routine maintenance, a property management company can schedule property inspections. These are to check the integrity of your structure, as well as ensure your tenants are not misusing your property.
Comply with Landlord Laws and Programs
As a landlord, you need to pay attention to a lot of legal information that is constantly being updated. You need to be aware of a multitude of state and federal policies, including:
- Renter’s rights
- Landlord-tenant laws
- Security deposit laws
- Fair Housing laws
- Discrimination policies
- Habitability laws
An experienced property management firm will stay informed on the changing laws. Additionally, they will keep you and your tenants informed. Furthermore, a knowledgeable property management service will inform you of beneficial landlord programs. If there are requirements you much take to participate in these programs, they will inform you of those as well.
Teach You How to Be a Great Manager
You can hire a property manager to take care of one, some, or all of these services. Your management may need to improve in one or all of these services. However, a quality property management company will show you reliable and efficient ways to handle whatever landlord obstacles come your way.
By hiring a property management firm, you are relinquishing some of your control over your property and letting someone else manage it better for you. Be sure to take advantage of this opportunity by asking questions and observing as much as possible. Take note of how they handle important procedures, like:
- Screening tenants,
- Writing leases, and
- Repair services.
Also, take note of industry software they use for client communication, rent collection, maintenance requests, and accounting. These are all very important factors with management. So, they should have excellent software.
Hiring a well-oiled property management firm lets you live your life independent of the worries and hassles that come from managing properties. At the same time, you can reap the benefits of owning a passive income resource. We’d say the learning experience in itself is worth a try. You have only eight to 12 percent of your total rents to lose, but years of management knowledge to gain!
A Note of Property Management Services and Fees
In these scenarios, the property management company performs the grunt of the work required to keep your investment afloat. While not all property management firms will require it, you should expect to pay fees for beneficial or out of the ordinary procedures. These may be placing a new tenant, handling emergency repairs, collecting late payments, and pursuing evictions.
In conclusion, hiring property management services is a personal choice that requires you to reflect on your valuation of time, money, and control. In addition, you also need to assess your plan for being involved with one.
No matter how long you have owned a property and have been managing it yourself, our team can help you. At MyHomeSpot.com, we have been helping clients with managing their properties for many years. Our team ensures your tenants are happy while you enjoy making passive income. If you are in the Pensacola, Florida area, consider using our property management services.
myHomeSpot.com is a professional property management company in Pensacola, FL specializing in residential, multi-family real estate asset management. We also offer Community and Homeowner Association Management services for Condominiums, Residential Communities and Commercial-Retail Centers.