As rental property investors, you may wonder if you should hire a property manager. Is the property management fee worth it? But let me tell you, hiring a property manager is the best decision you can make, especially if you’re new to the real estate game. From dealing with tenant issues to legal compliance and maintenance nightmares, the responsibilities can pile up fast. This is why hiring a property manager is a must if you want a more profitable, hands-off investment.
What is a Property Manager?
A property manager is a a person or a company who manages the day-to-day operations of your rental property on behalf of the owner. They take maintain the property and the tenants. A property manager is responsible for:
- Finding and screening tenants
- Setting monthly rents based on the market
- Maintenance and repairs of the property
- Managing tenants
- Evictions
💡Tip: Ensure clear expectations are outlined. Know what all your property manager is responsible for.
How much does a Property Manager Cost?
Property managers typically charge a flat monthly fee of 8%-10% of the monthly rent. However, there may be other fees that they may charge. Here are some other fees they may require:
- Lease Fees: A flat upfront fee for getting a tenant under a lease.
- Legal Fees: This is a fee they charge for handling legal actions like evictions. This usually does not include the court fees.
- Other: They may charge a fee for their time that is not included in managing the property. For example, meeting an evicted tenant to collect belongings.
💡Tip: Make sure you read through your Property Management agreement in detail and understand all the fees!
The Benefits of Hiring a Property Manager
The fees that a property manager charges you, may seem like you are throwing money down the drain. It may seem like there are a lot of fees. Many new real estate investors don’t know what all goes into managing your properties. You may think it is easy to do-it-yourself (DIY), but here are a few reasons why you may want to think it over.
The Legal Stuff
One of the biggest mistakes newbie landlords make is underestimating the legal complexity of rental properties. There are a lot of laws and regulations you have to take into account and ensure you don’t violate them. This can get you into BIG TROUBLE! Landlord-tenant laws vary by state and city. If you don’t follow them, it can lead to costly lawsuits, fines, or even eviction delays. This is why I always like to have a good experienced Property Manager to help ensure I follow the laws and regulations.
Make sure your Property Manager:
- Knows the laws and regulations and stays up to date
- Has clear, detailed and legally sound leases
- Deals with evictions legally and in timely manner
Emotional toll of Managing Tenants
The next thing many new real estate investors overlook, is the emotional toll that dealing/managing tenants can have on you. Sure it may be easy with one or two properties, but as you grow and have more tenants, it will add up! Dealing with tenant complaints, late payments, and property damage can wear you down. I had a taste of it a few weeks ago with a tenant. It was emotionally exhausting!
Some benefits of outsourcing:
- Less stress and frustration
- Avoid emotional decisions
- Don’t need to deal personally with disputes
- Use that mental energy to build your portfolio or on other things
How much is your time worth?
Finally, let’s talk about the numbers. Because you may think you will save money by managing your properties, but it may turn out to be the opposite! Many new landlords look at the 8% to 10% management fee and prefer to save it. But they forget that time is money as well. The time that is spent on tenants, maintenance, bookkeeping, has monetary value. So how much is your time worth? Let’s break it down.
Case Study:
| Rental Property | $1,800 / month |
| Property Manager Fee | 10% of monthly rent |
| Hours Spent on Managing Rental | 4 hours/ month (average from google) |
Cost Break Down:
- $180/monthly ($1800 x 10%)
- $40/hour ($180/4 hours)
Question to Ask Yourself:
- Is saving the $180/month worth it?
- What other costs may come up with managing on my own property?
- Can I use those hours more effectively in other venture?
Overall, managing tenants, coordinating repairs, and handling emergencies at 3 AM is not only time-consuming, but stressful. For me, I can spend that time better with family or growing my business. You can spend that time on scaling your portfolio, building other income streams, or just enjoying life.
What to Look for in a Property Manager
Deciding to hire a property manager is the easy part. Finding a good one is the hard part. I know from experience how choosing the wrong can be worse!
Property Manager Checklist
- Experience Level: How long have they been in business? Do they specialize in your type of rental?
- Portfolio Size: How many units do they manage? Too few may mean inexperience, too many could mean lack of attention.
- Organization & Efficiency: Are they proactive or just reactive? Do they use tech tools for communication and maintenance tracking?
- Reputation: Check reviews, ask for references, and talk to other landlords about their experiences.
Above all, make sure their ethics and approach align with yours. A property manager is an extension of your business, and you want someone who will treat tenants fairly while also protecting your investment.
Is a Property Manager Right for You?
At the end of the day, hiring a property manager isn’t just about convenience, it’s about buying back your time and ensuring your investment is protected and is successful. Hiring an experienced Property Manager is right for you if you want to:
- Protect yourself legally from lawsuits etc
- More free time for life and other ventures
- Reduce stress and the mental workload
- Ensure your properties are maintained and managed
- Keep your tenants happy
Remember that a property manager is more than just another expense. It is a strategic decision that can help you scale your portfolio. However, if you still prefer to manage your properties, I recommend the book Managing Rental Properties. Tune into the episode for more!
FAQs
1. How much does a property manager typically cost?
The average standard fee for property managers is about 8-10% of monthly rent. However, there may be other additional fees like leasing fees. Therefore, make sure to read your agreement carefully.
2. What are the biggest risks of hiring a property manager?
The biggest risk is that they neglect your property, mishandle tenant issues, or overcharge for repairs. That’s why it is important to interview several and know what their process is. Plus ensure you check reviews and references.
3. Can I manage my properties myself and still be successful?
Of course. However, remember success includes other factors besides just money. Include your time and the stress.
4. When should I hire a property manager?
You should think about hiring a property manager when:
- You start growing your portfolio to several properties
- If you are an out-of-state investor
- Your time is limited from family, job, school, etc
- Want a more passive investment
5. How do I know if my property manager is doing a good job?
Even though you have a property manager, you still have to manage the manager. Ensure that you verify documents they send you, communicate regularly, and they are managing your property efficiently when it comes to maintenance and tenants. A big red flag is if you have high vacancy or turnover rates, tenants complain, or you’re still handling issues yourself, it may be time to re-evaluate.
