If you have a rental property on your hands, or you’re thinking about becoming a landlord, you might consider hiring a property management company.
Before you decide to bring on a team of professionals to help you manage your business, it’s important to have a comprehensive understanding of three things:
- What is property management?
- What does a property manager do?
- How much does a property manager cost?
In this guide, we’re going to answer these three questions and give you a few tips for hiring a property manager for the first time.
What is Property Management?
According to Investopedia, property management is “the daily oversight of residential, commercial, or industrial real estate by a third-party contractor.”
Property management companies can be incredibly helpful when it comes to running your business and managing day to day responsibilities that landlords have. Property management companies can take care of everything from collecting rent to repairs, maintenance, move-out cleaning, and more.
Most property management companies will also advertise your available properties, conduct credit and background checks, meet with prospective tenants, give tours of your properties, and draw up leases and other necessary contracts.
Property management companies come in handy in many cases. For example, if you own a handful of rental properties that you don’t have the time or resources to take care of on your own, a property management company can handle as much or as little as you need them to.
Or, if you live in another city or state, you can hire a local property management company to keep an eye on your properties, make sure your tenants are well taken care of, and make sure you receive your rent check on time.
Let’s take a deeper look into more scenarios in which property management can be helpful:
- You want to be a hands-off landlord
Many landlords want to purchase and rent income properties because they are great investments. They create passive income and can generate generational wealth if done correctly. If you are more interested in the business and financial side of renting out properties, and less on the management side, hiring a property management company can help ensure you get the most out of your investment.
- Being a landlord is your second job
Becoming a landlord is a great way to earn extra money on top of your 9-to-5. However, if you’re already working 8-hours a day, you might not have the time or energy to care for your properties and tenants. A property management company can do it for you!
- You have the income
Hiring a property management company isn’t cheap. But if you can set aside 5%-10% of your rental income and still manage to afford your lifestyle, you should consider hiring a property management company. Once you are relieved of most of your landlord responsibilities, you can focus on growing your business, spending more time with your family, or just relaxing!
- You aren’t interested in being an employer
As a landlord, you always have the option to hire one or two people to help you take care of your properties. Some people will also choose to hire one of their tenants because they are already on the property so often – it makes for a very convenient situation! However, you might not have any interest in dealing with the complexities of being an employer. A property management company can help you avoid the hassle.
- You participate in an affordable housing program
Managing properties that are involved in affordable housing programs usually involve a lot of paperwork and stipulations. Most property management companies have plenty of experience in dealing with affordable housing programs, so they can easily help landlords get the financial assistance they’re entitled to, help with filing taxes, and getting tenants all set up with their new, affordable homes.
What Does a Property Manager Do?
There are many positions within a property management company, but the property manager is the one who is the most involved. A property manager essentially acts on the landlord’s behalf to make sure properties and tenants are taken care of while generating income.
Specific responsibilities of a property manager include:
- Supervising and coordinating building maintenance and repairs
- Performing light cleaning work
- Resolving tenant concerns
- Advertising
- Showing vacant units
- Collecting and depositing rent
- Communicating with the property owner
- Screening tenants (and pets)
- Applications
- Handling new leases and lease renewals
- Lockout services
- Emergency maintenance
- Notices of entry
- Evictions
A property manager is hired to be a landlord’s eyes and ears when they aren’t around. They will ensure that the property is handled professionally, and tenants are well cared for.
As with any great service, property managers don’t come cheap.
How Much Does a Property Manager Cost?
Property management companies charge for the service and convenience they provide landlords. Everything a property manager does helps ensure the success of a rental property and the happiness of the tenants. Although their services typically come at a steep price, providing top-notch service to tenants often means that a landlord can charge higher rent prices. This may be able to offset the cost of hiring a property manager.
Before you can decide if hiring a property manager is the best decision for your business, you must know what fees are associated with property management and why.
- There are Two Main Property Management Fees
Property management fees are usually set up as a percentage-based fee (based on rent price), a flat fee, or calculated per project.
In addition, property managers charge a leasing fee and a monthly management fee.
Leasing fees are used to covers the costs associated with marketing, showing properties, reviewing applications, screening, processing paperwork, and getting a unit move-in ready. Leasing fees may cost 75%-100% of the first month’s rent.
Monthly management fees are used to cover costs associated with monthly recurring services such as collecting and processing rent checks, inspections, maintenance, and inspections. Monthly maintenance fees are typically 7%-10% of a unit’s rent.
Landlords can pick and choose what they want to use property management companies for. Some will only want leasing services, others will want help with monthly management, and some will want both.
- Other Property Management Fees
Vacancy fees may be charged after your property is vacant for a certain amount of time. This is because property managers are responsible for the property whether it is vacant or not. So, they will charge a small fee to protect and maintain the property while it’s empty.
On-boarding fees can be charged when you first get set up with a property management company. The price will vary, depending on how many properties you have and the services you need.
Maintenance fees are collected to pay for repairs and property maintenance. The way maintenance fees work will usually be negotiated between a property management company and the landlord. Some companies will charge a little bit more to have a maintenance “bank” and automatically complete repairs that are below a certain threshold. Others will charge a markup for the repair services and keep the difference.
Lease renewal fees may be a flat fee, a portion of one month’s rent, or equivalent to one month’s rent.
Eviction fees are charged based on the amount of time and effort it takes to evict a tenant.
Tips for Hiring a Property Management Company
When looking around for property management companies to hire, make sure you ask about their fee structure and which services are included. Be sure to also look at their testimonials and get references from current tenants. You want to be 100% confident that the company you hire can be trusted with your money and income properties.
Here are a few more things to consider when hiring a property management company:
- The number of properties they are currently managing. If they have a large portfolio, make sure they have the staff and resources to give proper care to the units you’ll be adding.
- Their inspection process and how often they are conducted.
- Their tenant and pet screening process.
- What you will be paying up-front and monthly.
- Any additional fees that you might run into.
- Services they offer besides property management (can they help you buy/sell properties?)
- How involved you will be in the management process (what kind of situations will require your attention? How easily can you gain access to information you need?)
Final Thoughts
The decision to hire a property management company should not be made quickly or lightly. Take your time and meet with as many property managers as you need before you feel comfortable handing over the keys to your business. If a property management company seems pushy or wants you to make a quick decision, they probably aren’t the best match for you.
Hire Speed Commercial Real Estate for Your Property Management Needs
Speed Commercial Real Estate is the top property management company in Ridgeland Mississippi. We will take care of your properties as if we owned them ourselves! No matter if you are local, a few hours away, or on the other side of the world you can rest assures that your properties are in great hands.
Contact us today to set up a meeting. We look forward to speaking with you!