Pros and Cons For Outsourcing Your Rental Property Management
As a property investor, you may be wondering if you’d be better off managing your rentals rather than outsourcing them to a property management firm. In this property blog, we have what you need to know about rental property management to make an informed decision about who is best equipped for the job!
Property management Charleston companies are among many with lots of experience managing large and small rental property portfolios for landlords. Some of the following information has come from them.
More Than Just An Intermediary
One wrong assumption that new real estate investors can have is that property managers are just go-betweens for the landlord or owner and the tenants. However, when a property manager manages a rental property, it is on a legal contract. In the contract aka rental or lease agreement are the following topics:
- Property management company obligations
- Landlord responsibilities
What Is the Role of a Property Manager?
The property management contract ensures both parties are aware of and in agreement with their role in the tenancy agreement. Remember, tenancy agreements are governed by law to protect the tenant, and if you choose to manage the tenancy, you will need to understand and abide by its terms.
One of the key benefits of outsourcing to a property management company is managing the tenant according to the tenancy agreement lies with them and not you!
It is the property manager’s role to take care of the following:
- Tenant selection includes vetting and signing of the tenancy agreement
- Rent collection – includes the inital bond and ongoing rent payments
- Property inspections
- Property maintenance – acting on behalf of the landlord
Property Management Fees
Yes, engaging a property manager incurs a fee. However, you don’t need to spend hours learning tenancy laws and the ongoing responsibilities which may take you longer than an hour a week.
You get your time back when a property manager uses their time to manage the tasks you’d have to do to secure and manage a tenant for your rental property. If you have more than one rental property, you’ll need to free up more of your time keeping your tenants happy and the properties in good condition.
Expect to pay a monthly management fee of approximately 7% to 10% of your total rental income to a property manager. They may also charge other fees, including:
A one-time fee that covers the setup of the property manager and ranges from $300-$500.
This fee covers the work towards drawing in new tenants. You can expect to pay up to one month’s equivalent rental income.
Your property manager may charge for the filing and execution of an eviction.
Some landlords, for better or worse, choose to manage their rentals due to their reluctance to pay the property management fees. It can seem the better option to keep as much profit as you can; however, it depends on how you value your time.
For example, say the weekly rent is $500, and the management fee is $35. What’s your hourly rate? Or another way of looking at it is – how much do you value your time?
Most landlords work out, if not immediately, eventually that their time is worth more than the property management fee that is also tax-deductible.
Pros Outweigh Cons
Engaging a property management company may be an extra expense that cuts into your profits, but the benefits heavily outweigh the negatives.
As an owner, you can benefit from the experience of a property management company to help you to create a profitable rental property.
A property management company will bring its market experience and expertise to the table and help landlords manage their rentals.
While a property manager may deal with the in-person relations with tenants, any binding agreements or regulations will be authorized by the landlord only.
The property manager has no official authority above or equal to the landlord, so the control remains with the property owner’s daily grind managed by the property management company.