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!

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
• Fees
• Liabilities
• Term
• Termination

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 that the legal responsibilities of managing the tenant according to the tenancy agreement lie with them and not you. This can provide a sense of security and relief, knowing that these legal aspects are being handled by professionals.

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
• Termination

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.

By entrusting a property manager with the tasks you’d have to do to secure and manage a tenant for your rental property, you’re effectively reclaiming your time. This can make you feel more efficient, especially if you have multiple rental properties to manage.

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:

Onboarding Fee

A one-time fee that covers the setup of the property manager and ranges from $300-$500.

Leasing Fee

This fee covers the work towards drawing in new tenants. You can expect to pay up to one month’s equivalent rental income.

Eviction Fee

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.

Consider the value of your time. If the weekly rent is $500 and the management fee is $35, what’s your hourly rate? This perspective can help you realize the importance of prioritizing your time over the cost of property management.

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. They can also provide valuable insights into market trends, rental pricing, and property maintenance, which can help landlords maximize their rental income and property value.

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 landlord’s role is crucial in overseeing the property management process and ensuring that the property manager is fulfilling their obligations.

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.

Outsourcing property management to full time professionals makes sense and today is it preferred especially by real estate investors with more than one rental property.

Property management Charleston in South Carolina is one location with experienced firms managing large and small rental property portfolios for landlords.