Debates can be interesting. While attending an investor meeting recently, the always interesting debate on whether or not to hire a property manager was being bantered back and forth.
People have such incredibly strong opinions on the issue. I know personally I have had this question asked numerous times. Should you or shouldn’t you? Which is better?
Personally, I do not think there is a right or wrong answer, as everyone has different objectives as well as strengths in working with people and managing people and tasks. Some people simply are not cut out for it at all, while others are very good at it. Then there is the question — whether you are good at it or not: is it the best use of your time? Finally, what is truly most cost-effective for you?
How you can decide whether to manage it yourself or a get a property manager
When I first started out, I managed all my own properties. Now, I would not do such a thing. Is this because I aged and got tired of the process or simply evolved into a different train of thought?
Here are five basic tasks that need to be completed by property managers. After reviewing each task you can determine who is better suited to tackle it: you or a hired property management company. Perhaps a majority response will help you decide with this checklist below.
- Screen and Source Tenants: Bar none, the most important task a property owner faces is ensuring you get great tenants. One bad tenant can cost you your entire year’s cash flow. Effectively finding and screening tenants is a skill that is built by repetition. The more you do this, the more experiences you encounter and in turn the better you become. With so much at stake, you want the most experience in the screening process. This starts with having a large pool of tenants to choose from. You may want to ask yourself:
Who can produce the most number of tenant prospects? You________Property Manager_________
Who is better qualified to screen these tenants? You________Property Manager_________ - Management Responsibilities: Meeting with occupants and prospects, screening tenant calls 24/7, paying bills, calling and scheduling repair services and bookkeeping of the property are all time-consuming tasks. They are tasks that can be handled swiftly by a person scheduled to receive calls and perhaps considered nuisance calls when they come in unexpectedly when you are busy doing other things. More distracting is when these calls come in while you are trying to take time off or are away on vacation.
Who is better equipped for day-to-day management? You_______ Property Manager_______ - Keeping Decisions Logical: Three days before New Year’s Day and your tenant with three small children calls and informs you that she spent part of January rent on her children for Christmas. She cannot come up with the full monthly rent and asks for a one-time acceptance of a partial payment or to work out a payment plan to catch up. This tenant is obviously tugging at an emotional chord. I mean, who can deprive a child of Christmas, right? These types of circumstances require you to have a system in place that addresses this with pure logic. Your cash flow has no room for emotions here. Management has an obligation to you the investor, who hired them to address these tough situations with a process.
Who is better equipped to keep decisions logical? You________Property Manager______ - Cost of Management Services: On one hand, a property manager is a fixed expense that cuts into the cash flow (typically 10% of the collected rents). On the other hand, it frees you up to spend more time at your chosen profession and to focus on true investing. You may feel you can do some work yourself or you know people who can do it for you. On the other hand, a management company has multiple vendors who can obtain economy of scale, such as bulk pricing, to reduce the cost of materials and services.
Who is most cost-effective at property management? You________ Property Manager_______ - Compliance and Fair Housing Laws: Keeping up with local, state and federal housing laws and Fair Housing practices is paramount in running a trouble-free business and keeping the government off your back. Knowing what you can and cannot say to a tenant or a prospect or what rules you can or cannot implement is mandatory. Do you need to have a rental license where your property is located? Who will go to court should you have an eviction?
Who is better equipped to handle these legal issues? You________ Property Manager_______
Debates are so full of emotion, and there is very little room in investing to be ruled by emotion. I always suggest weighing things out and doing what makes the most sense for your situation.
The video below may help you decide:
Who manages better? You or a property manager?
If you hire a property management company, it is important to remember that not all property management companies are created equal. A property management company can make or break the investment, so hiring a great one is paramount. Here is a list of questions that I always give to my clients that you may find helpful.
In fact, if you are considering to managing the property yourself, you may want to ask these questions of yourself. This may help you decide.
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