When investing in rental properties, there are a lot of tasks that need to be done on a regular basis if you want to find success.
From placing ads to taking phone calls to showing properties and more, a landlord has a full list of responsibilities to handle if they want the process to return a great profit long-term. However, all that work doesn’t need to be done by you. Professional property management companies can take care of most of the above list and more, but management companies are not a perfect solution either.
So should you manage yourself or hire someone else? Although there is no “one size fits all” solution, there are several key issues that a real estate investor should consider before making the decision.
How Much Does Property Management Cost?
Property management fees vary by location, but typically for a single family house or small multifamily property, you’ll be looking at 8–12% of the rent in a monthly fee and a large, one-time fee each time the unit is rented. This placement fee is often 50% of the 1st month’s rent all the way up to the entire 1st month’s rent. Some managers also charge a “renewal fee” each year, as well as “marking up” the maintenance costs.
For a property owner who doesn’t have a lot of cash now, property management can quickly turn a decent investment into a negative cash-flowing investment.
Of course, the other side of the coin is that by allowing a manager to look after a property, it frees up the investor’s time to do “higher value” tasks, like finding more rental properties. If a management company costs $2,000 per year, but the time saved helps an investor buy one more property per year that nets him or her $5,000 in cashflow, then the savings might be worth it.
Are You Willing to Learn How to Become a Landlord?
People are not born with natural landlording skills. So perhaps one of the biggest questions to ask yourself when deciding whether to manage yourself or hire an outside company is this: will you invest the time needed to learn how to become a great landlord?