Today and Friday's posts will share our thoughts on hiring a property manager for your rental property. Today we'll discuss what they do, how much they typically charge and what to expect from them. On Friday, we'll discuss how to find the right property manager for you and your unique circumstances.
Owning a rental home can be a welcome source of additional income. In fact, owning several provides a living for many a landlord. One thing that is recession-proof is shelter and providers of shelter have a revenue stream that is reliable provided vacancies are rare. Therein lies the challenge: finding and keeping dependable, long-term tenants for a single-family house. Depending on home value in the real estate market, this task can be pleasant and quick or, on the other hand, arduous and extended. Owners must decide whether to see to all the details of property management or delegate it to professionals.
That Does a Property Manager Do?
In the context of single-family residences, hiring someone to manage the house might strike a landlord as extravagant. After all, the manager -- or management company -- will take a piece of the profits away as a fee. Indeed, managers are in business to make money just like owners. Yet viewing professional stewards of this sort as simply an expense might work against the landlord. Sure, you may be handy around your own house and may know a thing or two about leases but that sells the manager short.
Property managers do not just place a classified ad for the house. They screen all prospective tenants to determine creditworthiness, character, financial capacity and suitability. The aim is to recruit and retain occupants for multiple years, giving the owner a consistent and steady source of cash flow without disruption. To this end, managers vet candidates carefully and make sure they understand their responsibilities under the lease.
In addition, management companies and realtors who specialize in this area maintain networks of contractors and tradespeople who will swiftly attend to any repairs or renovations the property needs. Calling such services cold may have you placed on a waiting list. Furthermore, managers carry the water in the unpleasant event of eviction. Most have been there before and run interference for the landlord. Generally, however, seasoned property managers are able to develop a rapport with occupants. So, there are definite advantages to hiring a management company or individual manager.
What Do Property Managers Charge for Their Services?
As noted above, property managers do not work for free. Yet measured against the number of hours an income property might demand, the cost may or may not be worth it. Many who supervise the operation of single-family houses will charge a percentage of the monthly rent. In such cases, an owner must estimate how many hours of labor the property would require and measure it against, say, $200 to $300 that the manager would collect, i.e., ten to fifteen percent of a house that earns $2,000 per month.
By contrast, a property manager can also itemize charges based on the service, e.g., leasing, lease renewal, maintenance or eviction, for example. Leasing can sometimes take an entire month's rent while renewal often hovers around $200 as a fixed fee, assuming a monthly rent of $2,000. Maintenance and legal fees vary according to the job done. When you sign on with a management company, there may be a set-up fee for your account, as well.
If I Hire a Manager, Do I Need to Oversee the Work?
As the owner, you want the home value to rise while the income flows in. Yet the landlord has a liability the manager does not share. So, there are things that demand your attention. Renting out a house is a highly regulated activity, so make sure the property manager is fully aware of Fair Housing laws: they know what questions they can and cannot ask prospective tenants; they (you, actually) should provide reasonable accommodation for disabled persons; and they can make rules regarding personal safety, structural security and cleanliness. A manager should never be responsible for a lawsuit.
The National Property Management Association (NPMA) is a source through which landlords can connect with potential management professionals.