Should I Manage My Rental Property or Hire a Professional?
If you’re one of the thousands of people who hold real estate as an investment for the longer term or someone interested in investing in property and renting it out, it is likely you’ve considered hiring a property management company to maintain your rental property and look after all the details. Maybe you’re wondering why you would pay someone to do all the things you can do yourself? Find out what’s right for your strategy.
First of all, congratulations on making the decision to buy and hold real estate as an investment. Holding long term real estate is a great wealth building strategy, however, it can come with some challenges. One of those challenges is property management.
If you own a rental property you may have considered how to approach self-managing or hiring a property manager. The best way to assess how to manage your property is to ask yourself the following questions:
1. How many properties do you own?
2. Do you have reliable, great tenants?
3. How good are you at dealing with people?
4. Do you have a flexible schedule?
5. Do you have a list and relationship with trusted, reliable contractors, vendors?
6. How often do you travel?
7. How often are you willing to replace tenants? Do you know where to find and how to place good tenants?
8. Do you have reliable sources of income for unexpected damages costs?
9. Do you know what you can rent your property for unfurnished or furnished?
10. How much time are you willing to invest on a regular basis on maintaining your property?
These are just a few things to ask yourself to gain a better understanding of how you see your involvement in your real estate investment. While some people find that they prefer high involvement from every aspect, others have decided they would rather their property act as a strategy in their overall investment strategy and prefer it managed.
Here are some advantages of having your property professionally managed.
Infrastructure is already in place
If you think you might spend a couple hours a month cashing a cheque, depositing money or answering the odd phone call, think again. While the advent of technology allows for ease in receiving payments (e-transfers) not all tenants are comfortable with this method and you may find cash and receipts and coordinating pick up times and so forth eating up more time than you would like. Other things like policies and staffing are in place to handle things like this, as well as leases, applications, notices of entry and all other documents, as well as screening procedures and knowledge of the landlord and tenancy laws in your province. Property management companies will also have an extensive list of trusted and reliable contractors and vendors that they have built a solid rapport with.
If you choose to do these things yourself you should put all these required documents together and be prepared to distribute these at a moment notice sometimes, additionally, you will need the professional skills of contractors and vendors, as doing it yourself is not an option unless you are qualified to do so.
Ability to save time
Property management companies are skilled professionals who not only know the little nuances that often come up but know how things add up and become time-consuming. They simplify investment property ownership by allowing you the freedom to enjoy life, work or buy more rental properties to add to your portfolio. Finding a quality management company can save irreplaceable time and money.
Opportunity to outsource
Managing a rental property is not without its headaches. Consider things like dealing with angry tenants, severe maintenance problems, placing good and long term tenants, property listing and tenant showings, accurate rental value, damages, potential evictions, broken leases and more. Having a thick skin to dealing with some of these issues, as well as cool head under pressure and stress is not only a skill, but a requirement. Think of your investment property like a business, and your tenants like your customers. Of course, there are a number of other things we haven’t covered, but let’s take a look at the advantages of self managing.
Chance to save money
A professional property management company will have a fee structure for all their hard work, usually charging between 10 to 15 percent of collected income or structured similarly. This is an expense you can save by managing the property yourself if you feel you are capable and have the time to commit.
Avoidance of fraud
Not every property management company is run ethically and managing yourself can make it easier to avoid becoming a victim of these types of things. Selecting a professional and reputable property management company is an important consideration. More on this below.
It is crucial to know all the facets of property management even if you are not doing it. Not only does this help you to evaluate the level of service your property management company is providing, but it also gives you perspective on that area which can help fine tune your buying criteria for the future.
If you do decide to manage your own investment properties be sure to speak with a lawyer to familiarize yourself with landlord and tenancy laws, compliance in fair housing practices, as well as gathering legal leasing agreements, forms, entry forms, and generating policies like late rental payments and fees, payment plans, etc. You will also need to build a network of trusted and reliable contractors and vendors whom are bonded, qualified and prepared to work during emergency situations (like a pipe bursting or rodent invasion).
Securing a licensed property management company
If you do decide to hire a property management company, the best place to ask for referrals are from other successful and savvy real estate investors. When a property manager has a proven track record with other investors, it is much more likely they will provide excellent service for you too. Regardless of referrals, it is important to vet property management companies before hiring them and ensuring they specialize in the type of property that you own.
Property management interview questions
• What are your management fees and how are these collected?
• How long have you been property managers and how many properties do you manage?
• How many evictions do you have each month?
• How long do properties usually stay vacant before being leased?
• How do you screen, and do they accept people who have had evictions? (If they do, it should be only after five years and or with a larger deposit and co-signer).
• How do you handle maintenance requests?
• What is the minimum charge for a maintenance visit?
• What do you do when a tenant does not pay rent?
• How do you intend to market my property?
Real estate investments as a buy and hold may be the best way to generating long term wealth but as mentioned, it is not without its own set of challenges, one of those management. Without letting this discourage you from a lucrative opportunity in investment real estate, execute a diligent plan, whether that means managing properties yourself or hiring a licensed property management company to do it for you.