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Property Management Blog

WHAT TO CONSIDER WHEN HIRING A PROPERTY MANAGEMENT COMPANY

Mendell Gosnell - Thursday, September 29, 2022
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WHAT TO CONSIDER WHEN HIRING A PROPERTY MANAGEMENT COMPANY

Knowing which property management company to hire is one of the most important decisions a property owner can make. The owner must consider what company their property will be managed by and who the people are that are managing it. Choosing the wrong property management company might mean more work for the owner than if they had not hired a property manager in the first place. Handing over the management of the property to a company is a huge step and before making the decision, it is important to understand: 

  • The implications of self-owned management 
  • The pros and cons of outsourcing property management 
  • The options if you do not want to outsource 

The Implications of Self-Owned Management 

There is a clear difference between owning a property and managing it. All too often, property owners make the mistake of buying a property without knowing how to manage it. 

Before purchasing a rental property, it is important to understand the following: 

Landlord-tenant law: If you are a property owner, you must be familiar with the state law that governs the relationship between landlords and tenants. Little or no knowledge about this could expose the landlord to lawsuits and fines. 

Be familiar with the state law and be on the safe side. 

Time and expense spent visiting properties: It is important to always check in on the rental property regularly for proper maintenance, emergency maintenance, and awareness of the status of the property. If you own more than one property and they are far away from each other, you will be spending a lot of time going from one property to another. As a property owner, spending all your time performing this task at the detriment of your primary job is not advisable. 

Time is money, save time, and channel it towards earning more money by outsourcing. 

Repair and maintenance responsibilities: A landlord must have a diverse range of skills if the landlord wants to pick up the maintenance tasks. The landlord needs to have carpentry, plumbing, landscaping, and electrical skills for proper maintenance. If the landlord is not versed in these skills, there will be the need to spend more money on repair services. 

You need to have a diverse range of skills if you want to maintain the property. 

How to screen tenants: Weeding out problem tenants during the screening process is a skill that every landlord needs to have. 

Problem tenants can cause damage to your property and reputation. 

Good Landlord-tenant relationships (especially with difficult tenants): No matter how perfect the tenant screening is, there are chances that you might still end up with unruly and unhappy tenants. As a property owner/landlord, you need to stand firm in the face of adversity and ensure the tenants strictly adhere to the rules guiding the lease. 

Professionalism and diplomacy are very important.

Good software for property management: If you are managing a large number of units, having property management software yields more efficient results by: 

  • Decreasing costs to be spent on ads by posting units automatically on popular listing sites 
  • Accepting rent online 
  • Carrying out credit and criminal background checks with ease 
  • Auto reminders to the tenant on when they need to pay their rent 
  • Using preexisting data to create letters and tax forms automatically
  • Getting rid of poor records by automating certain processes

A good property management system can come in handy, especially for novice property owners.

The Pros and Cons of Hiring a Property Management Company  

Pros: A property owner that has hired a property management company should expect: 

  • Increase revenue generation: A property management company is more experienced and has access to larger potential renters, which makes advertising easier. Additionally, property management companies understand the local rental rates, which help them maximize the amount they charge per property. 
  • You are in control of your time: the moment you hand over your property to a property management company, you have extra time to handle other businesses. Being in control of your time is the most obvious and enjoyable benefit of hiring a property management company. YOU ARE BUYING TIME AND PURCHASING YOUR FREEDOM!
  • Reduction in direct cost: Preventative maintenance can be performed by the property management company, which helps reduce the direct cost to the property owner. It is also important to add that property management companies have in-depth understanding of local landlord/tenant laws that help protect the landlord from lawsuits and fines. Avoiding one lawsuit may help pay for the property management services for years. The property management company will also help with tenant screening to help reduce poor tenants. 

Cons: Some risks must be considered when outsourcing. A property management company that does not understand the gritty details of the job could cause more harm than good. Here are the most common downsides: 

  • The cost: a property management company charges between 6%-12% of the property’s gross monthly rent. For properties with large units, this will come to a significant sum.
  • Management fees are not the only fees to consider: Property management companies also charge for maintenance, advertising, and creating or renewing leases. 
  • There is a chance of developing a bad reputation: The unhappy tenants are always the most vocal. Unfortunately, more and more tenants leave bad feedback online about their experience.
  • Inadequate record-keeping: Most of the time when a property management company is hired, they take charge of the record-keeping (accounts payable and receivable, tenant complaint records, service records, etc.). Any mistake or poor job keeping a record on the part of the company means the property owner may be completely lost once they part ways. Inadequate record keeping can put the property owner in a bad position if a tenant files a legal complaint. 
  • Vulnerability to lawsuits: As stated earlier, good property management companies can help the owner avoid a lawsuit; however, a poor property management company could cause the lawsuit. A poorly managed company that does not keep track of changes in landlord/tenant law or does not have an understanding of the law can cause harm to the property owner because a single lawsuit can be very costly. 

A property owner must weigh the benefits they will be deriving from hiring a property management company. If the benefits justify the expense, hiring a property management company is a good step. Owners should also ensure they are outsourcing to companies that are effective and ready to help them grow their business. If a property owner considers these two factors and the pros of hiring the company outweigh the cons, then property owners should consider hiring a property management company. 

What if You Do Not Want to Outsource?

If when reading through the pros and cons you wished there was some kind of middle ground, there is! Hire a residential manager. This of course means you need to be ready to become a boss, handle payroll, train, supervise, etc…

A residential manager is a person that occupies one of the units of the property and is assigned the role of carrying out the basic tasks of property management. 

The basic tasks that can be performed by the residential manager include: 

  • Carrying out light maintenance and clean up.
  • Taking prospective tenants through the vacant units at the property.
  • Working with repair persons to solve and fix maintenance issues. 

It is Your Decision  

Whatever choice you make, a firm understanding of what property management truly is, is crucial to the success of your rental property. 

For owners who choose to manage the properties themselves, they will need to hone their property management skills. 

Property owners that outsource, but have little or no understanding of the industry might be sending the trouble down the road to be dealt with later.  

The bottom line is that every property owner should know the ins and outs of the business, no matter who oversees management. 


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