There’s a lot that goes into being a landlord. From marketing your rental unit to screening tenants and collecting rent, successfully managing a rental property can be a daunting task. That’s where property management companies come in. They handle a majority of landlord-related tasks, which sounds like a dream to many property owners. But is it only peace of mind you are buying through a property manager, or are they worth the fee when it comes to your bottom line as well? Read our blog to find out more about what property management companies do and if they could be worth it for you as a landlord.
What Do Property Management Companies Do?
Property management companies take the reigns for virtually every aspect of maintaining your rental property or properties. This includes:
Marketing and Advertising the Rental Property
One of the top responsibilities of property management is to market and advertise your rental property. From taking photos and videos to listing them on rental sites, property management companies leverage different marketing strategies to ensure your rental unit gets maximum exposure. They also create professional listings that highlight the features and amenities of the property to attract prospective tenants. In doing so, property managers increase the chances of filling your property quickly with high-quality tenants.
Tenant Screening and Selection
Another crucial function of property management companies is tenant screening and selection. They have the experience to identify high-quality tenants and screen out those who may cause problems in the future. Property managers use different screening criteria to assess the credit and financial stability of prospective tenants, as well as their rental history, criminal background, and employment status. By sifting through the applications, property managers can help you find the best tenant for your property.
Rent Collection and Accounting
Property managers also handle the task of rent collection and accounting. They increase the likelihood of on-time payments by sending rent reminders and handling fees for late payments. Additionally, they handle all the accounting aspects of managing your rental property, including generating financial reports, bookkeeping, budgeting, and tax form preparation. As a result, you can save time and be sure that your financial records are accurate.
Property Maintenance and Repair
As a landlord, one of the most common headaches you’ll face is maintaining and repairing your property. This involves handling tenant complaints, scheduling repairs, and overseeing maintenance projects. However, property management companies can take care of all these tasks for you. They have access to a network of licensed, insured, and trustworthy contractors who can handle any maintenance issue that arises. They also conduct regular inspections to ensure that your property is in top condition. This means you do not need to live within a certain distance of your property (or even in the same state) to ensure your tenants’ issues are addressed promptly and knowledgeably.
Lastly, property management companies ensure that your rental property is compliant with all applicable laws and regulations. They remain up-to-date on all state and federal laws related to rental properties, including fair housing laws, eviction rules, and safety codes. They also have experience dealing with legal disputes arising from tenant or landlord issues, such as contract breaches and lease violations.
What Do Property Management Companies Charge?
Some property management companies charge a flat rate, but most charge a percentage of your monthly rental income. This is generally between 8 and 12 percent. In addition to this fee, you may be charged additional fees for vacant properties, a start up fee, and a surcharge for overseeing any maintenance issues. You will want to review your gross income and assign you own time a value to determine if a property management company is worth it for you.
When looking for a property management company, pay attention to customer reviews. You want high quality work without price gouging. Look for sentences like “flat fee” and “honest.” You also want to have a company that you can reach when you need it. Look for reviews that include buzz words like “great communication” and “highly responsive.”
You can start with property managers that have a Better Business Bureau accreditation. These companies are already held to a higher standard of customer service in order to earn and maintain their BBB certification, so they are a great place to begin your search.
So, Are Property Management Companies Worth It?
In many cases, yes. Your time is valuable, and if you find you are dedicating more hours than you would like to property management, it may be time to outsource it. Ask yourself the following to determine if the 8 percent you would pay to a property manager is worth it for you:
Is Property Investment Your Full Time Job?
If the answer is yes, you likely already have systems in place to facilitate the oversight of your properties. You will also have more time to deal with issues without a second job taking up your time.
Do You Live Close to Your Rental Property?
If you live within 30 minutes of your property, you can easily conduct regular inspections, perform routine maintenance, schedule repairs, and other tasks that might be more complicated to arrange farther away.
Does the Expense of the Property Management Fee Outweigh Your ROI?
When you figure in the time you will save utilizing a property manager, you may find that it actually positively affects your ROI. Without the need to search for clients, market your listings, arrange repairs, and collect rent, you can sit back and watch your investment grow. You can also be sure you won’t be charged costly penalties and lawsuits associated with legal compliance issues.
Do You Prefer to Be More Hands On?
That being said, many investors prefer a more involved approach to their rental properties. They get satisfaction from getting their hands dirty, working face-to-face with tenants, and building their own team of trusted contractors. If this is more your style, a property management company may add to your stress, rather than reduce it.
Get Financing for Your Next Rental Property in Colorado
Whether or not you decide to utilize a rental management company is ultimately up to you. They can alleviate a significant amount of stress, and even add to your bottom line in certain cases. But they aren’t for everyone, especially if you prefer to be more hands on in your approach or you aren’t spending enough time yourself on the property for the fee to be worth it.
When it comes to financing the purchase of your next property, Pinetree Financial Partners is here to help. We lend on a variety of projects, from new builds to mixed-use investments. We offer the most competitive terms and exceptionally fast turnaround times. If you have a Colorado real estate venture in mind and you need funds now, contact our office to get started.