Should You Hire a Property Manager for One House?
You’ve probably considered managing your own rental property. And who wouldn’t? Passing on management fees saves you money up front. But if you don’t have the right experience, it can actually cost more money in the long run.
Property managers do much more than collect rent checks. They know landlord tenant codes and how to write binding leases that protect your property. They know the market and can guide you on what property improvements you need to make to attract the right tenants.
Managers have the resources to do a thorough background check to select the best applicants. They can also approach situations like late rent payments objectively to set clear expectations with your residents.
Does Self Managing Work?
In some situations, it may not make sense to hire a property manager. If you have experience managing properties and your schedule will permit the flexibility needed to be responsive, you can take the DIY approach. Just make sure you’re willing to handle emergency calls late at night, on weekends or on holidays.
What Does a Property Management Company Do for You?
Managing a property takes time – lots of time. If you’re managing your own property, you’ll deal with everything from repairs to contracts. It’s about knowing not just what to do, but also how to do it. With only one house, you won’t get back much return on the time you invest. It’s simply not worth the learning curve of figuring out the legal and business standards for effectively managing a property.
Advise About the Market
The rental market is extremely localized. Home prices and rental rates differ drastically depending on your property’s location and specs. Only real estate agents have the software with the most reliable information on the market. So, if your manager is a real estate agent, they can access the information needed to market your property at the right price.
Sites like Zillow, Trulia, and Movato allow free submission from the public. This skews rates and distorts the information. MLS, however, keeps the public at bay and real estate agents in business.
Offer Legal Knowledge
After you find the right tenant, you need a proven lease. Otherwise, you can spend weeks deciding what to include and how to address certain issues. In Texas, you’ll want to use the Texas Real Estate Commission Resident (TREC) lease – a contract only licensed managers can use. Use this reliable document, crafted to protect the owner while following the law.
Establish Business Relationships With Tenants
One of the most underappreciated benefits of property managers is the business relationship they maintain with tenants. Managers are used to enforcing contracts and having necessary conversations with tenants. Plus, they understand the lease, so they feel confident handling breaches of contract.
Sometimes owners don’t know how to handle difficult situations. If they’re unsure of their legal rights or the contract specifics, they’re likely to let the tenant get away with offenses.
It can also be difficult for owners to collect fees for late payment or early termination if they become emotionally invested in a tenant. Stories of family illness or hardship often persuade the owner to forgive the debts owed.
A property manager knows what’s fair and legal, and has experience enforcing the policies established in the lease. It’s not a matter of insensitivity. It’s a matter of upholding the agreement.
Provide Proven Systems
How does property management work to everyone’s best interest? Successful management groups have processes in place that make the rental situation better for the owner and for the tenant.
When a tenant is late for rent, breaks lease, houses unauthorized guests, or damages the property, managers have the systems in place to respond appropriately. They know what to enforce, how to collect, and what legal steps they can take to resolve problems.
What’s the Cost of Property Management?
The typical property management fees can range anywhere from 6-12% of monthly rent.
Are Property Management Companies Worth It?
YES. A management company is worth your money, unless you’re knowledgeable about marketing a property, vetting the tenants, making repairs (during and after hours), handling security deposits in escrow accounts, returning a security deposit legally, and filing for eviction.
Also, property managers keep you from undervaluing your house. A good property manager finds out how much the market will pay. Recently, we had a client in Denton who was leasing his property for $600/month. He had priced his property based on the college demographics, but he underestimated the market. After our market research, we upped his rate to $1,300/month. In cases like these, a minimal management fee is well worth the monthly increase that follows!
How Do I Find a Good Property Manager?
If you’re hiring a property manager, look for experience and certifications.
How many years has the business been in operation?
Are they certified as a residential management company by the National Association of Residential Property Managers (NARPM)?
Property managers undergo extensive reviews of procedure, customer service, and experience before earning this certification. NARPM requires certified residential management companies to:
- Have a Master Property Manager designee on staff.
- Provide verification of 500 unit years of management experience. (One unit year equals management of one residential unit for one year.)
- Successfully complete an on-site visit from an NARPM auditor selected by the certification committee.
- Complete the audit process within three years of making the application.
Do they specialize in property management? Or do they work primarily in residential sales?
For more details, check out our Property Management ebook in the right-hand column.
Should You Hire A Property Manager?
If you’re unfamiliar with landlord tenant codes, Fair Housing laws and other regulations, it’s in your best interest to hire a professional. These codes include guidelines for handling rental operations, like where you should keep security deposits and how to return them to residents. Not following codes (even innocently) can lead to major repercussions.
It’s also a good idea to hire someone if you don’t have the tools to do background checks on applicants. Locating good tenants will alleviate a lot of stress and protect your property from damage.
What’s Best for You?
Ultimately, whether or not you decide to hire a property manager is up to you. Even if you have experience you should weigh both options. Are you interested in saving money or saving time? You may find it’s worth the investment to pass the responsibility on to another person.
A great benefit to hiring a property manager is reducing the risk of management oversight that can jeopardize your cash flow. Remember that security deposit code we discussed earlier? Depending on where you live, if a security deposit isn’t returned within a certain time frame to the right person, you may be held liable for three times the deposit amount. It’s small details like this you may be unaware of or don’t have the time to coordinate that a property manager will take care of.
Originally published on the LEAP Property Management blog.