For any landlords that use a property management company, what is the biggest reason that you chose to use a property manager?
The reason that my own friends and family chose property managers in the past is because of the maintenance hassle. Not wanting to take the tenant calls and then find a contractor to fix the issue.
Also, for self managed landlords - would you ever use a service that ONLY managed the maintenance calls for you? Basically, taking tenant calls for maintenance and coordinating contractors. You'd still have to do everything else from finding tenants to accounting, etc.
As a property manager, I can tell why.
First of all, some local landlords outsource only marketing (finding Tenants) and accounting.
Tenants are flaky and not showing for appointments quite often. If you have to drive whole hour for nothing - it gets on the nerve. Plus, the lease agreement is always better when done professionally.
Even local landlords don't live where their rents are: rentals with 18-22% ROI are not in A class, where most landlords live
Next reason: out if state investors. They do accounting and pay bills themselves but they can't build relationship with Tenants - and this is the major thing in this business - make Tenants happy to keep them longer. You can outsource marketing (any agent will list it), accounting (any CPA) but without relationship with Tenants you'll have constant problems.
Such companies exist - they take phone calls 24/7 and then transfer them to PM to coordinate contractors.
If you don't care about your bottom line, you can hire such a company: they will call to the most expensive plumber co, electric co, etc - you pay the money, they fix the problem.
Fixing toilet would take you 10 min plus driving, they will call the plumbing company which takes $200 just to diagnose the issue (im not kidding - I've had such thing). Next they will give you the price - $1400 with promis yo count $200 as an advance. My plumber charged $320 to fix it and I paid $200 just to hear that's really major issue and they will need Whole day of working by two teams.....that's how different PM might work
@Ethan Lieber , to expand on what @Irina Belkofer mentioned, managing a single property can be very time consuming. Yes, you could have a great experience with a rental and easily assume they will all go the same way. However, it only takes one unlucky rental to sour the taste. Some properties are plagued by maintenance issues. Some tenants are pickier than others and call in for the smallest of things. Some units can be time consuming to rent. As mentioned, no show prospects really set me off. I have one rental that maybe one out of every four appointments I have actually show up. Maybe it's due to the area, which is why I ask that they drive by the property first to make sure it's in an area they will be comfortable with. Point being, managing rentals can be very time consuming. When you add up all the time spent showing units, qualifying applicants, generating paperwork, dealing with maintenance issues, collecting late payments, filing and attending evictions, inspecting units, etc. It adds up quickly. Many seasoned investors find that they can spend that time that may be wasted more efficiently, by doing what they can to make money instead. It's a trade off they understand will be more profitable in the long run.
In the past, I have picked up a lot of Landlords from eviction court. Once they lose a case due to procedure, they become bitter and remorseful for not spending the extra money to have it done professionally. It's a waste of time and delays getting a paying tenant in place. Having a professional company handle things for you can help ensure things are being handled according to state Real Estate Tenant Law. I can't tell you how many non-legal leases I've seen over the years. Landlords downloading a generic lease online and assuming it will work. Does more harm than good.
Regarding maintenance, if you wanted to, you could contract with a local "Jack of all trades" handyman that can handle most any maintenance issues for you. Have them generate a fridge magnet to give your tenants and ask them to call them for all maintenance issues. You have to trust the contractor will have your best interests in mind and not gouge you on the pricing or respond to tenant related or nonsensical issues (ie, I have a broken slat on my miniblind and need it to be replaced). Maybe you could set it up so the contractor contacts you when a tenant calls in and you can direct them from there?
There are a lot of reasons to use a property management company. I'm sure others will chime in as well. You just need to determine if it is in your best interest to do so. The percentage you pay for a professional company to handle things for you may be well worth it to you when you consider all the possible pitfalls, and the possibility of using that time to make more money. Best of luck.
Great post, @Steve Maginnis
I'm working on a sale now - the owner is self managing landlord, he's proud how much money he saved for 25 years of owning few condos.
He was renting his condo for $650/mo - no lease, tenant pay cash, he pays HOA, taxes and happy to have $400/mo cash flow.
I rent exactly same condo for my tenant in this development for $890, same expenses =$250/mo and my PM=$100. So the cash flow is $640/mo. These extra $140*12*25years= how much he "saved" on PM for these years....don't even mention that the Tenant was really upset he's asking her to leave and left trashy place behind.
If you buy A house for $250-300K and Rent it for $2600-3000/mo - you don't need PM. The cheaper the rentals - the more it's time consuming. Your choice
Because I value my time more than the 7-10% of rents that a PM will cost me.
I can't focus on finding and acquiring new properties if I am chasing tenants for rent and unclogging toilets.
I think the only reason NOT to have a property manager is if you are househacking and living in the property, or live within a short drive of all your properties and enjoy doing maintenance and chasing rent checks.
@Steve Maginnis , that makes sense about picking up landlords in eviction court. It is a worst case scenario for anybody. I'm sure as a property manager it is probably the worst thing (and time consuming thing) that you have to deal with.
@Matt Leonard , that makes sense. Especially if you're actively acquiring new properties. I'd imagine once you hit a certain size property management becomes less scalable. (Because at a point the fees would just be too high. $10k+ per month... even $20k+per month.)