In this video, Chris and Eli discuss the things to consider when deciding if you want to hire a property manager. How much does it cost? What are the pros and cons? Can you manage your properties yourself?
Topics in this video include:
- What does a property manager do? [0:32]
- How much does a property manager cost? [1:59]
- The pros of hiring a property manager [3:56]
- The cons of hiring a property manager [5:29]
- The pros and cons of managing your properties yourself [7:26]
- Property management software [8:41]
Transcript
Chris Lee: Hi there. This is Chris and Eli from Landlord Gurus here again. Thanks for joining in. Today, we are talking about the question, “Should you hire a property manager?” If you have rental property, you might grapple with this decision. Should you hire someone to manage your properties for you or should you do it yourself? So we will talk about that here.
Eli Secor: Yeah, it’s an important question and one that I think pretty much every independent landlord looks at when they face the challenges of managing themselves.
What Does a Property Manager Do?
CL: Yes. So, the first question is, I guess, what does a property manager do?
ES: Right. Essentially they’ll take care of advertising, getting the word out there, which could be on Craigslist, could be on any number of the online rental platforms. Ideally, pre-screening those people who are interested to make sure that they’re a really good candidate before showing. And then moving on to screening, looking at reports, making sure that the criteria that have been set are met. Then, accepting a tenant and moving on to signing leases, collecting rent, all the kinds of paperwork, logistics.
CL: Exactly. Yeah. And they will also deal with maintenance issues, right? They’ll handle those calls or requests from tenants if something’s broken or needs attention. So they will, you know, triage the problem and find the right person to send out there to take care of the issues.
They will also take care of communications, which we just talked about, and they’ll also do your bookkeeping. In a lot of cases, we’ll do your bookkeeping for you and provide you reports and things like that, rent rolls.
ES: Generally, they will pay vendors, like you said. They have, ideally, a host of established, embedded vendors for maintenance issues. Then, we’ll take care of paying those and also paying utilities, usually. So you’ve got all your income and expenses readily available with any report from a property manager, which is handy.
How Much Does a Property Manager Cost?
CL: Yeah, I mean it sounds great. It sounds very tempting, but obviously there’s a cost involved with that and what is that? How much does a property manager cost?
ES: Yeah. I mean, you hear about the 5%, especially for lower unit counts. I mean, maybe you’re getting 5% if you have a great, big, you know, hundred-unit property management. But then you’re also having an onsite manager generally too.
So generally, for our purposes, we’re talking 8, 10, sometimes 12% of the gross rents, right off the top, every month. That’s the big line item. Then you move into the rent-up fees, which, you know, some property managers charge and others don’t.
CL: Right. And the ones that do, I’ve seen anywhere from what, half a month of rent to a full month of rent.
So if you have a rental apartment or a house that’s going for $1,500 a month, you know, for them to find that new tenant, they’ll charge you $750 to $1,500.
ES: On top of the vacancy.
CL: Exactly. On top of the lost rent that you have for that month while it takes them to fill it.
What else do they charge? I mean, I think that they might get into, if they’re handling the maintenance for you, what does that entail?
ES: Again, it depends. I do think that costs are gonna be higher in large, metro areas where everything is more expensive. But, often, there will be some kind of a markup on the costs of vendors, costs of what they’re paying out. That can be anywhere from 5 to 15%. And you also can see individual, administrative, or kind of coordination costs. So, if they’re dealing with a dishwasher that’s out, there may be a fee. Generally, they’re not huge, but individual project management costs can be in there.
CL: If they hire a plumber to come fix that dishwasher, they’ll charge another 5, 10% on top of whatever that plumber’s charging you. Is that how I understand that?
ES: Often. Yeah. I mean, most businesses, when they pay for a service, do add some overhead markup. Often it’s not included in the percentage of the monthly rent that you’re paying already.
And the other one especially relevant right now is trip fees. Fuel is really expensive and commute times are longer.
The Pros of Hiring a Property Manager
CL: Got it. Okay. So it sounds like there’s things to think about. What are the pros and cons of hiring a property manager? I guess we’ll start with the pros.
ES: Yeah. So two main points in my mind, and Chris and I have talked about this a lot, are rent up of properties. There’s a lot that goes into that and it’s important to get good tenants.
So the pros there are that you have somebody who should know the market well and be able to price your property so that it rents quickly and that knows the local laws, which is an increasingly onerous prospect where things seem to be continually changing.
CL: Which comes into play when dealing with leases or if there are complaints or you need to send notices or start evictions, things like that. The property manager will know how to approach that.
ES: Well, and even advertising. The basics are you have to not discriminate against any of the protected classes, which is very established. That’s not too hard to figure out. You need to be careful of that every step of the way. Also, in some places, you’re required to set criteria ahead of time, communicate it ahead of time. There are various things that, even in the advertising process, can come up.
CL: Yeah. And other pros that a property manager brings are that they’ll do the rent for you, they’ll handle the leases, they’ll handle the signings.
ES: And take care of the maintenance calls. So, it gets you out of a situation where you can be on call even if you’re asleep or on vacation.
CL: And they can provide you with reports to see how your portfolio or how your property is doing, on a month-to-month or yearly basis.
ES: And tax time.
The Cons of Hiring a Property Manager
CL: Definitely. Yup, exactly. Okay. And then some cons, you know, obviously we talked about costs. What are some other cons to hiring a property manager?
ES: They have a little less of a personal relationship with the property and the investment objectives you may have. One of the big ones, in my mind, being kind of a maintenance and construction-focused person, is how those jobs get done and whether or not there’s a long-term outlook on it. And, whether or not it’s done in a cost-effective way.
CL: So they may not provide that level of care or attention or detail that you might, as a property owner?
ES: Likely, I think. Although it’ll vary depending on the property manager.
CL: You also talked about the personal aspect. I think we’ve talked about this before, a lot of tenants prefer or like working with the independent property owner themselves, as opposed to having a property manager in between. That extra layer in there that a lot of tenants don’t particularly like.
ES: There could be multiple layers. It could be a maintenance coordination person, it could be a lease-up person, and then kind of an upper-level supervisor who takes care of managing those people.
CL: And so that affects the tenant happiness, which affects maybe how long they wanna stay and things like that.
ES: Yeah, I think it has real impacts on those things. And, I’m a one-point contact for all of my tenants and they like it.
CL: They like knowing who they can call.
ES: For sure, yeah. And then I do return calls. Sometimes, things are less personal and less responsive with property managers.
CL: Yeah, that brings me to the next point is often you have to deal with their availability. Sometimes they are not available when you want them or when the tenant wants them, and that’s something you deal with. They may also have differing priorities than you in terms of, you know, they’ve obviously got other clients and other properties that they’re managing, so yours, they might not take it as seriously or as top of mind.
ES: Yeah, there are different priorities. I don’t think most property managers are as cynical as this, but there is a benefit, usually, for them at turnover. There’s a turnover fee of that 50 to 100% of rent. So they may not be as long-term focused on tenants as I would be.
The Pros and Cons of Managing Your Properties Yourself
CL: Okay, great. If you don’t wanna hire a property manager and you want to do it yourself, what are the pros and cons of DIY property management? You know, obviously, the pros are the opposite of the cons of hiring a property manager. You get to maintain control and oversight, you get that personal relationship with your tenants. Lower cost.
ES: I mean, like we said, it’s, you know, easily 10% of your gross income. That’s pretty well inevitable with the property manager.
CL: Yeah. I guess the cons of doing it yourself, obviously, it takes time. You may not have, if you’ve got another full-time job or may not even want to be awake or be woken up at midnight for those emergency phone calls.
ES: Which doesn’t happen very often, in my experience.
CL: It doesn’t. But it always feels like it could be out there. And now that you said that, you’re gonna get one at midnight tonight.
ES: Oh man, I have my fingers crossed.
CL: There’s also the knowledge and experience that you don’t have, that a property manager might bring to the table.
ES: And market knowledge.
CL: Market knowledge, yes. But all those things, you can learn by doing it and, you know, we try and explain a lot of this stuff as well. So, that’s stuff that you can learn and figure out and the more you do it, the better you become at it, I think.
ES: Yeah. Doing it yourself generally is a much more reliable path to building wealth and having better cash flow. But, you have to be careful about how you do it.
Property Management Software
And, to that end, we talk lots about the tools that are out there that make it easier to manage yourself. You know, the full-feature property management software platforms like Avail, TurboTenant, RentRedi, and lots more will help you advertise, take applications, do the screening, even moving into 50 state-specific leases that you sign electronically online, and then initiating rent collection online too. Or electronically I should say.
That, for me, has streamlined things a lot. Yeah, I spent much less time traveling for one thing.
CL: Great. Yeah. And then there’s other property management software platforms that kind of allow you to pick and choose what you want to do yourself, and maybe what you wanna outsource. Like Hemlane, for example, off the top of my head. I think they will allow you, or they will in some cases, handle some of those 24/7 phone calls if you don’t want to do that, but, still give you the ability to collect rent or to advertise yourself. Or they can do it all, you know? So it sort of encompasses that whole spectrum. Whatever you like.
Also Read: Manage Maintenance on Rental Property Using Property Management Software
ES: But even when they do it all, the portal gives you visibility. You can go to see the advertising that’s online. You can go look at the rent roll, right there. See what’s been paid, what expenses have gone out. So, you know, that’s an added benefit in my mind.
CL: Yeah, for sure. So there are definitely platforms out there and products out there that can help you. And we’ve, you know, done videos on many of them and written about many of them on our website. So check them out, we’ll put links below.
Also Read: The Best Rental Property Management Software: Product Overviews
And then, I guess you gotta decide for yourself if you wanna hire a property manager or do it yourself. You kinda weigh all the pros and cons and all the benefits and costs. And then let us know what you guys are doing. Let us know if you guys are choosing one over the other in the comments there. Like the videos and subscribe. We’ll talk about more of this in a little bit.
ES: Very good. Thanks for watching.
CL: Thanks for joining.
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