Are property management companies worth the cost?
Let’s start with the obvious: Some are, some aren’t.
I had 56 properties when I’d had more than enough of dealing with tenants! At that point, I started seriously searching for a property management company I could turn them over to. The search was a huge eye opener. I found no one I would trust my properties and tenants with, and I was extremely disappointed.
So, I opened a property management company. Because you are not allowed to manage properties you don’t own without a real estate license (including properties for family members), I first had to open a real estate brokerage and hire licensed real estate agents. This was only the beginning of the costs involved in owning and operating a property management company.
How property management companies earn their fees includes :
- Train property owners – There is a huge intake with property owners. The management company must:
- collect all the details and legal documents on both property owners and their properties
- make sure they have landlord insurance
- set them up with automatic communication and payment methods
- Take a tremendous amount of time with new tenants including:
- market for, screen, sign contracts
- babysit them the first four to six weeks as they adjust to their new home. When a tenant first moves into a property, they’re unfamiliar with it and with their management company, so they want to check out both. Typically, the first month involves a lot of calls from the new tenants – “This squeaks. That leaks. This doesn’t shut properly. I don’t know where this turns on.” The property owners don’t want to be bothered with all that, but someone has to go out to the property and figure it all out
- Keep the communications open and to make sure everyone feels well attended to. Some companies send tenants monthly invoices and even newsletters
- Deal with all thing pets (some owners allow/some don’t)
- Collect payments
- Chase non-payers
- Keep track of fees – late fees, pet fees, etc.
- Handle evictions
- file evictions at the courthouse when they don’t pay
- appear on the scheduled court date
- ongoing communication/collection attempts with tenant during eviction process
- going to sheriff’s office to file for lock-out if payment is not received
- meeting sheriff at property for lock out
- changing locks and dealing with articles left in property if tenant has still not vacated
- finalizing the eviction
- Prepare, clean, marketing property for new tenant
- Know and follow local property management laws.
- Join professional organizations including local landlord association and the board or realtors.
- Keep up with changing rules and regulations as well as contract and consumer protection laws, including laws governing the eviction process.
- Determine rental prices
- Market your property effectively
- Which includes taking your property photos
- Maintain a network of reliable, trustworthy, competent, cost effective maintenance people
The best property management companies do a lot for their monthly fee. I fought managing properties for others for two years because I thought a person would be crazy to take on someone else’s headaches for only 10 percent of the monthly rent. Would you manage someone else’s property for $100 per month? Sure, if all you had to do was cash the rent check and mail the owner $900. Those are the sweet month’s that rarely happen.
Before hiring a property management company:
- check them out
- find one you’re comfortable with
- fire any that don’t work out
Interview for the good ones; fire the bad ones. The good ones earn their money.
If you decide to manage your own properties, please check out my book The Essential Handbook for Landlords for help.
Do you use a property management company? What’s been your experience?