After conducting hours of extensive research and weighing out the options, you’ve just purchased your first rental property. You’ve considered all the real estate tips out there, and you’re ready to start making money in the crazy world of real estate. There’s just one problem: you don’t want to deal with being a landlord. You are now considering a property management firm to deal with all of your landlord work. Before you jump in and sign the papers to have this firm manage your new rental property, please look over the following points to help you decide if a property management company is worth the cost:
The responsibility is still all yours.
There are many responsibilities that come with being a landlord that you simply may not want to deal with. You don’t want to hear every time that the dishwasher breaks. You don’t want to hear about the lighting problems. You especially don’t want any phone calls at five in the morning. In a sense, you relieve yourself of these responsibilities by hiring a property management firm. On the flip side, these are still your problems because it’s still your property. You must keep in mind that no matter how the management firm works, you can’t and shouldn’t just ignore your property. Nobody else will ever care about this property as much as you do. If you want to pawn off all the responsibilities, you may very well be unsatisfied with the outcome.
Dealing with paper work.
Some of us simply loathe paperwork. I personally don’t mind it in small doses, but I do see how paperwork can get annoying. A property management firm will alleviate all of your paperwork responsibilities. The company is usually responsible for screening tenants, finding tenants, putting together lease agreements, and billing the tenant. All you have to do is pay the property management fees. For some, the elimination of paperwork alone can be worth the fees. It all depends on how you value your time and how much you mind conducting paperwork.
How much will you pay?
From my own research, I found that the typical payment for a property management firm can be anywhere from $80-100 per month for a condo. I was told that the price can fluctuate depending on the size of the property and the amount of properties that you have. If you consider all your other expenses (mortgage payment, utility fees, maintenance fees, property taxes), the property management fees could really be the last straw and make you think twice about taking them on. These fees may also force you to charge a higher rent which may make it harder to find a tenant.
How old is the property?
A new property can be very easy to manage and very hands-off. From my personal experience, everything in my condo is under warranty for the first year. If something stops working, the solution is really simply: just call the company that provided the product to come check it out. For example, I just had my washer-dryer combo fixed the other day. It’s really not worth hiring a property management firm for such a simple process.
On the other hand, older properties may have more difficulties around the house. This will lead to more problems around the property. This in turn will lead to a more hands-on property management process. Are you willing to deal with this or would you like to delegate this whole process to a property management company?
At the end of the day, the decision to hire a property management firm to monitor your new rental property requires much consideration due to the responsibilities and fees involved. I hope that you consider all of the points mentioned in this article before making the decision. Also, I’m curious to hear where you guys stand on hiring a property management firm? Are you considering one? Have you ever dealt with a property management company?
(photo credit: theerin)