Being a landlord can be an agonizing and very rewarding business. I have been a landlord for over 14 years and currently have 55 rental units. I happen to love it, but it is not all roses all the time. Surprisingly, being a landlord is not that tough and you can manage many units without a lot of work, but you have to have your business set up correctly. You can scale your landlord business with or without professional property management. I happen to think property managers are expensive for what they do, but I also understand the tremendous value they can bring. There are many different reasons you should consider using a property manager, but before you make that decision consider these 6 questions:
Where are your properties located?
I have tried long distance management and can tell you it is tough. For it to work, you need great systems in place, which is not easy to set up when you are not on the ground. You will also most likely be relying, at least to some extent, on other people who are not licensed to do what you need them to do. This could include anything from signing a lease, to collecting rent, to fixing a faucet. In my business, I feel it is worth the money to hire property managers to manage all my out of state properties.
How many properties do you have?
You can manage a lot of properties with just a few hours of work a month. I manage all my in state properties myself because it is easy to do and is not worth it to me to pay someone else to do it. In fact, when you are getting started, I would strongly encourage you to manage your own properties. This will help you gain valuable experience, even if you want to eventually turn them over to a manger. To manage multiple properties, you need good systems. This includes a team to do your handy work (basic handyman, plumber, electrician, appliance repair, etc.) Obviously, this is all outsourced so you don’t need employees for this to work. You also need a great leasing agent. A leasing agent is someone who will typically give you advice on what needs to be done to get a unit ready and they will market, show, and negotiate your property. You can have them do the lease signing too, although I would recommend you do that so you get a chance to meet the tenant. Other systems you will need to implement include; rent collection, evictions, move ins and outs, maintenance requests, property improvements, enforcing the lease, transferring utilities, etc. I would consider a manager if I got so many properties that I felt overwhelmed, and in this case I would hand select properties to turn over.
Are you organized?
Here is where you have to be honest with yourself, which is not always easy to do. To manage multiple properties you really do need to be organized. You will have payments coming in for rent and going out for maintenance, mortgages, utilities and more. You will be getting maintenance requests, requests to add or remove people from the lease, request from government agencies, and requests from a slew of others. If you cannot stay on top of this, it is time to hire some professional help.
Do you have a problem property?
These are the worst and you won’t know you bought one until after you own it for a while. I have a few that give me trouble. Although I still manage them myself, those few problem properties take up more of my time than everything else I have combined. This is one time that I would consider a manager for a local property.
Can you afford it?
As I mentioned, property management can be expensive. You should expect to pay ½ or more of the first month’s rent in a leasing fee, 6-10 percent of the gross rent amount in a management fee, and additional costs for maintenance (this is usually marked up). I would try to look at this as if the property can afford it, not you. You really don’t want to get into the habit of feeding your investments, so if there is not enough cash flow from the property, then you might consider managing it yourself until you can get your expenses down or your rents up.
Do you have the time?
Because it only takes a handful of hours a month, my guess is you do have the time. The real question is, do you want to be managing the property with that time? As you get older and your goals change, it might make since to start to step away from your landlord business. Retiring is the obvious example. At that point in your life, you will most likely be deciding between professional management and liquidation.