What do property management companies do, anyway? What don't they do? How much do they charge? Are they worth it?
Whoa there, tiger. We'll answer your questions about property management, and succinctly, at that.
Property
Landlords and rental building owners hire property management companies to assume all of the headaches involved with managing properties and tenants, allowing the landlord to spend their time in other ways. Typical responsibilities of a property management company include screening tenants, fielding phone calls from them, taking care of all repairs and maintenance, complying with rental laws (such as lead paint tests and disclosures), signing rental agreements and rental disclosures, etc. As an added bonus, they keep track of all the money that's spent on each property, making your accounting a LOT easier. In a word, they do the everyday management.
What they usually DON'T do is pay your bills, such as your mortgage payment or property taxes (word to the wise: have your mortgage lender escrow for property taxes & insurance, ground rents, and any other recurring bills to save time). Property management firms typically don't register your rental properties with local municipalities, either.
What do they charge? Property management companies generally charge in the 7-10% range, as a commission of all rental income collected (e.g. if the rent is ,000, the management fee may be -100). This is no small fee every month, and constitutes a major disadvantage to using a management firm, especially when so many landlords only break even or have a small cash flow from their rental properties.
So now the hard part: are property management companies worth the expense?
The answer, of course, is that it depends. You may not be able to afford to pay a management company, if your rental only breaks even each month. But there is something to be said for being able to sleep at night without being woken up by obnoxious tenants calling to complain that the smoke detector needs a new battery, or having to spend your lunch break running out to show a rental property. The fact is that most landlords can handle the management of a few rental properties, but there is a critical mass at which point it no longer becomes feasible to perform property management duties for your rental properties AND do all of your other business tasks.
So my recommendation is to handle management yourself for your first few rental units, and get a crash course on managing rental properties. But when you can't take it anymore, it's time to pass the buck along to someone else, and get back to your primary business: making money.
Property Management - Pros & Cons
Kevin Kiene is a landlord who's managed dozens of rental properties over the years, and manages EZ Landlord Forms, an online provider of property management software and rental agreement forms.