Owners of investment rental properties face a decision whether to manage their rentals themselves or to hire a professional property management company. The advantages and disadvantages are multifaceted, so let’s analyze them.
Direct vs. indirect control of property management
Owning one or two rental properties can be a profitable long-term investment. It entails a set of responsibilities that the owner must juggle. When the owner has only a small number of properties, this may be doable, but as the portfolio grows, many owners hire a property management service.
Responsibilities for rental property owners include:
- Listing and advertising available properties
- Interviewing and screening applicants
- Negotiating lease agreement terms
- Complying with laws and regulations on landlord-tenant relations
- Contract signing and enactment
- Collecting deposits and monthly rent payments
- Managing property make-ready
- Managing property maintenance and repairs
- Negotiating and settling disagreements and disputes
- End-of-lease management and deposit refunds
The fundamental difference between DIY property management and a professional service is the degree of direct involvement and the relationship the owner has with tenants. Many owners want to build that relationship, but some prefer that a management team take on the responsibilities.
Advantages of using a property management service
Hiring a property manager brings these benefits:
- Having an expert in the legal dynamics of advertising the property, screening applicants, negotiating lease terms, dealing with disputes, and maintaining the property
- Unburdening yourself from the time commitment of property management
- Maximizing rental income from each property
- Cost control for maintenance and repairs
- Having an established vendor list of repair companies, so you don’t have to find your own plumbers, electricians, and so on.
- Relieving the stress of dealing with all these pressures
- The ability to scale the management scope as your portfolio of properties grows
Disadvantages of using a property management service
- Paying management fees that cut into your profits
- Loss of relationship with your tenants
- Less personal control of decisions as you give that responsibility to the manager
The decision point
For many owners, the decision to use a management company comes when they realize that
growing a portfolio of properties will require professional help. An owner can only handle so much responsibility, after all. A growing number of properties forces the owner to seek help in keeping the enterprise running smoothly.
Related – Screening Tenants for Your Rental Property
