Are Property Management Companies Worth the Cost?
Did you invest in a new property recently? You might’ve been surprised by how much work it entails. You might not have realized how labor-intensive, stressful, and time consuming owning an investment property can be.
This is where property management companies can help.
Property management companies are made up of experts with the common goal of managing properties, so their owners don’t have to. Even though their services remove the stress that exacerbates a person’s property ownership, it’s still an investment on top of the one you already made into the property.
However, depending on the amount of time, money, and resources you intended to pour into managing your property, a company to take care of all of it for you can come in handy.
So, is a property management company right for you? Is it a worthwhile investment? Let’s take a look at the essential items a property management company can handle for you.
Property Management Company vs. Property Manager
Before we delve into a property management company’s services, let’s demonstrate how they differ from a stand-alone property manager.
Property managers are specialists that manage and coordinate everything related to your property. Unless the property managers are physically taking care of the property themselves, they’re coordinating the needs, such as landscaping and necessary maintenance, for you. They’ll also directly communicate with your tenants.
More often than not, property managers are employed by management companies. However, you can find some property managers that take care of properties without being employed by a company.
This can come in handy for some, but it’s better to use a company with a proper vetting structure.
On the other hand, property management companies employ property managers or have a team of people to manage your property for you.
Large companies will have managers that specialize in different areas and different property types. For instance, if you have a mixed-use property (both residential and commercial), you could use a manager experienced in handling both types of needs.
Property Management Duties
Property management companies offer a wide array of services to property owners.
Some companies offer full packages or a la carte services depending on your requirements. Extra services can include in-house maintenance professionals, realtors, janitorial staff, and even professionals who can help with marketing and accounting.
If your property is a short-term rental, some companies offer management services specifically designed to handle those needs.
But before considering your options, look at what managing your property will entail. Regardless of whether it’s a commercial or residential property, there are still common factors that every owner will be faced with.
Physical Property Management
The first thing that should come to mind when understanding a property management company’s potential value is your property’s current physical state.
If you’re the lucky owner of a property with new construction, then your maintenance might come down to moderate upkeep, such as landscaping or yearly winterizing.
However, if your property is older and you’re not planning on doing any major upgrades, you’ll most likely need a property manager to be on hand for maintenance issues.
The same goes for bigger commercial buildings with multiple tenants. A management company can field multiple support issues and coordinate repairs.
Also, most property management companies have built up a list of trusted contractors. Instead of researching and comparing quotes yourself, you can have your management company do it for you.
If you already know that you don’t want to deal with the people or businesses occupying your property, then you’ll want to employ a management company to do it for you.
Management companies will assign a manager to be the direct line of communication for your tenants. If you have a residential property, that helps shield you from dealing with emergency calls in the middle of the night. If the property is commercial, a management company can stand in the way of a deluge of requests or tenant complaints.
These companies can also handle tenant search, onboarding, and evictions.
Property management companies are often partnered with real estate companies or have their own real estate branch. They can interview potential tenants and do background and credit checks for you. They’ll also handle onboarding paperwork.
Have a tenant that’s continuously broken contractual obligations or hasn’t paid rent? The management company can monitor this for you, and, if need be, evict the tenant in your stead.
Property owners can attest to the numerous bills, notices, and policies that are sent to them. Apart from people and buildings, most property owners receive a massive amount of paperwork through mail or email.
But property management companies can handle that as well.
Bills, invoices, taxes, insurance documents, and property records can be organized on top of the paper trail created by property repairs and tenants.
Also, if you plan to provide government-subsidized housing, you can expect even more paperwork.
It’s good to have someone receive that incoming information and organize it for you.
So, what’s the cost of a property management company?
Most property management companies work on a percentage basis. The fee is usually between 5 and 12 percent of your monthly rent revenue. It could also include a flat fee.
The determining factors include the number of properties you need managed, the services you want to include, and if the company has any extra fees on top of their management costs, such as vacancy fee, set-up fee (to show the property), or a leasing fee.
If this sounds like it’s too expensive, just remember, if you aren’t paying for someone else to manage your property, you’ll be left with all the work.
Take into consideration the opportunity cost and the value of your time. Do you want to always be on-call for your tenants? Managing maintenance? Or taking care of the paperwork?
If not, you can expect your money to be well spent on a property management company.
Are Property Management Companies a Worthwhile Investment?
Still unsure if a property management company is worth the cost?
As mentioned before, consider the number of properties you have. If there are multiple, you’ll be saving a lot of time and avoiding a lot of headaches with a management service.
But even if you have one property, it’d still be helpful to have someone manage it for you (you’ll especially want to get help managing your property if it’s listed on Airbnb).
Look at the amount of time you have to allot to your investment. If it’s worth more to avoid the stress of management or if you simply don’t have the time, then a property management company is well worth the cost.