Owning rental properties can be a lucrative income pathway, but actually managing those properties can be challenging. For most landlords, a property management company can help smooth the path.
What Exactly Does a Property Management Company Do?
Property management companies are available for all aspects of the rental process. As the property owner, you can still manage any tasks you choose. However, you can also let the property management company deal with it all, if you choose.
The basic services property managers offer include the following, though you can request additional tasks if needed.
- A property management company will market your properties to attract clients and keep vacancies to a minimum.
- They’ll process applications and screen applicants.
- They manage all the rental paperwork, and keep records of everything.
- They collect and process rental payments.
- If a tenant isn’t paying rent, the property management company will pursue legal actions and even manage evictions, when necessary.
- They communicate with tenants to take and manage complaints and maintenance requests. This can include hiring plumbers, pest control, lawn care specialists, and more.
Do I Need a Property Management Company?
You don’t have to hire a property management company, but doing so can certainly make owning rental property easier. This is especially true if you meet any of the following:
- You don’t live near your rental properties. It’s difficult to manage rental properties effectively if you’re not close enough to take care of things.
- You own more than one property. Managing one property can get tough, especially if that’s not your full-time job. Trying to manage several – especially if they’re located in different areas – can be completely overwhelming.
- Management is not your interest or your strong-suit. Just because you want to own properties and make an income from them doesn’t mean you want to be directly involved with them. And if management isn’t a strength, you might end up losing out on rental payments, not fulfilling maintenance requirements, or other important aspects.
- You don’t want to be an employer. If you choose not to use a property management company, you can either handle everything yourself or hire a resident manager. The last option makes you an employer, leaving you to meet certain legal requirements and deal with additional paperwork. If you don’t want to be an employer and take on the stress related to that, a property management company is a much better idea as they are considered independent contractors.
How Does a Property Management Company Make Money?
The answer to this question depends. Most often, a property management company will keep a percentage of the rental income. This usually ranges between 5% and 15%, but it can be higher or lower. When interviewing potential companies, be sure to ask if that percentage is taken from the rent due or the rent that they actually collect.
Property owners also typically pay a fee for certain services provided by the company, such as credit checks, repairs, and bookkeeping. This may be a flat rate each month or due only when these services are provided. You’ll need to get the specifics from any companies you consider, as it can all vary from one to the next.
Using a property management company can provide several benefits, but only when you choose one that’s as committed to your success as its own. Before choosing a company, interview a few, check reviews, and ask friends and associates for recommendations so you can find the right fit.