Should You Hire A Professional Property Management Company?

By on July 19, 2016

What if the real estate dream of relaxing on a beach chair with a laptop in front of you… while the passive rental cheques continue to come in… can be real?

Can it really be real?

With so many tasks that you can expect to look forward to as a landlord, it’s hard to imagine that a sandy beach has anything to do with it.

Yet actually, you can. The solution lies in hiring professional property management companies.

These companies exist specifically to offer services that take on your responsibilities of landlording so that you can goof around whenever and wherever you want. The jobs they take on include:

  • prospecting for tenants
  • preparing tenancy agreements
  • attend to tenant requests
  • manage maintenance and repairs
  • manage the difficult relationship with contractors
  • and pretty much everything else

It’s not far fetched to suggest your tenants might never even know you exists!

If that is so, why are there not more property investors hiring them to do this job for them?

The issue is always about price, and how much profits are left after deducting their fees.

  • For a typical house, you could be looking at about a 10% fee on the monthly rent. This means that if your rental is $2500, you are looking at a charge of about $250.
  • On top of that, you pay up to a full-month “commission” each time the company is able to secure a tenant for your property.
  • You might then have to pay an annual management fee
  • And pay a premium price for vendors, suppliers, and contractors for maintenance and repairs due to a markup on their end

So if you don’t do your numbers well, the prospect of positive cash flow from real estate assets can quickly start bleeding negative cash flow.

Now you might immediately turn your back on hiring a professional property management company after reading this. But the decision on hiring or not still depends on factors unique to each individual.

The factors usually falls into the area of “How much more money can you make by freeing up your time?”.

If outsourcing the job of landlording to third parties enables you to spend more time making more profitable investments, common sense should tell you that hiring them still makes sense even though they could be expensive.

Avoid hiring the wrong people

So let’s say that you have decided to hire as you don’t want to waste your valuable time on trivial matters. You had already made the big decisions, micro tasks should be left to others while you go on and explore more investment opportunities.

This is just the beginning…

Just like any service provider, there are incompetent property managers all over the place. And seldom will you land on a capable fairly priced one on your first try.

As a matter of fact, your motivation to seek value will probably lead you into hiring a company that under delivers.

I think this is partly due to the nature of such business operations.

Service providers that are set up this way often get complacent after signing up a customer as they feel that the customer will be tied down for a whole year. This leads to complacency.

It’s sort of like how banks give us mortgages that has a lock-in period. Once we are signed up, we get neglected like homeless dogs. And in extreme situations, they even raise interest rates during lock-in periods as they know full well that we would not go anywhere. In fact, leaving the bank at this point might incur a bigger expense than staying with it.

When the company you hire has a large portfolio of real estate to manage, seldom will you get any special attention from them. They stream line their systems to treat each unit fairly. Meaning that you probably cannot expect any special favours and have to follow their terms and conditions to the dot.

So if you are to hire management company, go for one that has a good reputation which they will go all out to defend with good service.

You can also:

  • ask landlords you know of any referrals or references they can provide
  • start a discussion in your investing network on this topic to learn from the experience of others
  • talk to at least 3 service providers before deciding on one
  • talk to some of their current and previous clients to see what they have to say about the service provider

The best people to hire is your own staff

Your real estate operations might not be big enough to warrant it’s own staff. But if you are already a business owner in some other areas, you might consider getting some of your staff to take on different tasks for you.

You can even pay them to do so. You retain more control and have a better picture of what is going on when the people managing your properties are taking orders directly from you.

Do note that if you are going to give this a try, that how you balance the different relationships you have with your staff is of utmost importance. What you want to avoid is to have them prioritize their time in a way that could jeopardize your current business.

If this is an idea that you cannot turn to, then consider hiring a family member part-time.

There might be members in the household or a relative who have a lot of free time and don’t mind taking on a job for side income.

On top of my head, I can already think about 3 relatives might be interested to do the job of managing properties on a part-time basis.

I can imagine that they would be happy to make extra money, while I can depend on them to treat the job seriously. Mistakes can always be rectified as long as they are frank and honest with what they did wrong.

Finally, do remember that hiring a professional property management company does not mean that you are home free. Very often, you will have to manage the management company… which defeats the whole purpose of hiring them. So… will you still hire?



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