Are Property Managers Worth Their Fees?

Are Property Managers Worth Their Fees?

Ask yourself a few questions before deciding to hire a property manager.

Whether you are an accidental landlord or if you planned to become a residential real estate investor, someone will have to manage your property.

Who will find you new tenants when yours move out? Who will handle complains about leaky faucets in the middle of the night? Who will handle tenants who do not pay rent on time?

You, the homeowner, could handle all of these things yourself, of course. That is assuming that you live a reasonable distance from your rental property and actually want to take on the responsibility. But, what if you live in another state? What if you don’t like dealing with the confrontation of a non-paying tenant?

What if you simply do not have the time, energy, or proclivity to want to handle all of these things? These are just some of the reasons why hiring a property manager might be a great choice for you and your residential rental properties.

Isn’t A Property Manager Expensive?

When a lot of my friends and family hear I’m a landlord and outsource the property manager role to a firm, I’m always asked about the cost. In the grand scheme of things, hiring a property manager is not too expensive when you compare the amount of everyday and monthly tasks they handle for the property owner.

Managing a property is not very hard in most cases, but it is often time consuming, especially when you are in-between tenants and looking for a new one or when there is a property issue.

A property manager typically charges a flat fee of 10% of the rent you charge. So for example, if you charge your tenant $1,200 per month in rent, then a property manager will typically charge you $120 per month for their services. They collect the rent, take out their fee, and pass along the remainder to you. This is also after paying any maintenance and repair costs. You’re left with a cash flow to pay your mortgage, insurance, property taxes, private mortgage insurance (PMI), homeowners association (HOA) dues, home warranties, or any other fees.

What Services Does A Property Manager Typically Perform?

There are many things a property manager typically does for a landlord as part of the monthly fee that they collect. While this is not an all-encompassing list, it does provide you with a good idea of what you can expect the typical property manager to do for the fees they charge the homeowners.

  • Find and screen new tenants
  • Advertise your home vacancy online and in print
  • Evict non-paying renters, if needed
  • Collect rent payments and deposits
  • Handle calls from potential and current tenants
  • Schedule routine and emergency maintenance
  • Coordinate with contractors and home warranty companies
  • Conduct monthly or quarterly inspections
  • Show the property to new renters

Property Managers Understand State And Local Law

Additionally, property mangers know and understand the specific local, state, and federal laws that govern being a landlord such as accepting renters, removing non-paying tenants, application denials, which references to check, and other aspects of renting.

The law covers a host of specific details that you may not know (or even want to know). It is hard to keep up with all of the rules and law changes. Hiring a property manager absolves you of responsibility and puts it on the property manger’s shoulders.

A Property Manager Knows The Lay Of The Land

My property manager’s company manages over 200 single-family residential homes in a three-county area. She has a wealth of history and knowledge about the residential real estate market in our area. She knows exactly which types of homes and locations that are renting well in every season. She is very familiar with all of this data because she has a large pool of properties to reference, and this is the only job she has every day, 9 to 5.

Not only does a property manager know the lay of the land in your specific town or neighborhood, but they most likely are real estate agents as well. If they are real estate agents, they also have access to the real estate multiple listing service (MLS), which provides realtors with a wealth of data about all homes that have sold and/or been rented in the area. The MLS database can provide comparable properties (comps) and can query the database specifically for one or more specific points of interest.

Do you have a home with an in-ground swimming pool, for instance? What are the monthly rental prices similar homes have commanded over the past year when compared to ones that do not have a pool? This is just one of the many examples a property manager can search for on the MLS database.

Is A Property Manager Worth The Fee?

Of course only you can truly answer if a property manager is worth their fee. You will have to consider your profit margin. Is the rent you are able to charge your tenants barely covering your mortgage, insurance, private mortgage insurance (PMI), taxes, homeowners association fees, maintenance, and the host of other costs of owning residential rental real estate?

Like most things in personal finance, the answer is that it depends. What do you want to do with your property? How involved do you want to be–or can you be? For many landlords, it makes sense to hire someone who can manage your property for you. But often it is simply a profit calculation you have to make and live with.

Do you manage your own rental properties? Or, have you hired a property manager to do that for you? Which course of action would you recommend for a new landlord? Why?

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Last Edited: August 7, 2013 @ 12:17 am
About Hank Coleman

Hank Coleman is a fan of everything personal finance. He's the creator of the popular site Money Q&A, as well as other financial sites. Hank is currently studying to become a CFP. His freelance writing work can be seen across a variety of top-notch publications in finance and investing.