Crunching the Numbers: Self-Management vs. Hiring a Property Manager
If you own rental property, you may be wondering if it’s worth your time and money to hire a property manager to handle it for you. After all, it can be time-consuming to manage yourself. But property managers aren’t free and, depending on how much profit you’re making from your rental, it may not be worth it.
Understanding how property managers make their money can help you make the decision as whether or not you want to hire one!
Self-Management vs. Hiring a Property Manager
Most property managers charge a fee, usually anywhere from 7%-12% of the rental income, plus expenses. Keep in mind, that’s 7%-12% of the total rental income, not just your profit after the mortgage payment is made.
Depending on the management company, they may charge a flat fee instead of a percentage, usually around $100 a month. But those aren’t the only fees you can expect to pay. Other fees may include:
New Tenant Placement
A management company may charge a fee for finding a tenant for your property and getting the lease signed. This fee can be as much as 50% of the first month’s rent. However, this is a one-time fee when a new tenant moves in, not a fee you pay monthly.
You may be charged the equivalent of one month’s rent up front if your unit is vacant. This gives the management company up-front money to advertise your property and show it to potential renters as well as preparing the lease paperwork, which can take several hours.
As your property will need ongoing maintenance and most property management companies have their own maintenance crew on staff, a maintenance fee is usually a must. You will need to negotiate what regular monthly or bi-monthly routine maintenance will need to be done, and you can expect to pay labor fees of $20-$50 per person, per hour, plus materials. This would be the same for any other maintenance issues that pop up, like a broken appliance or leaky faucet. Emergency maintenance calls are usually charged at a higher rate.
Unfortunately, you may get a tenant that just doesn’t work out for whatever reason. They may lose their job and be unable to pay rent or they may be disturbing the neighbors. Whatever the reason, evicting a tenant can be time consuming. There are forms to file and probably even a court appearance for the property manager. You can expect to pay your property manager anywhere from $200-$500 to process an eviction.
With all of these fees, you may be thinking you’re better off managing your property yourself, and that may be true, but there are some things to consider with self-management as well!
Most importantly, consider the time factor.
Do you have the time to do the regular maintenance yourself? Do you live in close enough proximity to your property to be there if there’s an emergency? If not, do you have a contractor or handyman nearby that you can count on? And how many properties do you own? The more properties you have, the more responsibility you have for managing them so the more time consuming it becomes.
There’s also the factor of experience to consider.
Do you know how to write an iron-clad lease? Do you know the steps you need to take for eviction? And if you’re just starting out and don’t have a handyman you can count on, what happens if you hire the wrong person and the job ends up costing more?
There are definitely pros and cons to both sides of the equation, and you need to take a look at your own situation to decide what works best for you when it comes to managing your rental property!
For more detailed information and help regarding property management, click below to download MilitaryByOwner's free Landlord-Tenant E-book.