Is a Property Manager Worth It?

Managing a property can be a demanding and time-consuming responsibility, whether you own a single rental unit or a portfolio of properties. Because of this, you may be asking yourself “is a property manager worth it?”

In this article, we discuss the cost of hiring a property manager, exploring the various aspects that determine whether hiring a property manager is worth it for property owners seeking to maximize their investments.

What Does a Property Manager Do?

A property manager plays a crucial role in overseeing the day-to-day operations and maintenance of real estate properties on behalf of the property owner. Their primary responsibilities revolve around maximizing the property's value while ensuring the satisfaction and safety of tenants.

Here are some key aspects of a property manager's role and why they are valuable:

• Tenant Management: Property managers act as the main point of contact for tenants. They handle tasks such as advertising vacancies, screening potential tenants, drafting and enforcing leases, collecting rent, and addressing tenant concerns or complaints.
• Rent and Financial Management: Property managers handle rent collection, accounting, and financial reporting. They set rental rates based on market trends, calculate annual rent increases, and enforce rent payment policies.
• Legal Compliance: Property managers stay updated on relevant local, state, and federal laws that govern property management and landlord-tenant relationships. They ensure the property owner's compliance with these laws, which include matters such as fair housing regulations, eviction procedures, lease agreements, and safety codes.

Determining the Cost of Hiring a Property Manager

The cost of hiring a property manager is influenced by several factors, including the property's location, size, required services, local competition, and the expertise and reputation of the property management company.

To determine the cost of hiring a property manager, a series of steps can be followed. First, you need to define the specific services you expect from a property manager, such as tenant screening, rent collection, property maintenance, financial management, lease agreement preparation, and legal compliance.

Next, conduct research to identify reputable property management companies in your area, considering their experience, client reviews, expertise, and range of services provided. Compile a list of potential candidates based on this information.

Reach out to the selected property management companies and provide them with detailed information about your property and the services you require. Then request a cost estimate tailored to your specific needs for the properties in your portfolio.

Property Management Return on Investment (ROI)

Professional property management services can be highly beneficial, especially for first-time landlords who may lack the knowledge and time required to navigate local laws and regulations. By entrusting these responsibilities to experts, landlords can avoid costly mistakes that may lead to legal issues.

Another advantage of employing property managers is their ability to minimize vacancy periods. With their expertise and resources, property managers can efficiently turnover properties and reduce the time between tenants.

On average, this can translate to about a month's reduction in vacancy time. The quicker turnover allows landlords to start generating income sooner, contributing to a healthier financial situation. As the saying goes, time is money, and property managers can help maximize both.

Calculating ROI

When considering investment properties, it's common for landlords to calculate their projections based on an average tenant occupancy of approximately three years. This duration serves as a benchmark for estimating potential returns.

The cap rate calculator is commonly used by investors to determine their profits from rental properties. While it can provide a rough estimate before making a purchase, it may not be suitable for first-time landlords since it lacks specific breakdowns necessary for effectively managing the asset.

For a more accurate assessment of the cost of hiring a property manager, it’s a good idea to use a property management cost and profitability calculator for a complete understanding of the costs associated with property management.

The Bottom Line

The amount of savings you can achieve by using a property manager may not meet your expectations when calculating return on investment, particularly if you have a higher income.

Landlords typically spend a minimum of 40 hours per year managing a single rental property. In major cities with high rental prices such as Los Angeles, San Francisco, New York, and Miami, it’s possible that cash flow might not be significant, but the property value appreciates at a faster rate compared to smaller cities.

This prompts a question: Do you prioritize equity investments or cash flow investments? The answer to this question will help you determine whether or not it makes sense for you to hire a property management company to manage your investments.