Do you need a property manager for your rental property?  For a number of reasons, more and more people are turning to property managers to provide services in excess of what they have typically been known to do.  Today’s property management teams aren’t just there to find tenants, collect rents, and help make repairs like they once did.  In many cases, they are helping make the determination of what to buy, handling the rehab, and even doing market analysis for sale.  They are adding these value added services to help people better answer the base question:

Do You Need A Property Manager?

Let’s start by breaking down who you are into one of these three categories: homeowner, real estate investor, multi-family owner.  The answer and the reasons why or why not will change significantly based on each.  If you are in one of those three categories (fingers crossed that I didn’t leave anyone out), you can scan down to the category you belong to or you can read each and maybe learn a little.  Your choice.

You are renting out your home – Homeowners

For whatever reason, you have found it necessary to rent out what used to be your primary homestead.  Let’s say you got relocated and were underwater on your mortgage and couldn’t afford to sell.  So, now you need to find someone to live in your home and then help out with repairs as they arise.  Also, it would be nice to make sure someone kept an eye on the place to make sure the new tenants weren’t destroying the place, making it even harder to resell once you are in a financial position to do so.

Here’s what you could do: You could find an agent to list your home for rent, take out some ads in the local paper or on Craigslist and get a tenant in the home and paying rent.  Then, if they called and something needed repair you could just do a Google search or ask old friends for a recommendation and call them in.  Seems simple enough, right?  What happens when they stop paying rent?  What if you can’t oversee the repairs to the property and they aren’t done to your liking?

Here’s what you should do: Hire a property manager.  Period.  If you aren’t going to be around, you need someone who will be.  You need a Landlord who will be present, proactive, and professional.  For a nominal (and tax-deductible) charge, they can find and screen tenants, use their network to make repairs the right way, and collect rent, deal with the tenants and anything else that comes up.

Your are a Real Estate Investor

Well, this really depends on you, your personality, and your experience.  It might also have something to do with the location of your rental properties.  The question you need to be able answer honestly is: “Do I have the time, temperment, and know-how to be a good landlord?”

If the answer to that question is yes, then chances are, unless you own a boatload of rental properties, you probably don’t need a property manager.  The exception to that, of course, is personal preference.  If you don’t want to deal with it, then hire one.

If the answer to any part of that question is no, then you might want to consider hiring a property manager.  There’s nothing to be ashamed of by doing so.  You have a financial advisor for your investments and an insurance agent for your insurance.  So, why not think of a property manager in the same light.  They are there to make sure that your investment is performing the way it should, for a nominal (still tax-deductible) fee.  Whether you just don’t think you have the time because of your full-time job, or your rentals are in a bad part of town, or you just think that your tenants might take advantage of you (a common mistake by new investors), property managers can give you the peace of mind to know that your investment is performing the way you planned on it.

Side note: You might also see if your property management company can help you with the rehab on your property.  Most have a network of contractors and get a better price than you can.

You are a Multi-Family Investor

I’ll make this one real easy.  Chances are if you own a building with more than 6 doors, you need, at the very least, a handyman.  Maybe not a property manager unless you are experiencing a lot of turnover in tenants, but it would be, well, handy to have someone on call to help with repairs.  If you get into a bigger project, but not big enough to staff a permanent leasing agent, then a property manager might make very good sense and you can probably cut some sort of deal with them instead of the standard percentage of gross rent arrangement.

Hiring Your Property Manager

There are two major things you want to see from a property manager.  First, a scope of services that is well laid out and part of your agreement with them.  Second, you want to make sure that they actually have a track record of performance.  Ask for referrals from current clients.

You also want to make sure that you are accounting for their fees when you make your purchase decision.  For example, let’s say that your monthly note on a property is $800 and you are charging $1000 for rent.  You are making $200 a month.  However, adding in the average rate for property management in my market, you are only making $100.  Would that affect your decision to purchase that property?  Depending on the equity, it probably would.

Finally, you want to make sure that you are free to leave the contract if you feel that you are not receiving the service you are paying for.  Read the agreement carefully.

The Bottom Line

Property Managers can be a very valuable part of your real estate team.  They can give you a peace of mind that your rental is being taken care of by professionals that really know how to make your investment perform.  However, they do come at an expense to your bottom line.

The question is, and will remain, “Do you need a property manager?”  Like most other questions when it comes to your money, you are the only person that can answer that question.