Rent through Property Management Company or hire a Rental Manager?
The best thing about having a rental business is its passive nature. But by being someone who actively manages the landlord business, you are at a mistake. If your business allows and you have the margin to share your profits, you should definitely consider some help. Depending on your business, you can either rent through a property manager or can hire a rental manager to manage the business. So, take a leap now and avoid the landlord’s mistake of self-managing your rental business.
Renting through Property Management Company or hiring a Rental Manager has a few similar roles. They both manage your rental business but in a different way. The Rental Manager is a bit of a middleman who looks after your property, collect rents and take tenants complaints. On the other hand, a property management company performs the complete operation involved in running a rental business.
Should you hire a Property Management Company or Rental Manager?
Hiring a property management company or employing a rental manager can actively manage your rental business for you. But, who to hire is a big question. Depending upon the scale of your business and the operations of your business requirements, you can hire the one. Take this questionnaire and make a suitable choice for your business.
What is the Scale of your Rental Business?
The scale of your rental business depends upon the number of the unit you are renting to the tenants. Large efforts and more managerial skills are required if you have a lot of units on rent. A big system is required to operate a rental business with having a lot of units. Having more number of units means you have lots of tenants to handle.
You are required to show a large number of rental units to lots of tenants, run background checks on them. You need to keep an account of rent collected, handle the complaints, and manage vacancies. A huge rental business is also prone to a large number of evictions and other legal hassles. These issues can occur every month.
As an investor, you never wish to kill your time going to court or handle legal matters every now and then. It is better to hire a rental management company if you own about 10+ rental units. A rental management company also makes more sense if you have units in more than one building and at different locations.
But if you have one property that has around 5-10 units, you should consider employing only a rental manager. The 5-10 rental units can be easily managed by a rental manager and unnecessarily you don`t need a management company. The tenant`s issues that occur in 4-5 units will be still less than what you will have in 10+ units.
How much margin your rental business allows?
If you have a big rental business, there is a good chance that you have a good margin available to hire somebody. But how much margin exactly your business has will help you determine whom to hire. Generally, a rental management company takes about 8%-10% of your gross monthly rent to manage your rental property. And for a rental manager, they can charge from $1000 to up to $3000 depending upon how many landlords and units they are working with.
If you can share 8%-10% margins, it is better to hire the Property Management Company. The Management Company is anyway more effective in handling rental tasks. They have a team of professionals for every specific task. Furthermore, you can even save a few extra bucks with the Property Management Company.
The company has hired dedicated employees ranging from service persons to lawyers. If anything goes wrong with your rental, these employees can get it in place faster. And at a much cheaper rate than what you pay if your rental manager hires individually.
But as said above, a rental investor should only hire a rental manager who has about 5-10 rental units. A part-time rental manager who works for several property owners in your area will cost less compared to profit margin shares with Management Company. Also, in less than 10 units, you are not able to stay profitable if hiring a Management Company.
What is your experience in managing a rental business?
A newbie or an inexperienced landlord can quickly destroy the rental business. Not following the recipe of successful landlords, you will not be going to scale your business anytime soon. A landlord business involves a lot of strings and various day to day operations. Like every business, there are highs and lows in the rental business.
There will be times when you have to suffer vacancies and you have a hard time renting your place. You need to market your rental, run background check on prospective tenants. Also, you will be having some eviction process on the way to evict the bad tenants out of your property. All these things require experience and there is nothing better than getting some help in the way.
Getting assistance from someone or having someone exclusively to do the process for you is altogether with a different experience. If you are someone who has no prior experience of handling these situations and processes, you should consider renting through Property Management Company.
But if you have a rental manager, you will miss the possibility of having someone to act exclusively in your place. A Rental Manager is just an independent employee who only performs certain tasks in your rental business. The rental manager is a middleman who is representing you at your property. In cases of legal matters, it is you who has to take the charge and go through the pain and challenges.
Can you give up control of your Rental Property?
Having a rental property is a big investment. You have put a lot of your money into this investment. And giving the control of your investment to someone else is an intimidating thought. Renting your property through Property Management Company means someone else is in charge of your property.
You have willingly given up your control to someone. And now whatever happens on your property, it is out of your control. The Property Management Company is now in charge and has control over your renting business. If the property management company fails to do their job right, your investment property is at a risk.
On the other hand, hiring a rental manager to manage your rental property still keeps you in charge of the property. The rental manager is just a middleman who is looking after your property and performing some tasks on your behalf. You can enjoy the freedom of your ownership and assess everything that is going on in your property.
Hiring the rental manager, you are the owner of your rental business. You can determine the course of the business. Having the ability to run it on your terms, you have a chance to increase your rental profits. Your investment will stay under your hand. You will either increase your returns or decrease your returns depending on your skills and how well you can run your business.
How proficient are you in Business Management?
Having an investment property and renting it to tenants is a mere fraction of what a rental business is. The rental business is like any other business which involves lots of managerial work and tasks like advertising, marketing, financial accounting, and record keeping. Being a rental business owner, you should be proficient enough to handle these tasks.
But if you are renting through the property management company, you can save yourself a lot of time. The Management Company will be in charge and perform all these tasks in your rental business. You are no longer required to prepare a marketing strategy, keep accounts of rent collected, filing taxes and managing the property.
However hiring a rental manager, you still have to do the most tasks of your business yourself. You still have to market your rentals, keep the accounts, file taxes and handle legal procedures. Your rental manager will only be performing the task of showing rentals, collecting rents and taking up tenant`s complaints.
So now it totally depends on you how you want to operate your rental business. If you have good business management skills and short of budget, you can simply employ a rental manager. But if you are someone who has lots of businesses to manage and can`t give your time to your rental business. Then, you should definitely consider hiring a Rental Management Company to manage your rental business.
How about transferring the Liability?
The rental business is exposed to a lot of risks from delinquent tenants. You are always at the risk of getting sued by your tenant for some reason. If a mistake occurs in your management which causes some harm to the tenant, you will be held responsible. However, you have the option of transferring this liability if someone else is managing the business for you.
The option of transferring the liability of getting sued by the tenant is only available if you are renting through Property Management Company. If something wrong happens at your rental property, the management company will be held responsible. But if you are operating by hiring a rental manager, the risk of getting sued still lies at you. A rental manager is just a maiden person who is managing the rental property on your behalf.
But if you are someone who can`t afford to hire a Property Management Company, you can still manage the risk of getting sued. Think of getting incorporation on your rental business, you can manage this risk to a great extent. Having incorporated under LLC, your personal assets are still protected even if you lose the lawsuit.
The Bottom Line
No matter whether you rent through Property Management Company or employ a Rental Manager, you will stay at advantage. You will be saving a lot of your time and effort. So decide yourself according to your situations what will be more beneficial for you.