Should I Hire a Property Manager? Pros and Cons
As a landlord and real estate investor, you know how overwhelming it can be to manage rental properties from a distance. Between maintenance repairs, showings, screenings, and rent collection, it’s essential to have someone available to handle the day-to-day responsibilities and unexpected emergencies of owning a rental property.
At some point in their careers, many real estate investors ask: Should I hire a local property manager? Read on to learn the pros and cons of outsourced property management and how tools like Azibo help landlords and property managers strengthen their partnerships.
What does a property manager do?
As their name suggests, a property manager is a professional responsible for overseeing the day-to-day operations and maintenance of real estate properties on behalf of the property owner. Their primary goal is to ensure that the investment property is well-maintained, generates income, and retains or increases its value.
While each property manager's list of activities will depend on factors such as management company, property type, location, and local regulations, there are several typical responsibilities shared amongst them, including (but not limited to):
- Advertising vacant units to attract potential tenants.
- Screening and selecting tenants, which may include conducting background checks, credit checks, and reference checks.
- Drafting and enforcing lease agreements, including setting rental rates and collecting rent.
- Addressing tenant complaints, concerns, and maintenance requests.
- Regularly inspecting the property to identify maintenance and repair needs.
- Hiring and supervising maintenance personnel, contractors, and repair services.
- Managing and scheduling routine maintenance tasks like landscaping, cleaning, and HVAC servicing.
- Responding promptly to emergency maintenance issues.
- Setting and adjusting rental rates to maximize income and market competitiveness.
- Managing the property's budget, including handling expenses, tracking income, and providing financial reports to the property owner.
- Collecting and depositing rent payments.
- Handling security deposits and making deductions as necessary.
Property marketing and advertising
- Developing and executing marketing strategies to attract prospective tenants.
- Maintaining an online and offline presence for property listings.
- Conducting market research to stay competitive regarding rental rates and property features.
- Staying informed about landlord-tenant laws and regulations.
- Ensuring compliance with local, state, and federal housing laws.
- Handling eviction processes when necessary and in compliance with the law.
- Fostering positive relationships with tenants to encourage lease renewals and tenant retention.
- Addressing tenant inquiries, concerns, and disputes.
Property inspections and reports
- Conducting regular inspections of the property to ensure it is well-maintained.
- Preparing and delivering reports to property owners regarding property performance, income, and expenses.
- Implementing risk mitigation strategies, such as property insurance and security measures.
- Handling insurance claims in the event of property damage or liability issues.
- Maintaining detailed records of property-related transactions, including income and expenses.
Lease and lease renewal management
- Managing lease renewals and negotiating lease terms with existing tenants.
- Ensuring that all lease agreements are up-to-date and legally sound.
While some landlords self-manage their properties, hiring a property manager can help save you time and money by ensuring that properties are well-maintained, tenants are happy, rent payments arrive on time, and more.
Why consider hiring a property manager?
Hiring a property manager can offer several advantages for property owners, whether they own residential or commercial real estate. Let's take a look at some of the key benefits:
1. You save money in the long term
Yes, it's pretty well-known that property managers can charge upwards of 10% of your rental income, but they can save you money in the long run. As a result, many landlords who hesitate to hire property managers because of the fees aren't maximizing their cash flow over the years.
Hiring a property manager will help you protect your investment by staying on top of maintenance issues to avoid costly repairs - for example, a single instance of water damage that isn't quickly addressed can easily surpass the cost of a property manager. They also help you maintain positive cash flow by enforcing on-time rent payments and filling vacancies fast.
2. You optimize your time
For many people, investing in rental properties is an excellent source of income — but it's often not their full-time profession. That means in addition to their day job, many landlords are responsible for communicating with tenants, collecting rent, fulfilling maintenance requests, preparing for showings, and more.
Hiring a local property manager means you no longer have to spend hours handling the day-to-day responsibilities of owning rental properties. Instead, you can focus on other areas of your business or life.
3. You can reduce tenant turnover
Successful property managers are responsive and available, addressing questions and concerns as they arise — and, in turn, giving tenants the best experience possible. By creating an excellent experience for tenants, local property managers can help landlords reduce tenant turnover and avoid vacancies.
The disadvantages of hiring a property manager
While hiring a property manager offers numerous benefits, there are also some potential disadvantages and challenges that property owners should consider:
1. Management fees
One of the primary disadvantages of most property management companies hiring a property manager is the cost associated with their services. Property managers typically charge fees based on a percentage of the property's rental income or a flat fee. These fees can vary but can add up over time and significantly reduce the property owner's overall rental income. Property owners need to weigh the benefits of professional management against these ongoing expenses to determine if they align with their financial goals.
2. Reduced control
When you hire a property manager, you relinquish a degree of control over your property's day-to-day operations. Property managers make decisions on behalf of the property owner, ranging from tenant selection to property maintenance and repairs. This reduced control may not always align with the owner's preferences or priorities. Property owners who are accustomed to hands-on management or have specific ideas about how their property should be run may find this loss of control frustrating.
3. Communication issues
Effective communication is vital in property management but can sometimes be challenging. Property owners may experience difficulties in maintaining open and timely communication with their property managers. Misunderstandings or delays in addressing issues or making decisions can arise, potentially leading to tenant dissatisfaction or property-related problems. Property owners should establish clear communication expectations with their managers to mitigate these issues.
4. Potential conflicts of interest
Property managers may have financial interests that could conflict with those of the property owner or rental business. For example, a property manager may recommend maintenance services or contractors with whom they have a financial relationship, potentially leading to higher costs for the property owner. Property owners should carefully review contracts and agreements to ensure transparency and prevent conflicts of interest that could impact their profitability.
These disadvantages should be weighed against the advantages of hiring a property manager to determine the right choice for a particular property owner's circumstances and preferences. Careful selection of a trustworthy and competent property manager, as well as clear communication of property manager responsibilities and expectations, can help mitigate some of these challenges.
How do platforms like Azibo help landlords with property managers?
Azibo is a one-stop shop for landlords' financial services needs. Our integrated platform provides free tools for landlords and their property managers, including free online rent collection, fully-featured financial management, real estate accounting & tax prep, Schedule E classification, bill pay, insurance, and more.
Landlords and property managers use Azibo to collaborate and manage rental property finances better. For example, Azibo's CEO lives in Nevada but works with a local property manager for his rental properties in Ohio.
Here are eight ways landlords who use property managers can benefit from Azibo’s platform:
- Azibo is free for landlords and property managers. If you’re worried about how hiring a property manager will impact your profit margins, you can eliminate the cost of expensive property management software by switching to Azibo. And yes, Azibo is free — instead of charging recurring fees like traditional banks and property management software companies, we make money in other ways to provide our core service at no cost. If you’re curious, you can learn more about our business model here.
- You can sign up for Azibo using your LLC or other alias rather than your personal details. This is ideal for landlords who want to keep their identity private when communicating with tenants or paying vendors.
- Azibo offers shared visibility into property management. A strong relationship between property managers and landlords guarantees smooth management processes and satisfied tenants. Azibo allows you to create portfolios of properties to share with property managers to get complete visibility into your entire portfolio in one place, while property managers only see the properties they manage. You can share different portfolios with different property managers while you, as the landlord, have access to all portfolios and properties.
- Azibo provides real-time rent payment status so landlords always know who has paid and who hasn’t. By linking all of a landlord's bank accounts and providing the ability to tag transactions by property and expense type, Azibo allows landlords to manage all their portfolio finances in one place.
- Pay bills and return security deposits online with Azibo. Quickly pay vendors, partners, property managers, and tenants for free. Our high transaction limits are designed with landlords in mind.
- Azibo offers one-time invoices. If you need to bill your tenant for a one-time fee or payment, you can request money quickly and efficiently with a one-time invoice. This addresses fees or payments outside of monthly rent collection, including late fees, pet deposits, etc.
- Streamlined bulk tenant onboarding helps property managers and landlords set new tenants up to pay rent more efficiently. We offer free onboarding where you'll get a dedicated support representative to guide you and your tenants through the setup process so you can quickly start collecting rent online with Azibo. To sign up, schedule a call with Azibo today.
- Azibo simplifies tax preparation and expense management. Come tax season, many rental property owners painstakingly pore over spreadsheets and bank statements to make the most of their deductions. With Azibo, landlords can easily tag transactions by property for up to 24 months of expenses or even tag expenses in non-Azibo-linked accounts. You can also use Azibo to tag expenses by property and Schedule E category to itemize deductions when you need to file quickly.
Should you hire a property manager? Final words
Whether to hire a property manager is a significant choice for landlords and real estate investors. While property managers can offer valuable expertise and time savings for real estate investment, they come with management fees and a potential loss of control.
Platforms like Azibo provide tools to streamline rental property finances, making it easier for landlords and property managers to collaborate effectively.
Ultimately, hiring a property manager should align with your specific needs and goals as a property owner. Weigh the advantages and disadvantages carefully to make an informed choice that maximizes your rental property investments.