There are many property management companies in the marketplace today. All companies have their own charges and fees that you must incur to contract their services. The truth is that the only management companies that you should hire with are the companies that are FREE.
I know everyone believes there is nothing that is “free” and this is true in general but not from every perspective. When I refer to Free property management, I am talking about a company that provides added value to the properties that it handles. A value that would be unlikely to be reached by the owner managing the property themselves. Let’s examine the value of good real estate management. Value can be expressed in many terms such as equity, lower turnover, higher rents, lower maintenance costs and most importantly, time. Time is the most important asset that exists. Simply put if you had all the money or goods in the world but you had no time to enjoy them, you don’t have much.
Many property owners have full time jobs, family obligations, and little time to manage the property they own to maximum efficiency. Some of these owners work long hours in an attempt to “save” money by not hiring a property manager. After we examine this practice we will see that in most cases the property owner is actually losing money, and more importantly losing time.
The old saying “Time is money” will be a cornerstone of our analysis. Let’s say the property owner in our example is an employee at XYZ Corp and is paid $20 an hour. A general price for property management is somewhere around 10% of collected rent. So we will pretend this owner owns a two family rental property and each unit rents for $700. That means the fee for professional management of this property will be in the area of $140 a month (10% of 700= $70 per unit, times 2 = $140). That equals 7 hours of income for the owner. So if managing this property takes more time than 7 hours a month, or the management of the property interferes with the work of the owner than the owner would actually be better off with a professional property manager.
The time analysis shows that there is not a lot of money to be saved by managing the property yourself, especially if you could use your time towards work you are paid for. However, the time analysis does not show the complete benefits of property management. If managing property was easy and predictable there would be no property management companies. We all know that real estate repairs can pop up seemingly out of nowhere and late tenants can turn into evictions at any time. The main cost occurs during these times, when you need to evict tenants, repair the property, advertise and attract new tenants, and lease the unit to get rental income again. These are the times when property owners with other obligations really lose time and money. You see if a property owner is unable to manage the issues efficiently and loses just one month of rental income, they would have lost enough money to pay for close to a full year of professional property management in many cases!
Good property management will allow you more time to create income or spend time with family and friends. More time is a good enough reason to hire a property manager but that is not the end of the benefits. In addition efficient management will be able to pass savings on to the owner for routine repairs and maintenance through network contractors and vendors. They will be able to make smooth transitions from vacancies to new qualified tenants and maximize Cashflow. So I will conclude by urging property owners with other obligations to strongly consider professional management, because sometimes the cost of trying to save money is just too high.