If you hire a property management company, he pays a management fee to make most of the headaches of rental property go away.
When you own a short-term rental or vacation property, there is a lot of work associated with keeping profits. You need to find and market the people who want to rent the property. You also need to handle the basic mechanics of having short-term guests. That's what a real estate rental management company does.
Handling things like tenant turnover, background checks, and daily maintenance isn't easy, especially if you don't live nearby. If you can't visit easily, it's hard to tell if the guests left at the right time. Organizing check-in is also a challenge. This logistics can be difficult even when things are going well, and it could be too difficult to handle even if you live nearby.
In many cases, people who own short-term or vacation rentals outsource these tasks to a property management company. The company makes sure that everything runs smoothly.
Should you hire a property management company?
Before hiring a property management company, evaluate your situation. If you don't live near your property, you probably need someone nearby to manage it for you. What would happen if a guest had problems accessing their rental or did not leave at the time indicated in their contract? Would you get on a plane to unclog the toilet or help a tenant kill a bug in the kitchen?
Even if you live nearby, it's worth considering what you want to be responsible for. Do you want to keep a calendar of who rents your property on what days? Can you market the property or clean it between guests? Are you willing to receive late-night phone calls asking you to solve problems?
A property management company handles most, if not all, of the work associated with renting your property. You will pay a percentage of the rental price (there is no standard fee, but 10% is common) and in return the business will usually take care of the following things:
- Manage your rental calendar
- Ensuring that tenant turnover is timely
- Running background checks and tenant screening
- Cleaning between guests
- Solve access problems
- Maintaining the property
- Guest complaint resolution
- Make sure guests leave when they are supposed to
- Any other reasonable problem related to the rental of your property.
And that's just for residential property management. If you rent a commercial property, a manager could do even more.
Many property management companies also market your property and help you find tenants. That's more likely if you own a place in a tourist area where there is a high demand for rentals.
If you use a property management company, you no longer have to think about your investment property on a daily basis. You are now paying someone to manage the property for you. And since a property management company is typically paid only when someone rents, they have a great incentive to find tenants and keep their investment property reserved.
Many homeowners prefer a property management company if they want a passive investment. You will still have work to do, but it will be much less than if you managed the property yourself.
Know what you're getting into
Do your homework before choosing a property management company. Find out what the company does and how involved you should be. It is also important to check here know the rules. For example, some property management companies require you to rent the property for a certain percentage of the year. That may not work for you if you use the property yourself.
You can also ask for opinions from people you know. And it's never a bad idea to see what's on websites like Yelp. If a property management company has negative reviews, take a look at how it handled them. Did someone from the company respond and politely address the issue? Were they dismissive and rude?
Almost all property management companies occasionally deal with dissatisfied clients. A property may not meet expectations or the weather may ruin someone's beach trip. However, how a company handles complaints is very important. A property management services company that is unresponsive or rude in a public forum is probably even worse behind the scenes.
If your rental property is in a resort, there may be an in-house property management company. Using that internal entity may cost you a bit more, but the demand for your unit may be higher because the company markets the property as a whole.
Why a Rental Property Investor Needs a Property Management Company
If you rent an apartment above your garage or something close to your house, you may not need a property rental management company. In those cases, you may be able to handle your tenant's needs, and you may even meet people who want to rent the property.
Once you venture out to own several investment properties or buy one that is not close to where you live, you will almost certainly need outside management help. Even if it is close by, it is worth considering if you really want to manage your property. It takes a lot of work.
A rental property management company should be able to get quick service from providers like plumbers and electricians. In addition, property managers will have their own people who can handle basic maintenance or help someone access a property when the key is lost or the keyboard breaks.
Hiring a rental property management company is about peace of mind and being realistic. It doesn't take too many late night phone calls or irate tenants for someone to pick up the phone and find a property manager.
When you use a property management company, you are paying someone to do a job you don't want. Homeowners who like all the work that renting a property involves may want to be active owners. If you don't like that job, hire a property manager.
What does a property management company do? In short, they save you a lot of work and help you earn money, for a price.
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