Owning a rental property is one of those income streams that people expect to be easier than it is. They might think they’re buying into passive income, but that’s not the case.
Depending on the size of your property and the number of units you have, keeping up with a rental can be a full-time job.
Many landlords resist hiring a property manager to take over the responsibilities. They see it as an added expense they don’t need.
The reality could surprise you. There are many ways a property management company can save you money. In some cases, you could save so much that their services pay for themselves and then some.
What do property managers do and how does it translate to savings? Here’s what you need to know.
What Do Property Managers Do to Save You Money?
Part of the issue with owning rental properties is that there are far more expenses than you might expect. Here’s how a property manager can help.
1. Better Tenant Screening
One of the most costly problems you can have is a bad tenant. If they don’t pay their rent, you might never be able to collect that money. Even if you do collect it eventually, eviction proceedings and court costs are expensive.
In some cases, a single bad tenant can give your rental a bad reputation. They can drive away existing tenants and prospective new ones.
The key is screening rental applicants well before you offer a lease. That can be time-consuming for a landlord. Between credit checks, references, income verifications, and background checks, it’s a significant process.
A property manager has the time to invest in finding great tenants. They also have specialized expertise about red flags and indicators of a poor tenant.
2. Less Vacancy Time
Another expensive problem for a landlord is an empty unit. Mortgage payments don’t stop when you have a vacant unit, and neither do maintenance costs. Every day that an apartment is open will cost you money.
If you’re trying to manage the property yourself, it could extend that vacancy time several times over. It’s a struggle to find the time to handle all the repairs and cleaning. When you do, it takes even more time to advertise a rental unit, show it, and screen applicants.
If you have another job, you’re in for a long, busy vacancy period.
A property manager, on the other hand, has the time and the availability you don’t. They’re around to show the apartment during times and days when you’re busy with other matters.
In addition, a property manager can stay on top of repair contractors. That makes it more likely that the contractors will stick to their timeline and have the apartment ready to show as soon as possible.
3. Higher-Quality and More Cost-Effective Marketing
If you don’t have a property manager, you have two options for marketing a vacant unit.
You could do all the marketing yourself. This is time-consuming as you’re trying to learn the process while you do it. Chances are that the marketing also won’t be as successful because you are inexperienced.
The other option is to hire a marketing company. Because it’s a one-off job, they’ll probably charge you a hefty price.
A property manager, on the other hand, gives you a distinct advantage. Large property management companies may have their own in-house team of marketing professionals.
Even if they don’t, your property manager is likely to have a relationship with a local marketing company. Because they’re a reliable and long-term client, the marketing company is likely to give them a volume discount of sorts.
Either way, the result is more effective marketing at a lower cost.
4. Potential for Lower Maintenance Costs
Maintenance is another expense many landlords underestimate. It’s also one you can cut down on with the right property management company.
In general, expect rental maintenance costs to be around 1% of the property value per year. For instance, a million-dollar apartment building will cost about $10,000 each year to maintain under normal circumstances.
In some cases, property managers have their own maintenance team. When you have maintenance on-site at all times, it means they can tackle issues as soon as they arise. That helps you avoid high-priced emergency calls to plumbers and other professionals.
Property managers who don’t have in-house maintenance can still offer you some savings. There’s a good chance that they have a relationship with a maintenance company or with local repair contractors. Those relationships tend to come with volume discounts you can enjoy.
5. Freeing Up Your Time
Too many landlords use the rationale that if they do a job themselves, it costs them less money. In reality, your time is expensive.
Take a moment to think about all the other ways you could use your time to make money. It could be at another job or it could involve making other investments.
Chances are that you could make more with a few hours of free time than you’d pay a property manager for that same amount of time. When you recognize this, it actually costs you more money to do a job yourself than to hire someone else to do it.
6. More Knowledgeable Legal Staff
In the US, we have a culture that litigates to excess. As a landlord, it’s easy to make mistakes in your legal paperwork that leave you vulnerable to expensive litigation.
There’s where a property manager can help. Property management companies tend to have templates for leases, addendums, and other contracts that a specialized lawyer developed.
If your contracts benefit from a specialized lawyer’s expertise, they can include the language you need to protect you from lawsuits. If a tenant does bring a lawsuit, you also have a better chance at winning if they’ve signed those well-written contracts.
Weighing the Costs and Benefits of a Property Manager
On the surface, a property manager looks like one more expense for your business. When you dig a bit deeper, though, you realize all the ways they can save you even more money than they cost you. Add that the value of getting your free time back and it’s a clear decision.
If you’re ready to hire a property manager to help with your rental property or want to learn more about what do property managers do, contact our property management team.