I think that’s a fair question.
This post is meant to help you solve the property management vs. self-management debate.
I’ve heard that from 50% to 80% of all rental properties in the United States are managed by the actual homeowner and not a professional manager. In fact, when we discuss our services I know people are thinking it, though they rarely asking it… “What am I paying you for?”
What really are the reasons for hiring a property manager and what do their services include? Why does property management seem like such a “nickel and dime” business?
I’ll do my best to tackle under what circumstances it makes sense to hire a professional manager and also help define their scope of services.
One of the biggest mistakes we see from self-managed homes is in the marketing of the home; specifically their discipline to find the right renter.
Typically, it takes multiple showings to find the right tenant for your rental and you have to be consistent in showing it to make sure the law of averages works in your favor.
You may get lucky and find the right tenant on showing one, but frequently it takes 7-10 showings.
Are you willing to drive to the property and show 10, 15, 20 times until you find the right tenant for your home? If you are, then you will save time and money on the backend.
Professional managers aren’t perfect, but they are consistently better than self-managed people about picking a tenant. I’ve seen many people make the poor decision of choosing a tenant with their heart and not their head.
Bad tenants are good storytellers. Can you see someone telling you a story and you believing it and letting them move into your home?
Much like #2 above, the separation between an owner of a home and their tenant can be a healthy thing. Situations involving your home and where a tenant lives frequently become emotionally charged.
You need a “buffer” for that can allow you to make a decision that doesn’t involve emotion.
Emotion clouds good judgment and a professional manager can help you maintain that clarity. Do you think you can remain level headed when dealing with a tenant who is not?
Whether you are ignorant to it or not, the Uniform Residential Landlord and Tenant Act of Alabama applies to you. If you own a house in one of our other cities, the appropriate state law applies to you.
If you aren’t in compliance with it and end up in court, judges don’t feel sorry for you because of your ignorance.
They give no passes and you will pay dearly for it. If you are not willing to read the whole law and know that you can consistently comply with it, you may need a professional manager.
Being a landlord means being knee deep in Murphy’s Law. Yes, I’ve had the a/c break on July 4th and the stove break on Thanksgiving.
The biggest reason tenants leave is a landlord’s unwillingness to get repairs handled quickly and that means on holidays as well.
Are you willing to answer the phone on Christmas day?
Keep in mind that professional managers are handling dozens of toilets breaking and dozens of broken light fixtures each month.
Because of the amount of business we are able to provide contractors, we frequently received discounted or preferred pricing.
Usually, that benefit passes along to you. Do you see the benefit of discounted pricing on work done to your home?
What do you do if the worst happens? Even great tenants lose their job or their car breaks down and they need to use the money typically allotted to pay you for other expenses.
Do you understand what it takes to collect that money and when it is time to evict a tenant?
Now that we’ve looked at the questions you should ask yourself when deciding whether to choose a professional manager or not, let’s take a look at what a manager does and outline their scope of services.
These typically fall into two categories . . . marketing and management.
When marketing the home, a professional manager should oversee and be responsible for the whole “leasing pipeline”. That means they should oversee the marketing, showing, applications, lease signing and move in of your tenant.
Your professional manager should provide you at a minimum the following to rent your home:
Your work is just beginning once your tenant moves in your home. A professional manager ought to provide the following services to you. . . A way for your tenant to submit a problem with the house that needs to be fixed, a solution for getting the work completed on the house after it is called in, and a consistent way to collect and account for the rent.
It’s the statement, “I feel like you are nickel and diming me.” Or, “That’s what I thought I was paying you for!”
I think there is a common misconception that leads to this misunderstanding with our Clients and I think it is appropriate to address it.
The misconception is “property managers are real estate agents and thus their services should include everything that has to do with my house.”
I think it is important to understand that we are in two distinctly different businesses and receive payment differently. A real estate agent who is selling your home is paid a huge commission when that home sells. There really isn’t a scope of services for someone selling your home other than, “Do everything you can to sell my home.”
That may mean showing up at the house multiple times, sweeping off the front porch, etc. For property managers, we get paid a leasing fee and a small fee every month to provide a limited scope of services – essentially trading time for money.
If we go outside of that scope of services (spend time) and don’t charge for it, then we lose money . . . which wouldn’t keep us in business very long. Therefore, we are happy to “go outside” the scope and spend the time, but we need to charge our Client for doing so.
When Clients ask us this question, it starts like this, “Can you just run by the house and . . . ” While this request often sounds like “management related activities”, property managers can’t afford to provide these a la carte items in their basic scope of services. These along with the numerous other services outlined earlier will keep the property management company from being profitable.
The sad thing is we want to be helpful and we want to provide you a good service. The reality of it is that we have to remain in business to be able to continue to provide you the basic services you and so many others desire.
When you are hiring a professional manager you need to keep two things in mind, TRUST and COMMUNICATION.
This is what you want when you hire a manager. We highly suggest talking to many and finding the one who you have confidence that you will trust them and they will communicate with you.
If they don’t, then move along.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.