Can Hiring a Property Manager Save You Money on Your Rental?
Whether it comes to rental licenses, leases with loopholes, or costly repairs, having a property manager on your side can prove well worth the investment.
Whether you're renting out your basement or considering setting up an Airbnb, you might be reluctant to hire a property manager. To avoid fees between 8-15% of monthly earnings, many homeowners initially prefer free tools such Cozy to self-manage their rental properties. However, investing in a professional can prevent unforeseen expenses later. Whether it's rental license, leases with loopholes, or costly repairs, having a property manager on your side might prove well worth the investment. Here are five reasons why investing in a project manager (PM) could save you major money.
Avoid legal hang-ups
Rhianna Campbell has spent the past 17 years providing real estate services across the nation. Now, she coaches landlords and real estate entrepreneurs through her company, Proper Planning. She says that while homeowners-turned-landlords know a lot about their property and neighborhood, they can easily be stumped by legal matters. And that is where it's easier to hire a professional than to train yourself.
"Hiring an expert is usually the best decision to make in so many areas of life, especially areas that have legal obligations," she explains. "Being a landlord requires you to know the local and federal laws, so having someone who is well-versed and knows how to manage most landlording situations is an invaluable resource."
Hiring a property manager who can draw up leases and obtain rental licenses is much cheaper than hiring a lawyer to fix flubs along the way.
Choose property management carefully
Mark de Sagun, the real estate investor behind Househack Los Angeles, takes a cautious approach. "Not all property managers are created equal," he warns. Out-of-town investors and frequent travelers should do their due diligence to find the right one. "In the case of investing in a different location than where you live, having a property manager that you can trust and that knows the area well is a must. Your property manager is such an important part of your team. They will be your eyes and ears on the ground to look after your property and they take care of any issues when they arise."
Issues can range from small repairs to major concerns such as weather-related incidents, tenant disputes, and in-person rent collection. These needs can require travel time and hassle by the landlord, but are already covered in most property management contracts.
Ditch contractor drama
Property managers can save landlords a lot of money when dealing with contractors. "When managing multiple maintenance and improvement projects, property managers have the upper hand," Campbell says. "Contractors often offer discounts or reduced pricing to managers because of the amount of work that they pass along. These reduced rates are passed on to their customers—landlords."
If you're new to renting out your place, the first year can be an especially good time to let someone else take the lead. Tenants use properties in ways you might not have considered, and that could cause costly contractor calls that you don't want to manage alone.
Vet your tenant
"Having a good or bad property manager can make or break your investment, just as much as a good or bad tenant," says de Sagun. Experian Screening Services and My Smart Move by Transunion offer tenant screening through the major credit bureaus. Many landlords use services like the National Tenant Network and App Folio to find the right renter.
Unless you're a seasoned pro, most new landlords benefit from the expertise of a property manager who knows their rental market and who can explain the difference between a "good" and "bad" tenant. On paper, it can be hard to tell. From city to city, income levels, credit scores, and work history can vary significantly. To avoid waiting months to find the perfect tenant, a property manager with a long history of tenant screening in your area can help place the right renter much faster than you could on your own.
Research short-term rentals laws
Many aspiring real estate investors think they'll buy a condo or single-family home to share with a short-term renter. And why not? Sites such as VRBO and Airbnb seem to offer a blissful compromise between owning and enjoying your own space and monetizing the time when you're traveling. But short-term rentals can be fraught with headaches.
Did you know that in New Orleans, short-term rentals are taxed like hotels? In 2019, the New Orleans City Council even banned some short-term rentals altogether. Campbell says this is more common than landlords might think.
"Laws are constantly changing regarding short-term rentals," she explains. "Many homeowner and condo associations are changing their rules in order to better manage and reduce short-term rentals in their communities. Having a manager with a finger on the pulse of local laws will help to ensure that landlords stay in compliance." A property manager can help avoid many fees and taxes—including those that could come from an honest mistake.