When should you hire a property manager? As with any large decision, there are many factors that you should consider as you decide what is best for your situation.
Here is a list of 6 questions you should ask yourself to help you decide if hiring a property manager is right for you:
1. Do you know the laws related to being a Landlord? This may seem like a basic consideration, however it is important and often overlooked. The laws involved with being a Landlord or property owner are many and diverse and the consequences for violating them – intentional or not – can be severe. These laws also vary from City to City and State to State. Even if you do not hire a property manager you should – at the very least – have a real estate-minded attorney with whom you consult regularly. The MSU College of Law publishes an online guide titled “Tenants and Landlords – A Practical Guide” which can be found with a quick Google search. This is required reading for any Michigan Landlord!
2. Do you have a system in place for handling maintenance and after-hours calls from your tenants? Routine maintenance and after-hours calls are inevitable when you are a Landlord. If you are a handy person, routine maintenance may be easy and enjoyable for you. On the other hand, if you have not done any basic building maintenance, these tasks will be difficult for you and probably cost you a lot more to complete on your own than if you were to hire them out. If you plan to manage your own rental property, contact several local vendors including plumbing, HVAC and general maintenance and have them ready to go when you need them. Having backup vendors is equally important!
3. Do you live nearby your rental properties? You want to be able to check on your properties at regular intervals to make sure that the home is being properly cared for. Drive-by and interior inspections should be a part of your management routine. If you live very far from your properties, chances are you won’t be thrilled to drive by them on your day off. A local manager or agent can take on the responsibility of routine inspections and deliver a report to you.
4. Are you putting off responsibilities related to your rental portfolio? You need to honestly ask yourself if you can make the time sacrifices and tough decisions required to be a successful Landlord. Rent Collection, Late Payments, Regular Maintenance, Application Screening, Showing vacant units, and the list goes on. A high degree of consistency, diplomacy, organization and a strong team is required to be a successful Landlord. If you find yourself procrastinating any or all of these duties as a Landlord, it may be time to add a property manager to your real-estate team.
5. Are you capable of handling the financial reporting for your portfolio? Basic accounting knowledge is vital if you want to be able to understand how your rental business is performing. This is probably THE MOST OVERLOOKED ASPECT of do-it-yourself Landlords. Having accurate financial records throughout the year will save you money throughout the year and on your taxes – your tax preparer will spend less time wading through receipts and they will be able to spend more time focusing on the tax advantages specific to your situation. In addition, you will quickly be able to understand the financial health of your portfolio at a glance and know if you have a problem siphoning profits from your bottom line.
6. Do you have the time to make the most of your real estate investment? The difference between a ho-hum real estate experience and a great experience comes down to the time and experience of those who are performing the work. Leveraging the time of others with more experience will greatly increase your chances of achieving a highly successful rental real estate business. Make sure you do not burn yourself out!
When investing in real-estate, it is important to focus your time and energy on the tasks that bring you the best return and enjoyment. If these 6 questions make you shudder with anxiety then hiring a property manager is probably going to be a good thing for you. If you feel that you have a solid grasp on these topics and enough time to attend to them then you can probably self-manage without too much assistance.