When investing in a residential property for the purpose of renting it out, an important question to ask yourself is whether you want to hire a professional residential property management company or whether you want to manage the rental property on your own.
Both options have their pros and cons. And although by the end of this blog one option will seem to outweigh the other, the decision you will make relies heavily on your personal preference as a real estate investor and a landlord and the amount of time and energy that you would like to devote to your investment property.
Do you want to lie back and enjoy the passive income that your rental property will generate for you, or do you enjoy getting involved and personal and feeling the satisfaction of watching the fruits of your labor ripen as your investment grows and takes shape in accordance with your personality?
So, let’s get into it.
First of all, let’s list all the advantages associated with hiring a residential property management company:
1. Saving time and effort
The first and foremost advantage of hiring a professional residential property management company is saving time and effort.
A management company will handle all the “dirty” work associated with your real estate property investment. This includes the possibly unpleasant tasks of finding high-quality tenants, going through their applications, conducting interviews with them, and acquiring their credit reports.
Additionally, your tenants will be expecting you to provide a number of services in addition to the rental property that they’re staying in in exchange for the monthly rent that they’re paying. You will need to be available at any time of the day in case the sink gets jammed or the lock breaks. As the owner of the rental property, you’re the one who will be responsible for troubleshooting whenever anything goes wrong with the property. This can be very time and energy consuming, especially if you have another full-time job besides your real estate investing business.
A management company will cover all of those tasks – ad many more – for you. These real estate professionals will have the necessary connections to get you great deals on home maintenance and other services that you need in order to manage your investment property. This is the main reason why people normally go for a residential property management company as their first choice.
2. Knowledge of the real estate law
One of the greatest advantages of hiring a residential property management company is the fact that a professional real estate company will always be up to date on all the different laws and regulations related to real estate and investing of the residential area of your income property. This means that whenever any changes are made that could affect your property or investment, the company will be aware of those changes and will give you heads up, or even undergo the necessary changes to avoid any future legal issues that you may be facing as a real estate investor, a property owner, and a landlord.
3. Finding the best tenants
As mentioned before, a professional residential property management company will save you all the time and effort associated with finding tenants for your income property.
But not only that! A residential property management company will even make sure that the tenants renting your property are the best tenants for your property. A high quality real estate company will have its own screening process to avoid renting out your investment property to irresponsible tenants who might cause beyond reasonable damages to your rental property, and will make sure that you have a steady positive cash flow on your property in accordance with your expectations.
4. Win-win situation
You have to always keep in mind that a residential property management company will be paid a portion of the monthly rent on your investment property. This means that it is in its interest that your property is always occupied and that it is doing well. It is also in its interest for your property to be making more money.
With this picture in mind, a quality residential property management company will always have your interest as its priority because your interests are entwined.
What about the disadvantages of hiring a residential property management company?
The obvious answer is very simple: you’re trying to maximize your profits, and residential property management means extra expenses and thus less profit margin. The average company will require the first month’s rent of your rental property as its first payment, followed by 8-10% of each month’s rent after that.
But taking into consideration the advantages mentioned above, it is clear that the difference in profit margin after hiring a professional property management company is not money that goes to waste. On the contrary; the money spent on a quality residential property management company will ensure that your investment grows and succeeds.
So what are the advantages of managing your own property?
For fun and knowledge, and sometimes it is just more convenient. Some people like to take charge of their own investments. They like to be in control. Some even find joy in getting a phone call at 2 A.M. and having to drive 20 miles just to fix a broken sink! This creates a personal relationship between you as a real estate investor and your source of income, a.k.a., tenants.
Sometimes, this personal relationship will drive your investment to a greater success than any residential property management company could ever do.
The advantages of managing your own investment property also depend on the type of property, its location, and the relative distance between you and that property.
For example, if you are trying to rent out a room in your condo or multi family home, then you do not usually need to hire a residential property management company to do the work for you. Your proximity to your property alone would give you an advantage over the company in that you’re always present in the property’s vicinity.
The bottom line is…
Hiring a residential property management company is, in most cases, the better choice for your investment property. The advantages provided by its services far outweigh the disadvantages. But nothing applies to everyone, and this isn’t any different. In the end, it’s a matter of personal preference in addition to the financial status of the real estate investor.
Whatever choice you end up with, make sure to check out our website at Mashvisor, where you can find all the real estate investing tools and advice that you need in order to find the perfect rental property in accordance with your preferences and needs. We offer market data and analysis that will save you months worth of research.