Why you might not want to hire a property manager
And why a leasing agency may make more sense
This article is mostly intended for local Indianapolis landlords who are contemplating hiring a property manager. Often times home owners become landlords unintentionally, and don’t really want to deal with it. Or, perhaps you have already hired a manager and are now questioning the ~10% fee that comes out of your pocket every month.
This article should give you a few ideas on ways to save money and make your life easier.
1. The single most important aspect of property management is tenant placement. Think about it. You are choosing the person who is going to move into a home that you own. You are trusting that this person won’t trash the place, will pay rent in a timely fashion and won’t be a headache. This aspect of property management is why most landlords initially hire a property manager. A property manager has a system in place to advertise, pre-screen the tenant, show the house (in person, not just hand out the key), get an application filled out, pull credit, check income sources, etc, etc, etc. That is why you hire a property manager… Right?
Well… what if I told you that you can hire that same leasing service that a lot of property managers in Indy are using. Lease 317.
Lease 317 handles all of this for a 1 time fee in the amount of 1 months rent. That way you can avoid paying 10% of monthly collected rents indefinitely. After the lease is signed what does a property managers job consist of? Well… Here you go:
Rent Collection + Maintenance… and if things don’t go so well, Evictions.
For an out of town or ultra busy landlord these items could be monumental tasks. But for a local person with some (not a lot…) of time on their hands the following thoughts and ideas are worth considering.
1. If you have properly screened your tenant and made sure that they have satisfactory credit history, rental history and income then you shouldn’t have to chase down rent. A good tenant pays on time or communicates when they are late. Period. Tenants that don’t pay can be avoided from the get go. Pulling credit is a very important step that a lot of independent landlords won’t do. You may think you can “read” people… but c’mon… Pull credit reports. You don’t have to pay a property manager 10% of your rent forever to get this done.
3. Once your initial lease is up many property managers will charge a “renewal” fee to sign a new lease. You can avoid this fee by simply using a tenant placement service like Lease 317 instead of a property manager. Often times a very qualified tenant will live in a home for 3 – 5 years with very little trouble. Sometimes with almost no maintenance problems at all. If this is the case do you really want to give up 10% of your collected rent every month? Plus a renewal fee!? That could all be your profit! Or.. get you to that critical break even point.
2. You can coordinate your own handy man and save yourself a 10 -20% markup on maintenance work. This is something to really consider. A good solid house shouldn’t have maintenance issues all the time, not even once a month. Maybe 3 – 5 issues per lease term. And a good percentage of those are things that you may be able to do yourself. Most property management companies will charge, for example, $75 – $100 to send over someone to light a pilot light or flip a breaker. If you can do these things your self, wouldn’t it be worth $100 per hour to make a trip to your rental? This applies even more so in a house that you have personally lived in… You know little quirks about the house that no property manager would ever know.
4. Communication has changed. Dont want a phone call about a leaky toilet? No one does. That is the number one reason why people are scared to be landlords. Just have your tenants text or email. It’s 2015! Everyone has the ability to text now. Another option is to line up a handy man or maintenance company to be on call. So your tenants call them, not you. You can set it up so that any repair under $200 (or any set amount) they will just take care of and send you bill, or to get approval first via email or text.
In conclusion, I will be the first to tell you, property managers are essential in many many situations. And this article is not meant to de-value the roll of a property manager. Rather, to educate and illustrate how the industry works. local and willing property owners should know and understand the options that are out there today.
It ultimately just depends on what you wants more important: saving time or money. If you want to hear the other side of the argument check out this article about why you should hire a property manager.