Managing a multifamily rental property requires a significant investment of resources. Screening and dealing with tenants, especially problematic ones, can quickly fill up a property manager’s schedule, while paying for maintenance and repairs can cut deeply into profits.
For these and other reasons, real estate investors often look to outsource management of their multifamily rental properties. Although some investors scoff at outsourcing, believing it to be unwise or simply a waste of money, having your property managed by another party can result in a number of benefits. Keep reading to learn more about why outsourcing might be the best option for you.
As mentioned, managing a property is an extremely involved process. Along with screening and managing tenants, the responsibilities of a property manager include collecting rent, conducting inspections, coordinating building updates, and advertising and marketing units. These tasks take up such a large portion of the day that many real estate investors find property management is a full-time job all on its own.
As an investor, you likely do not have room in your schedule for another 40-hour-a-week position. Outsourcing your property management will thus give you the opportunity to focus your attention elsewhere.
Hiring a company to manage your property does require a financial expenditure, of course. One real estate expert advises that you should plan to pay one-tenth of your gross monthly revenue to a property manager.
While you may feel uncomfortable giving away so much of your earnings, experienced investors note that the cost is well worth it. What’s more, over time, hiring a property management company will eventually save you money.
Consider, for instance, that, with your busy schedule, you may fall behind on completing repairs or making necessary building updates. In doing so, you run the serious risk of major problems developing on your property. A responsible property management company will consistently address all repairs and updates in a timely manner, ensuring that financially costly problems never even have a chance to materialize.
Protects You Legally
Owning a rental property involves navigating a number of legal considerations. A good property management company will have intimate familiarity with all applicable landlord-tenant laws, meaning you will be less likely to run into legal trouble in the first place.
In the event you do find yourself involved in a lawsuit, your property manager will have the knowledge to provide legal advice and, if necessary, refer you to a trusted attorney. Remember that the cost of dealing with a lawsuit is high, both in terms of time and money. It is therefore important to have the right people on your side.
Gives You Access to Experts
A company to which you outsource makes its money by providing property management. These services are not rendered part-time, nor are they something a company is trying to squeeze in between other responsibilities. Put simply, property management is what property management companies do best—they’re experts at it.
Despite your best efforts, you simply will never develop the level of expertise of a property management company. For instance, even if you are a master handyman, it’s highly unlikely you’re also a skilled real estate attorney. Going further, your skills almost certainly do not extend to showing, marketing, and advertising units; managing tenant relationships; performing inspections; and collecting rent.
In the same way a mechanic has the expertise required to fix your vehicle, property management companies have the expertise required to oversee your real estate. Most of us do not try to fix our vehicles ourselves, of course, and ultimately, the same logic applies when considering whether to outsource the management of your property.
Makes You a More Successful Investor
As experts, property management companies have detailed familiarity with local real estate markets. They understand, for example, exactly how much to charge for units, what issues a building in a particular neighborhood might have, the amount of revenue you can expect, and whether you paid a fair price for your investment. They may also know what renovations or upgrades might protect your property and save you money over the long term.
Having access to this information allows you to build your knowledge of a local market. In this way, property management companies provide you with services that you would normally need to hire a consultant to receive. The best part? You do not need to pay anything beyond your property manager’s usual management fee.
Armed with the knowledge gleaned from your property manager, you can more intelligently pursue additional investment opportunities in your market. What’s more, with the extra time and money you now have, you may decide to expand your investment holdings by purchasing rental properties elsewhere in the world.
Whatever path you choose, by allowing a property management company to oversee your investment, you can focus your attention on more important tasks, such as building an investment portfolio that will bring you a steady stream of income for the rest of your life.