If you’re itching to become a real estate investor, you have a lot of decisions to make.
First, there’s the matter of buying a property. You’ll have to find a mortgage, lock in low interest rates if you can, and determine the monthly mortgage payment you can afford based on your down payment and rent rate.
Then, you’ll need to gather the funds for repairing, renovating, and preparing your properties for advertising and showings.
With all this on your mind, you may have not even begun thinking about how you’ll manage your rental properties.
Fortunately, landlords rarely manage their properties alone. They either have the help of individual employees, a management company, or software to help.
So what are your options for property management? Below are the three most common property management solution options for your new rentals.
Hire a Resident Manager
Your first option is to hire a resident manager as your employee.
This person could be one of your more responsible tenants, or an outside professional looking for a job independently of a property management company. They would handle most day-to-day management tasks, including tenant screening, rent collection, maintenance tasks, showings, and other responsibilities.
Here are the pros and cons of hiring a resident manager:
Pros
- Provides individual attention to your properties
- Exclusively focused you and your tenants’ needs
- Often live on-site or nearby
- Easily available in case of emergencies
Cons
- Increased liability – as their employer, you are responsible for your resident manager’s actions
- Expensive (require a salary and benefits)
- May lack the resources or training offered by a larger company
- General, not specialized, knowledge in each area of property management
If you decide to hire a resident manager, be sure to conduct a thorough interview before choosing an employee. This will ensure that the manager is qualified for the position and has strong recommendations from prior employers.
Since you’re still liable for your manager’s actions, it’s a good idea to supervise their work throughout the leasing process.
Contract the Work to a Property Management Company
Another option is to negotiate a contract with a property management company. Property management companies are agencies with multiple team members who look after your properties.
You are not an employer because the property management company is your independent contractor. Instead of salaries, you pay a regular fee for their services.
Property management companies typically have both salaried workers and contracted vendors. For instance, the company may have in-house employees who handle tenant screening, rental contracts, and leasing, but they may also hire outside experts for specialized repairs, maintenance, or renovations.
Here are the pros and cons of hiring a property management company:
Pros
- Specialized/expert knowledge and access to resources
- Negotiable—you decide which tasks you want the company to manage
- Little to no liability because the company has their own insurance
- Free time for a day job or other responsibilities
Cons
- Expensive—can cost 8-12 percent of your monthly rent revenue
- Less individual involvement with your tenants
Property management companies are reliable and available across the states. However, be sure you’ve thought about which tasks you want to delegate before signing a contract. If there are certain tasks you can manage yourself, you shouldn’t pay extra for them.
Use Property Management Software
Property management software is the only cost-effective solution that allows you to manage your properties entirely on your own, if desired.
Property management software platforms offer a range of tools for rental management, including rent collection, lease signing, tenant communication, rental accounting, maintenance management, and more.
Thanks to its ability to automate many rental tasks, property management software makes it possible to manage your rentals without the assistance of an employee or management company. However, you can certainly hire these people if you operate many units or simply don’t want to do it yourself.
Pros
- Manage your properties on your own, or even remotely
- Cost-effective
- Minimal time commitment
- Cloud-based—your documents and data are safe and secure online
- Tenant interface for rent collection, maintenance tickets, and more
- AutoPay for rent payments
Cons
- No additional staff to help (unless you hire them)
- Expensive fees for landlords with large business (500+ units)
There are dozens of property management software platforms to choose from as well as features and pricing plans within them. If you choose this option, be sure to use all the features offered on your platform, or at least all the ones you pay for. Many platforms also offer free onboarding support, which can assist you during the data migration and setup processes.
Conclusion
Choosing a method for managing your properties is an important decision. The choices you make will not only influence your business, but also the lives of your tenants. By carefully evaluating each of these three management options, or coordinating between them, you can identify the perfect management fit for your rental business.
