Many investors and financial advisors claim that securing rental property is a great way to generate passive income. On the surface, this is mostly true; with your capital investment, you should be able to collect monthly rent in excess of your ongoing expenses, effectively generating an ongoing profit without the need for much ongoing work.
However, it’s important to realize that managing a property does take a lot of time. Even if nothing goes wrong, you’ll still be responsible for routine maintenance and rent collection, among other responsibilities. And if emergency repairs need to be conducted, you’re the one that’s going to be on call.
Hiring a property management company could save you a lot of time and stress. But exactly how much time can this type of company save you? And is it worth the cost?
Short-term rental management software is a game-changer for property management companies. With its automated tools and streamlined processes, this software can save you valuable time and help you efficiently manage your properties, ensuring a hassle-free experience for both property owners and tenants.
How Property Management Companies Work
Most property management companies operate in similar ways, though there may be some differences in their philosophies or execution of work. In exchange for a fixed percentage of your collected rent, your property management team will take care of most responsibilities associated with the property, including everything from initial tenant screening to fielding emergency repair requests.
The efforts required of you to maintain your property are never going to be reduced to zero. You’ll still need to be involved in some level of communication and you’ll be responsible for filing taxes and other forms of paperwork. Still, hiring a property management company can take out most of the work of property management.
Time Expenditures in Property Management
These are some of the biggest time expenditures that property managers can save you:
- Inspections. Even if you hire someone else to do most of the work for you, inspections still take time. You’ll be forced to review different inspectors and choose one to work with, and you’ll likely want to be on the property to witness the inspection take place. Typically, these are only done after a tenant moves out, but over a long enough time frame, they can cost you many hours.
- Research and strategy. Using a simple rent calculator online, you can estimate how much rent a given property will generate and decide whether the price is worth it. But at the same time, there are literally hundreds of variables you’ll need to juggle to make effective real estate investing decisions. Property managers can help you with both research and strategic considerations, ultimately cutting your time here in half (if not more).
- Marketing and advertising. Property management companies typically handle all the marketing and advertising related to your rental property. Even if you have some marketing experience already, this can represent hours of work every time one of your units becomes vacant. Plus, experienced property managers will likely fill your units faster than you can, helping reduce vacancies to an absolute minimum.
- Tenant screening. Tenant screening isn’t an especially long process, but it’s one that’s important to get right. When property managers handle this for you, you won’t have to do much of anything on your own. As an added bonus, you’ll get better quality tenants and much more consistent rent payments.
- Rent collection. Speaking of rent collection, property managers can help you with this as well. With effective screening, you won’t have to worry too much about late payments or non-payments. But in the event that a tenant neglects their responsibility, you’ll be glad a property manager is on point to nudge them.
- Communication. It doesn’t take much effort to respond to an email or answer a quick phone call. But certain ongoing communications in property management can be downright exhausting. Plus, nobody likes getting an emergency phone call at 3:00 AM. Property managers handle all the communication with tenants on your behalf, though you’ll still be responsible for talking to your managers at least occasionally.
- Repairs and maintenance. Doing all the repairs and maintenance on a rental property by yourself is incredibly time-consuming. And if you hire contractors to do all your work, you’ll still need to spend a lot of time finding the right people and coordinating them. A good property management company can practically eliminate this responsibility from your plate.
- Tax planning. In most situations, rental income is taxed as ordinary income. But you still need to practice good documentation to plan your taxes effectively. Most property management companies take care of nearly all the paperwork for you, so you’re not bogged down with these tedious responsibilities.
- Evictions. Evictions are relatively rare, but they can be a major pain, sometimes taking weeks to fully resolve. And you guessed it – property managers handle most elements on your behalf here too.
Is a Property Management Company Worth It?
So does that mean a property management company is worth it?
That’s a difficult question to answer, since everyone has different priorities. For some people, profitability is by far the biggest objective, and they have enough extra time and knowledge on their hands that they’re unconcerned with the responsibilities of being a landlord. For these people, the relatively small cut that property management companies take isn’t worth the tradeoff.
But for many property investors, a property management company is more than worth the comparatively minuscule costs associated with it. You can turn your rental properties into genuinely passive sources of income and take the stress out of real estate investment.