1. Increased time for asset management:
Property and asset management are closely related, but separate jobs and when you have enough units under your control, they should be treated as such. Newer investors typically play both roles and may not know the difference, but asset management is the “investment” side of management. This includes working with lenders, financial forecasting and analysis, property valuation, and other related due diligence items during the purchase or sale of properties.
2. Tenant Screening:
Good property managers have robust systems in place that allow them to select the best tenants in your submarket and manage the existing tenant base. While this is possible to do on your own, they have streamlined systems and can leverage volume to negotiate better rates for companies that perform credit and background checks, as well as members on staff to verify employment and other prerequisites.
3. Shorter Vacancies due to Better Marketing:
Property managers also have systems in place to put your units in front of the largest number of prospective tenants, reducing the amount of time your units sit vacant. A good property management company in the right market may even pay for itself by increasing rental income due to this fact.
4. Economies of Scale:
A good and reputable property management company will have built up relationships over the years with suppliers, contractors, maintenance, and other professionals needed for the upkeep of your property. If you tried to piece these teams together on your own, each individual professional will likely charge you more than they would a company who is likely contracted and feeding them business regularly.
5. Rent Rate:
When I was managing properties for mid-sized owners earlier in my career, all too often you found that the rents were significantly undervalued. These kinds of owners may increase the rent every so often, but they aren’t keeping a proper pulse on the rental rates in their market, and are just kind of “winging it” and slapping an extra amount on when they remember they should do so. Good property managers keep your rates at just the right place where your units are competitive, but you aren’t leaving any money on the table.
6. Showings:
One of the brutal parts of self-managing your own portfolio is showing the units to prospective tenants when there is a vacancy. People can be flaky about apartment showings and it is often difficult to line up the scheduling to a convenient block.
While you can hire a real estate agent to help with this, they will need to be compensated, either by you or by the tenant. Neither of these scenarios is ideal. A property manager will handle this for you, depending on your market, as part of their contracted services.
7. Tenancy Laws and Regulations:
You could think your building is in pretty good shape, but be unaware that a seemingly minor issue is in violation of a tenancy law or regulation. Property managers are experts at keeping your buildings in compliance with these laws, keeping away any stress of potential legal trouble from something that was not even on your radar.
8. Long Distance Investing:
Discussed further in a separate article, there are great benefits to unfurling your wings and exploring other markets outside your local one. In order to invest from a distance, however, you need a property management company in place. I would suggest that first step you take when you identify a new market to invest in is to identify a highly recommended property manager. When you cannot physically access the property without a plane ride involved, you’re more reliant than ever on your property manager.
9. Rental Collection:
Once tenants are in place, the property management company will set strict rules in place to run a tight ship and collect rent in a timely manner every month. Unfortunately a lesson smaller mom and pop owners realize the hard way is there will be tenants that try to bully you if you do not provide a professional, structured, and strict system that everyone must follow. This is the bread and butter of property management and they can likely perform better than a self-manager 9 times out of 10. An added bonus that also saves time is the property management company will make sure the rent is deposited directly into your operating account.
10. Record keeping:
Property managers must keep systematized records of all expenses involved with the maintenance of your property. While you should be doing this when self-managing, it’s one of the first things that start to get out of hand when a self-managed portfolio grows too large.
Your property manager should already have experience doing so for all of their clients – and systems in place to make sure there are no unreported or forgotten line items. This comes in handy during tax season and takes a little bit of work off you or your bookkeeper’s back.
Not only that, but if you plan to sell the property someday, there will be no need to thumb through old filing cabinets when the buyer asks for verification of expenses during their due diligence period.
