Purchasing a rental property can be a lucrative investment, but managing it on your own can be time-consuming and stressful. This is why many hosts and property owners outsource some of the tasks to a property management company instead of going the self-management route. From taking care of the general building upkeep to dealing with specific maintenance requests to collecting rental payments, property managers can assist in various ways.
However, just like you might have read horror stories about guests, not all property management firms live up to your expectations. To help you find the best property management company the first time around, here’s a closer look at the services they typically offer, the different fees involved, and key factors to consider when choosing a property management company.
A property management company is usually hired by a property owner to take care of the daily tasks involved in renting out their property. From apartments to tiny homes to three-bedroom houses, they can oversee various property types. They’re also equipped to take care of multiple rental properties at the same time, making them a popular choice among those looking to acquire more real estate investments.
To give you a better idea of what property management work usually entails, here are examples of the typical duties that property managers could be responsible for:
Property managers’ specialized set of skills can help real estate investors to unlock the full earnings potential of their rentals. In addition to helping them generate more money, working with property management companies also offer the following advantages:
One of the most significant and obvious advantages is that a good property rental management company can save hosts many hours and several headaches. Property managers can take care of all the aspects involved in running a successful vacation rental business to free up time that hosts can rather dedicate to other revenue-generating activities like looking for new real estate investments. Alternatively, they can use the extra hours to focus on a side hustle or simply spend it with their family.
Also, in the event that there should arise a problem, the property manager will deal with the guest directly. An unhappy guest can quickly escalate into a stressful situation which can be difficult to address if you don’t have to do it regularly.
From trends to new regulations, the best property management companies make sure that they stay up to speed with changes that can impact your real estate assets. This in-depth knowledge can, for example, be applied to increase your rental income as they can assist in setting competitive nightly fees to ensure a good occupancy rate.
Not only can they use their expertise to help you make more money, but they can also prevent costly fines or legal expenses. Property management companies are familiar with local laws and regulations and can ensure that your rental properties are in compliance.
On top of their experience and knowledge, a good property management company will also have connections with key third-party service providers like cleaning companies and plumbers. If they’re not able to save you money on essential services and perhaps products, they’ll know which vendor partners offer a reliable service/product.
There are a number of factors that can impact how much you have to pay for property management fees. These include:
When assessing the costs, you should also keep in mind that different property management companies might use a different pricing model. For example, some companies will charge a commission instead of a flat fee.
If a company uses the commission model, you’ll be charged a percentage of your monthly rent. Getting charged a percentage can work in your favor when your property is located in an area that has a short peak season. As for the average percentage that you can expect to pay, this can vary anything from 8% to double that.
Not only can the pricing structure vary, but there can also be extra fees in addition to the primary management fee. Depending on your contract, here are some of the extra fees that you might be charged:
You must also be on the lookout for possible hidden fees like an early termination fee or a late payment fee. Some property management companies might charge a fee if you decide to end your contract with them earlier.
As fees vary, it’s important for rental property owners to understand all the fees charged by the property management company before hiring them. You have every right to ask for a complete breakdown of all the fees to ensure that there are no hidden costs. If a property management company is reluctant to show this kind of transparency, expand your search to other property management companies until you find one that’s happy to share their pricing upfront.
Cost is an important factor. After all, there’s no sense in hiring a company if this extra expense means that your business won’t be profitable.
That being said, in addition to fees, there are a couple other factors to keep in mind. These include:
Rental property owners should consider the experience of the property management company. They should look for a company with a proven track record of successfully managing rental properties in their location.
Not only should they be familiar with the location and its regulations as well as occupancy and pricing trends, but they should also look for a company that has experience in managing short-term rentals specifically. Vacation rental management is a whole different ball game than, for example, student housing or looking after commercial real estate.
Years of experience suddenly matter less when a property management firm doesn’t have the reputation to back it up. To find out more about a company’s reputation, you can turn to online reviews and testimonials from previous hosts.
A common mistake is to assume that a company will take care of all the aspects. It’s a good idea to make a list of all the tasks that you need them to be responsible for beforehand and use this as a checklist. For example, if you stay on site, services like the restocking of supplies or property inspections might not be a deal-breaker.
The way that they deal with you is a good indication of how they will interact with your guests. Considering that guest experience is critical, look for a property management company that has a positive style of communication and is responsive. If they fail to reply to your messages in a timely manner, the chances are good that your guests will have to wait too.
Managing properties on your own is entirely possible, especially if you have the time and interpersonal skills. In some instances, though, paying for property management services will be the best move forward.
If you find yourself in the following situation, a good property manager will be able to add real value to your business:
Sure, smart home technology like keyless entry and noise-monitoring devices have made it much easier to manage vacation rental properties remotely. However, this type of technology can never replace the need to have a professional in your network who can visit the property in person in case of an emergency.
The more properties you have in your real estate portfolio, the more difficult it becomes to manage. The self-management approach is still feasible with one property, but if it’s your long-term goal to have several properties, finding a reliable property manager should be one of your immediate priorities.
Many hosts rent out properties on the side. However, it’s not entirely a source of passive income. As mentioned, there are various time-sensitive tasks involved and if it’s not your primary job, the guest experience might suffer without the extra help of a property management firm.
If you aren’t entirely sold on welcoming property managers to your team, an alternative is to invest in vacation rental software instead. It offers a range of features that will automate many of your daily tasks that will also help to free up time.
A tool like iGMS, for example, can be used to:
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