If you need to move but don’t want to sell your home, you have other options. The rental market has been heating up, and rents have been keeping up with (if not outpacing) inflation, rising almost 3% annually around the country. Renting your home instead of selling it may be a great way to make extra money and avoid selling at a loss. My wife and I recently became landlords, and we decided to hire a property manager to help us handle the process of renting our home.
What is a property manager?
A property manager can be a single person or a firm consisting of several people who manage rental homes for homeowners and act ask their representative with the new tenants. Property managers handle every aspect of renting out your home. They are responsible for finding new tenants, screening them, collecting rent, evicting non-paying tenants, hiring maintenance crews when things break, and a host of other tasks that you may not want to handle. They act as the middleman between the homeowner and the new tenants.
How to find the best property manager
Like most service industries, you do not want to simply pick a property manager out of the phone book. This company and their employees will be managing one of your biggest — if not the single largest — assets. Don’t trust your home and its value to just anyone. One of the best ways to find a great property manager is to ask for referrals from people you trust.
Do you have a friend or coworker who just rented their house? Who did they use? Even if they had a bad experience with a potential property manager, you want that information so you’ll know who to stay away from. Your realtor is another good person to ask for a reference, but be careful — they may try to steer you to their firm, which might handles rentals.
Once you find three different property managers, you will want to interview the property manager and ask a lot of questions before you hire them.
What fees do they charge?
Property management firms typically take 10% of the rent as their fee for managing your property and interacting with the tenant on your behalf. So, for example, if you rent your home to someone for $1,300 per month, then the property manager will receive $130 and then send you the remaining $1,170 balance every month (assuming no other expenses were incurred).
This is the standard rate in most states, but fees might vary a bit depending on where you live. Property managers may also charge homeowners one-time fees for advertising the property on the MLS network and other websites, and some may charge a fee each time that they you a new tenant.
Why you would want a property manager
Some people who either have the time or are handy with tools may want to forego the expense of hiring a property manager. Others may not want to deal with pesky tenants, or they may even live outside of the area. Just because you are moving to a new state doesn’t mean you want to sell your home. Hiring a local property manager to keep an eye on things can be a great help.
While the decisions for how your property is handled and maintained still rest with you as the homeowner, a property manager helps take care of the day-to-day operations and interactions with your tenants leaving you to draw a passive income. There are also tax benefits that help defray the cost of property management, as such expenditures can be deducted from your income taxes.
Why you may not want one
Hiring a property manager may be an expensive convenience. Your margins may be so tight that their fees could be the difference between earning a profit and suffering from negative cash flow each month. Some homeowners may also be uncomfortable with the lack of control that comes from hiring a property manager to screen tenants, collect rent, and schedule maintenance.
What about you? Do you own rental property? If so, do you use a property manager to help you with it?