When you’re looking to start property investing, it’s vital to calculate all the additional costs. One calculation that often falls through the cracks is the cost of human resources. If you intend on flipping the property, you’ll need construction help. If you decide to hold on to the property and rent it, you might need a property manager.
Over the years, we’ve worked with many investors considering whether they need to hire a property manager. We can’t decide for you, but here’s what we tell the investors that work with us:
The Pros Of Hiring A Property Manager
Takes responsibility for maintaining & bookkeeping the property
A property manager is responsible for fixing any issues, keeping the property clean, and ensuring all renters live up to their lease agreement. It’s also the responsibility of your property manager to collect rent on time and follow the correct procedures for late rent or paying off any contractors. Depending on your agreement, paying property taxes and condo fees could also become their responsibility.
Helps to find new renters
A property manager could be an individual or an agency. If you go with an agency, they almost always take full responsibility for the property, including leasing out the property. This is a huge load off your plate, especially if you’re considering having a short-term rental, like a vacation rental.
You shouldn’t be receiving phone calls all day and night.
This is probably the biggest pro to hiring a property manager. You do not need to get up in the middle of the night to look at a leak or figure out what that weird smell is! When you rent out your property, you are often on call 24/7. Hiring someone else to take this responsibility allows you to go on vacation, to keep a second job, or to own more properties.
The cons of hiring a property manager
“The average cost of property management services for residential properties is between 8 and 12% of the property’s rental cost. While there are some companies that charge a flat rate for their baseline price, it is more common to charge a percentage based on rent prices.” (Buttonwood.ca)
Giving up your money is tough, but the income you lose could end up coming back to you. If the property manager is able to keep the property rented and well maintained, your property will increase in value, and you’ll make more profit in the long run.
You still pay for vacant properties.
You still have to pay the management fees if your property is not rented. There’s usually a different cost for vacant properties, but it’s money coming out of your pocket.
You pay upcharges.
The manager is finding your tenants, and the manager will charge an additional fee (usually) for evictions. So, technically, they make money off finding bad tenants. You’ll need to be clear about this line item when you sign a contract with them.
Cost is the only con, but it’s not that simple. Yes, you give up part of your income to the property manager, but you also give up some power over your finances. They decided which handyman or plumber to use. They decide how to manage disputes that could end up costing you a renter and who to evict, and how.
When hiring a property manager, you must read everything in your contract carefully. Just because there is a contract does not mean there isn’t room for negotiation. You should always know what profit you have available to spend on a property manager and then work with them; check references and understand precisely what they will do for you. If you need help figuring out your profit and whether a property manager could help you to expand into more investments, schedule a free consultation with us (below).