When Does it Make Sense to Hire a Property Manager?
Perhaps you’re reading this, and you just aren’t sure whether it makes sense for you to outsource your property management to a professional. What factors should you be looking at in order to make this decision? As a starting point, you could do the following:
- Make a list of jobs that you hate to do.
- Make a list of jobs you can’t do.
- Make a list of jobs that you shouldn’t be doing.
If property management falls into one or more of these lists for you, there’s a good chance that you should be looking to outsource this job to someone else. For me, there were several reasons why I chose to work with a Property Management Company, so as a way of helping you process your own thoughts, I wanted to lay out my reasoning below. Of course, my rationale might not apply to your situation exactly (i.e. if you have different goals and objectives with your rental properties, you might not have the same perspective and motivations that I do), but at the very least, perhaps you’ll find some similarities and/or disagreements that you can contrast with your own situation.
1. I Hate Dealing With Problems and Complaints from Tenants.
I’ve always loved the idea of passive income from rental properties, but that doesn’t mean I want to deal with a constant stream of headaches and annoyances from the people who are renting from me. The beauty of allowing a property manager to handle this aspect of my business is that most of the time, I don’t even need to know who my tenants are! Why am I okay with this? Because I know that my property manager uses a time-tested tenant screening process that is proven to keep most of society’s riffraff OUT of my properties, while keeping the responsible, trustworthy renters IN them. My property manager handles all of the time-consuming aspects of finding the best tenants, and they automatically deposit the net rent proceeds into my bank account each month. On average, I spend an average of 2 minutes per month looking at the activity from each of my rental properties. Everything else (showings, screenings, site visits, evictions and much more) is handled by my property manager, while I’m out minding my own business, living my life and not worrying about it.
2. I Wanted to Focus on Growing My Business.
Take a look at any real estate mogul who has built up a vast investment empire of incomeproducing properties. How do you think they did it? Do you think Ken McElroy earned his financial freedom by personally responding to every tenant complaint that came up along the way? Do you think Robert Kiyosaki tends to every mundane detail out of his sheer need for perfection? Of course not! These power players reached their level of success because they knew what to spend their time on, and my goal is to look at my business the same way. If I want my business to grow, I need to spend my time looking for the right opportunities, not spinning my wheels managing them. If growing the business is part of my long-term strategy, it makes a lot more sense for me to leave the most time-consuming tasks for someone who knows how to do the job a lot better, faster, cheaper and more effectively than I ever could on my own
2. I Wanted to Focus on Growing My Business.
Being a business owner means you need to wear a lot of hats. Of all the things I’ve learned to do as a real estate investor, one of my biggest areas of incompetence is my complete inability to fix, build, renovate or repair almost anything in my rental properties. I can’t do it to save my life. I also don’t particularly enjoy accounting work and keeping track of petty little expenses and numbers (I can do it, but I still hate it). The problem is, I’m only human, and I can’t afford to be an expert at everything. It’s just not humanly possible! The ONLY way to scale a business is to start offloading some of these tasks to other people in a cost-effective way — and my property manager provided an excellent opportunity for me to do this. My property management company has access to every kind of expert in the business. For the truckload of things that I’d be terrible at on my own, they know how to do these things quickly and inexpensively because they do these jobs every single day. When you think about it, it’s not all that different from the other things we’re willing to pay for: Ever bring your car to a mechanic when it needs fixing? Ever go to a doctor when you’re sick? I work with these people without thinking twice about it because I don’t need to be the expert when somebody else already is. Is there a cost to working with these people? Of course! But I’m happy to pay it, because I know that in the end:
- They’ll save me tons of time.
- They’ll save me a lot money.
- They’ll do the job far better than I could ever do it myself.
- In the end, I’ll sleep much better at night.
Is it Smart to Hire a Property Management Company for Your Rentals?
If you’re serious about building a profitable portfolio of rental properties, you will inevitably be faced with a critical decision about your future. Are you going to manage these properties yourself, or will you hire a property manager to handle them for you? Make no mistake about it, this is a huge decision about how you’re going to spend your MOST valuable asset (a.k.a. your time). As with any big decision, there isn’t necessarily “one right answer” that applies to everyone. We all have different reasons for pursuing rental properties, so it’s important for you to understanding why you’re in this business in the first place. What is it you want out of your rental properties anyway? Whatever your verdict is, the path you choose for your property management will have a major effect on what your future looks like – so to the extent that you can, it’s important to get this right from the start. I’d like you to stop and think about which of these statements best describes you:
“I want to create a job for myself as the manager of my rental properties.”
“I want to retire early with a solid portfolio of passive income from my rental properties.”
Before you choose your fate, I should warn you: you cannot do both. Why? Because these paths work in direct opposition to each other — they lead to two entirely different places. If you want to be a property manager, you’ll never be free from a job. If you want to retire early and be truly free from the daily grind, you can’t be your own property manager.
Just speaking for myself, I started buying rental properties because I wanted the freedom that comes with passive income. I knew this would only be possible if I put someone else in the driver’s seat (someone with WAY more competence and experience at the job than I have). If I didn’t have access to a good, competent property manager, it would’ve been irresponsible for me to own rental properties because I knew I couldn't pull it off on my own.
That’s the honest truth. In my mind, paying 10% of my gross rental income to a skilled property manager was a bargain (and since I factored this into the cost of each rental property, their services were automatically paid for right out of the gate). Never buy any property unless you know you can deduct 10% of its gross revenue to pay your property manager and still show solid cash flow. A property management company is such a vital part of the equation — I would probably pay even more if I had to, because they’re worth it! They provide a service that allows you to live a life of freedom and that makes all the difference in the world.