Managing Your Rental Property
October 3, 2022
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How To Manage Your Rental Property
Have you recently acquired one or more rental properties?
If so, it’s time to start thinking about how you’ll manage your new investments and tenants. Your rental business is growing. You might even live miles away from the properties you’ve just bought or inherited.
Maybe you’re only interested in investing, and don’t care to participate in the day-to-day management of tenants and units.
Regardless of your situation, you need a reliable system—whether that be a person, company, or software application—to help you manage your rental properties. Without one, you’ll struggle to collect payments, manage leases, screen tenants, and track maintenance requests all at once.
So what are your options?
Traditionally, landlords have hired property managers to manage their properties. However, this isn’t your only option. You can also hire a property management company or manage your properties yourself, using property management software.
In this article, we cover the three basic ways to manage your rental properties, the pros and cons of each, and our recommendations for successful management.
Individual Resident Manager
Your first management option is to hire an individual property or resident manager.
A resident manager may be someone who lives in your units or an outsider offering their services and experience. They collect rent, screen tenants, turn over units, and perform or contract out maintenance tasks.
Here are the main benefits and drawbacks of hiring a resident manager.
The main reason to hire an individual resident manager is to have a person dedicated exclusively on your properties. They’ll know the ins and outs of your specific policies and can be responsive to your residents’ unique needs.
Another benefit is that resident managers often live close by, or on-site. Many landlords appreciate this in case of an emergency or other urgent situation, especially those who live far from their properties.
Resident managers aren’t ideal for every landlord.
As your resident manager’s employer, you are liable for whatever they do. Their mistakes and oversights can damage your reputation or finances. Plus, you’ll have to provide your resident manager with a salary and benefits, which can also strain your funds.
Lastly, since your resident manager isn’t part of a larger company or agency, they may not have access to the same resources. They also might lack the kind of specialized knowledge gained from working in a particular field (maintenance, law, etc.) for an extended period.
Here are some tips for hiring a resident manager:
- Interview before hiring. Since your resident manager isn’t part of a larger company or agency, it’s important to vet them properly. This means conducting interviews and seeking reviews or recommendations before hiring anyone.
- Supervise your resident manager’s work. Avoid surprises. Don’t wait for a bad situation to find out that your manager hasn’t been doing their job.
Property Management Company
Another rental management option is to negotiate a contract with a property management company.
That company is an independent contractor, so you aren’t anyone’s employer. Instead, you pay a monthly or annual fee for that company’s management services.
Most property management companies have both salaried staff and outside vendors. For example, they may have team members who screen tenants, review leases, and show apartments on-site, but they may also hire expert contractors for specialized tasks like repairs, cleaning, landscaping, or renovating.
The specific tasks of the property management company depend on the contract. You may prefer that the company performs certain tasks, but others you’d rather do yourself.
Here are the pros and cons of property management companies:
Property management companies are popular because they work reliably. This is because the company’s individual team members are experts at their specializations—marketing, law, accounting, etc. Rather than struggling to understand all these areas at once, you can contract out the work to a property management company, where you know it will be done right.
Property management companies also typically have insurance to cover potential liabilities. You can trust a thorough job while taking on less responsibility and saving time. Depending on the scope of your contract, you could have very few day-to-day responsibilities.
This option also makes sense if you manage lots of properties, especially if you don’t live near them.
The primary con of property management companies is their high cost. Apartments.com estimates most property management quotes to be between 8 to 12 percent of your monthly rent revenue.
Many companies charge additional fees for extra services, onboarding, tenant placement (when a new tenant signs a lease), evictions, or renewals. Of course, the property’s type, size and condition play a role in your total cost, too.
Another downside is that you are somewhat removed from your properties and tenants with this option. It’s fine if you don’t want to be involved with your tenants, but if you do, you may have hesitancies about using a property management company.
Here are some tips for using property management companies:
- Use a professional property management directory. Directories are available online on the national level as well as individual cities (Try the National Association of Residential Property Managers’ Directory). Look up your area and find out who is available.
- Negotiate carefully. Decide which tasks and property manager duties you want to contract out ahead of time.
Property Management Software
Your final and most cost-effective option is property management software.
Property management software solutions are cloud-based applications that help landlords streamline rental tasks.
Software for landlords includes features for online rent collection, lease/document signing, tenant screening, maintenance management, accounting, and tenant communication. Secondary features like renter’s insurance, tenant credit reporting, financial reporting, and listing syndication are also available.
You also have a range of platforms to choose from: Appfolio, Buildium, RentRedi, Innago, Tenantcloud, Rentec Direct, Yardi Breeze, and more.
Property management software is perhaps most attractive because of its relatively low cost compared to management companies. Capterra reports that most platforms quote an annual rate between $1000 and $5000.
However, pricing varies substantially between platforms. Some use unit-based pricing (the more units you add, the more you pay), while others use a tiered or featured-based model. With fewer units (10-50) you may only pay between $35 and $280 per month. However, if you have several hundred units or want more features, you could pay upwards of $500 per month.
Software for managing rental properties also lets you manage your rentals entirely on your own. You don’t have to pay (and trust) someone else to collect rent or screen tenants.
Property management software is also highly efficient. Its cloud-based approach means you never lose a document. With all your tools and tenant information centralized in one place, you can substantially cut down on the time spent managing your business. If you have another day job or responsibilities outside your landlord ones, software could make a huge difference in decreasing your time commitment to even a few hours a day.
Finally, property management software makes your tenants lives easier, too. They will no doubt appreciate the opportunity to pay rent, view leases, and submit maintenance tickets all on one site.
One disadvantage to software is that you’re managing your daily rental operations on your own, without other employees or contractors to help. You won’t have a management company’s bank of knowledge to tackle specialized tasks like tax or legal. However, using software doesn’t mean you can’t also hire additional staff to assist in these areas.
Another con is that while software fees are still cheaper than a property manager, they can get pricy for large landlords. It’s sometimes possible to negotiate the expense if you manage many units.
- Use all the features offered by your platform. If you’re paying for access to the software, get the most out of your investment by using all the available features.
- Choose a sensible pricing model. Large landlords with many units should look for feature-based pricing models, while those with only a few units may find inexpensive rates with a unit-based model.
- Use onboarding and support. Team members are waiting to answer your questions and help you solve technical issues. Don’t hesitate to reach out to them.
A new property is an exciting prospect for your landlord career. But without thoughtful management, your rental business will never reach the potential it could.
Your management solution should reflect the goals and priorities you’ve set for your rental business, as well as address the practical concerns of day-to-day operations. By investing in a management company, employee, or tool, you can conquer both your everyday rental chores and your long-term ambitions.