Why Should I Use a Property Management Company

Hiring a property management company is a significant decision in the real estate investment market, but it makes sense on many levels. Letting a professional company handle your properties' day-to-day management frees up your time and makes owning real estate investing properties stress-free. It may even increase your profit margins.

Should I use a property management company? How will it benefit me? Is it worth the cost? Before you can decide if you want to use a property management company, it's helpful to understand what they do.

How Do Property Management Companies Work?

Quality local property management companies handle a wide range of duties related to managing investment properties, including:

• Marketing vacant rentals: Property managers strive to fill vacancies quickly to provide a steady stream of income. Since they're familiar with the local area, they'll know how to attract tenants to your property. They usually use online resources to reach a broad audience.
• Finding and screening tenants: Someone may be interested in renting your property, but they might not be able to afford the monthly rent. A property manager performs a wide range of background checks — including credit history, previous landlord references and employment verification — to ensure the tenant is in good financial standing.
• Handling leases and related paperwork: The rental property management company prepares and reviews the lease with tenants to establish clear guidelines for them to follow. Going over the lease agreement with tenants can help prevent future issues and evictions.
• Collecting security deposits: After a tenant has passed screening and accepted the lease agreement, the property manager will collect the security deposit. They'll hold this money in escrow so that the funds are not allocated somewhere else by accident.
  
• Collecting rent: Your property manager can help you determine how much monthly rent to charge based on comparable rates in the area. They'll collect rent from tenants and confirm that the check clears. Since most tenants have credit or debit cards now, they might even offer you an online portal so your tenants can pay you more quickly and efficiently.
• Handling the eviction process when necessary: Property managers take care of tenants who have fallen behind on their rent by following appropriate eviction steps.
  
• Providing monthly financial reports: Since property managers typically manage your funds, they'll provide you with information regarding your income and spending, including 1099s to help you file your taxes.
• Performing maintenance tasks: Residential property managers will handle all your tenants' maintenance needs, including eliminating pests and replacing appliances. They usually have an in-house maintenance team that repairs and cleans your rental units.

A property management company essentially handles every aspect of managing your rentals and your tenants, saving you time and energy. You get the full benefits of owning investment properties without the hassle.

How Much Do Property Managers Charge?

When you work with a rental property management company, they often charge you the following for their services:



• Setup fee: You sometimes have to pay a one-time onboarding fee to cover the cost of setting up your account and creating any material that introduces the new property manager to your current tenants.
• Management fees: The property manager will typically charge you a percentage of your monthly rent to manage your property on a day-to-day basis.
• Leasing fees: You may have to pay the equivalence of a month's rent or a percentage of it when you lease or re-lease a vacant property. This cost covers marketing to and screening of prospective tenants.
• Maintenance fees: While the property manager will take care of any repairs or maintenance needed, you will be responsible for the cost of the needed maintenance, repairs or cleaning services.

As you go over your contract with your property management company, it's best to consult them about what specific fees you can expect to pay.

Who Benefits From Using Property Management Companies?

Not sure a property management company is right for you? Hiring a management service is beneficial for a variety of investment property owners. Some people who benefit from the service include:

• Property owners who live far from their rentals
• Investors with multiple rental properties
• People who want the investment but don't know a lot about management
• Experienced investors who want more freedom, less stress and more time
• Owners who prefer a hands-off management approach
• Owners who don't want to hire and manage staff
• People with limited time or patience
• Investors who don't want to wade through the legal aspects of renting properties



In other words, almost any property owner benefits from using a property management service. New investment property owners get professional expertise to handle the workload and ensure the operation complies with all applicable rules and regulations.

Benefits of Working With a Rental Property Management Company

Experienced property owners appreciate the opportunity to expand operations or reap the financial benefits without extra work. Let's look at some of the specific advantages you get as a property owner.

1. Ensure Compliance

Managing a rental property comes with many legal concerns you may not have considered when you purchased your property. Filling a vacancy takes more than just choosing a person to live in your rental. State and local landlord-tenant laws regulate the things you can do, from selecting tenants to handling inspections or initiating the eviction process.

Fair Housing laws also come into play when filling your vacancies. Because the laws can vary depending on the situation, you should understand the rules and regulations applicable to your rental unit's location. Failing to follow those laws can mean fines and other consequences, such as testifying in court.

Instead of sorting through laws and legal terms, let a professional property management company handle it. An experienced company is knowledgeable about local law. Their job is to follow the law so your investment properties remain in compliance.

Changes in those laws can also cause a problem for owners. Do you have time to keep up with housing law changes? A professional property management company stays current on housing laws so they can adapt how they manage your properties to stay in compliance.

2. Reduce Vacancies

 Vacancies cost you money because you lose your steady income stream. It takes time to advertise your rental, post signs and screen tenants. Your time is valuable, so you lose even more by handling these tasks yourself. Hiring a property management company eliminates all that work on your end. A quality company uses marketing strategies to attract tenants to your properties so they can fill them quickly.

A property management company's screening and selection of tenants work to an owner's advantage. A property management company has the tools and experience to choose the rent-paying tenants for your property. With experience evaluating applications, they know what to look for.

They have access to background and credit checks, which allows them to eliminate poor candidates based on those qualifiers. Property management companies often fill vacancies much faster than you can on your own, which gets that income stream flowing again.

3. Eliminate Paperwork

The mountains of paperwork never seem to end when you own rental properties. From leases to monthly expense and income reports, paperwork takes up a lot of your time if you manage your real estate investments on your own. It's crucial to complete these forms accurately, correctly and promptly. Documentation must be neat and accessible should you need the paperwork.

If you can't stand the thought of sitting at a desk to complete the paperwork, consider hiring a company instead. Property management companies take over this responsibility. They create lease agreements and ensure they are completed and filed. They handle documentation on all aspects of your business so you have the records you need.

4. Access Resources

If you're new to owning investment properties, you may not realize how much goes into the operation. You need several skills, such as marketing expertise, legal knowledge, maintenance and repair abilities, conflict resolution skills and financial experience. Having expertise across the board is rare. You may feel comfortable in some areas but lack expertise in others.

In truth, no one person can be an expert in all these fields — that's why you need a team of experts behind you. When hiring a property management company, that's what you have — someone with skills in every aspect of property management.

A property management company staffs a wide range of experts in all areas of managing rentals. They have marketing professionals who know how to find tenants for your properties. They have dedicated maintenance and repair people or access to reliable, professional companies in those fields. They have accountants who handle the financial aspects of your business.

You could hire an accountant, lawyer, maintenance specialist and other experts in various fields. However, you'll likely pay a lot more for those individuals than you would after hiring a property management company. You get access to the connections of the property management company.

These companies are experts, so they often work with related service providers to handle every aspect of managing properties efficiently. Those connections can mean discounted rates on services, which makes the upkeep of your properties more affordable.

5. Offer Professional Tenant Services

Quality services keep your tenants happy. Happy tenants stay put longer, which reduces vacancies and ensures you a steady income stream from your rentals. If you have a full-time job, a family and other responsibilities, you aren't always available to field calls from tenants or rush over when a maintenance emergency happens. As a business relationship, it's sometimes more convenient not to personalize your dealings with tenants.

A quality property management company handles those tenant interactions and services on your behalf, saving you time and presenting a consistent, professional image. Round-the-clock answering services to accept calls about emergencies ensure your tenants have someone to help without waking you up in the middle of the night. Get peace of mind knowing they're taken care of without compromising your sleep, family time or other responsibilities.

Fast, professional maintenance is another primary component of the tenant experience. Whether it's an emergency, such as a burst pipe, or a minor inconvenience, tenant satisfaction significantly increases when you immediately address those issues.

If you can't drop everything to handle those concerns, consider hiring a company that can get there fast. A professional will complete repairs and maintenance correctly, which further enhances your reputation and saves you in the long run.

6. Enjoy Hands-Off Management

Some people prefer a hands-on approach, but others prefer to keep investment properties as income without the actual management aspect. Dealing with conflicts, delinquent tenants and day-to-day tasks takes a great deal of time and patience, and it can add stress to your life.

Hiring staff is an option, but you then add the commitment of managing other people, which comes with its own set of difficulties. The management aspect of owning rental properties is even more challenging if you don't have a background in managing people and operations.

A property management company lets you take a hands-off approach to handling your properties. You still have decision-making powers. You always get to decide what happens with your rental units. However, you eliminate the stress that can come with being in charge. Someone else can handle those issues that inevitably pop up throughout the day.

The hands-off approach is particularly beneficial when conflicts or difficult situations arise, such as tenants who are late on rent or break the lease terms. No one wants to handle a midnight call for a noise complaint.

The eviction process is another tricky situation you may not want to handle yourself. Property management companies have seen and heard things you could never imagine. That experience comes in handy when they must professionally deal with your tenant issues. You'll be glad to have the company in your corner should a problem arise.

7. Handle Long-Distance Management

Managing properties becomes more complicated when you don't live near your rentals. Whether you live on the other side of town or the other side of the country, that distance takes you away from your other responsibilities. You don't want to drop everything and travel to address an issue, collect rent or inspect the property.

The further away you live, the more difficult it is to manage the property. If you live in a completely different area from your rental, it's simply not feasible to travel to the location for those routine issues.

Using property management services lets you handle those long-distance properties without racking up the miles on your vehicle or taking up all your waking hours. Your tenants get a much faster response when someone local handles maintenance and emergencies, which keeps them happy.

Knowing you have a reliable option with the property management company can open up the chance to purchase new properties. Instead of limiting yourself to investment opportunities in your immediate vicinity, you can expand those search parameters to find additional property options farther away.

8. Manage Multiple Properties Easily

Owning more properties gives you increased income, but it also multiplies your workload. Keeping track of paperwork, responding to maintenance requests, tracking rent payments, handling complaints and keeping units full becomes much more difficult as you increase your investment property ownership.

That workload is even more difficult if your properties are in different geographical areas. You have more responsibilities and added driving time to slow you down.

Hiring a property management company lets you expand your investment portfolio without bogging you down with additional work. You get consistent management across all your properties, and you don't see an increase in your responsibilities since the company handles them for you.

All your tenants get the same excellent service without you feeling like you're shortchanging anyone. It's a cost-effective way to expand your business without the need to hire and manage staff or spend every waking moment handling the workload yourself.

9. Save Time

Unless you can devote yourself to property management full time, you likely need a little help getting things done for your investment properties. Every aspect of having a rental takes time. When you have investment properties as a side income, those tasks cut into your daily schedule.

Whether you have one property or one hundred, working with a property management company frees up time in your schedule for other tasks, work, family and recreational activities. In other words, you have a better work-life balance while still reaping the ownership benefits.

10. Save Money

How can you save money by spending money to hire a property management company? It sounds counterintuitive, but it's a wise financial investment for most rental owners. We've touched on many of the money-saving aspects, but let's dig a little deeper:

• A decrease in vacancies: Fill your rentals faster when you let someone else find and screen the tenants. Shorter downtime between tenants keeps your rental income flowing.
• Lower turnover: A quality management company keeps your tenants happy with exceptional services and responsiveness. Lower turnover saves you money in a few different ways. You maintain a consistent flow of cash coming in for the property, and you eliminate costs associated with finding new tenants, such as professional cleaning, repainting and making minor repairs.
• Maximized rent: Professionals know how to get top dollar for your rentals. Having professional management is a major perk for your tenants, and they will be willing to pay for it. At AHPM, we use in-depth comparative market analysis to ensure your rental is the right price to maximize your income.
• Controlled maintenance costs: When you handle your maintenance, you may end up in over your head, forcing you to hire a professional. Property management companies often have in-house maintenance or pricing agreements with local contractors to keep the cost of repairs under control.
• Rent management: Stop wasting your time collecting rent and tracking down past-due payments. Your property management company handles all the financial aspects for you, including collecting rent. These companies have experience collecting rent from tenants who pay late.
• Financial reporting: Get detailed financial reports on your rental properties to keep you in the loop without spending hours trying to do the finances yourself. An analysis of your investment helps you maximize the property.
  

11. Decrease Stress

Rental properties have the potential for high income, but they come with plenty of responsibilities. When you have to devote more time than you want to your rental units, you feel increased stress. Taking most of the responsibility off your plate significantly reduces your stress. You have a partner who takes care of the time-consuming management tasks and handles complications that arise. You'll enjoy rental property ownership much more when you eliminate the stress factor.

12. Increase Freedom

Managing properties yourself can severely limit your freedom. You need to be available for unexpected problems, making it difficult to do things like take extended vacations. Your personal residence needs to be within driving distance so you can handle issues that arise. The workload of managing day-to-day tasks might keep you so busy that you don't have the freedom to do the things you want.

A property management company eliminates those restrictions. You aren't limited to a particular geographical region for your personal residence. Buy properties in other states or move out of the local area if the urge strikes. When you have a property management company in place, you don't have to stick around. Less work on your plate frees you up to do what you want while still having the rental income to fund those activities.

Learning how to find a suitable property management company saves you time and money. When you choose an experienced, reputable company, you get peace of mind. Follow these tips when selecting a management company:

• Get referrals: Check with other local property owners to see who they use for property management. Firsthand recommendations are often the best way to start your search.
• Interview potential companies: Don't just choose a random property management company. Schedule a time to visit the company and ask any questions you have. This initial meeting lets you decide whether the company is suitable for your needs.
• Ask about policies: Question the company on things like the tenant screening process, rent collection procedure and maintenance policies. Verify how long the company has been in business. Asking questions helps you feel more comfortable with the company and better understand how the company works.
• Get a quote: Verify the fees the company of your choice will charge. Ask for a quote so you know what percentage of your monthly income will go to the company.
• Understand the services: The specific services a property manager provides may vary from one company to the next. Make sure you know what the company will specifically handle and what you need to do yourself.
• Talk to other owners: Assess quality by checking on references from other owners who use the service. It helps to pay attention to the things the other owners like about the company and their complaints. Are their complaints major issues or minor annoyances? If you do hear a questionable complaint, check with other owners to see if they have similar experiences with the company.
• Look for complaints: Determine the reliability of a company with a little research. The Better Business Bureau is a useful resource to check for those complaints. Be careful not to judge a company on only one complaint. While it could be valid, it could also be a case of a disgruntled client creating problems when there isn't one. If you see a consistent pattern, it could indicate that you should choose a different company.

Knowing how to choose a property management company that fits your needs is an essential step in efficiently running your investment properties.

If you own rentals in the Central Pennsylvania or Baltimore Metro area, contact AHPM about property management services. We'll give you a complimentary quote for our comprehensive services to get you on your way toward stress-free investment property ownership.