Do you need a property management firm?
You bought your investment property and got in touch with some property management firms. They gave you a quote for their services. Did those numbers make you baulk? Did you look at what they were doing for you (and charging) and think, hey I could do this myself for less? To the outsider, property management might look like some phone jockeying and turning up to inspect the property once every few months, but chances are there are some more questions you need to ask yourself before deciding to manage your own investment property.
1. Do you know what’s involved?
Your property management team may have given you a list of their services that looks pretty straightforward, but chances are there’s a lot that isn’t explicitly outlined on the page. ‘Managing communications’ is just two words, but sometimes it’s two words that means a phone call at 2 am on a Saturday. Do you want to be on the other end of that phone call?
2. How easy is it for you to get to your property?
Do you live near your property? This isn’t asking if you’re willing to drive down there once every few months for an inspection: could you get there tonight after work if you needed to? What would happen if you were away on holiday and something popped up? Many property management teams do a monthly drive-by of the properties they manage, just to make sure that everything looks okay. Could you commit to the same? If yes, then great! If not, it might be worth looking at how much time a property management team could save you.
3. Do you have the patience to deal with tenants?
Even if you live near enough to your property to make it manageable, do you have the mental bandwidth to deal with property maintenance and client management? Yup, that’s right, client management: your tenants are your clients, and much like clients anywhere, you can’t always pick them based on who you like. What happens if your tenants are needy, or worse yet, aggressive? Do you want them to have a direct line of communication to you? A property management team can provide a buffer between your tenants and you, which might be particularly helpful if you live in the same town as your clients. Who wants to be bothered about dripping taps while you’re at the supermarket?
4. How familiar are you with property maintenance and repairs?
Your tenant calls you up on a Friday night and says the hot water service has stopped working and they want it fixing now. You ask if they’ll wait until Monday, they say no and hire their own plumber and installer to fix it, and hand you the invoice. Is that right? Do you know? Do you have the time to find out, and how helpful is the answer to you once you find it? Property management teams deal with these issues day in and day out, so they’re more familiar with a landlord’s obligations than you need to be.
5. What about accounting and admin?
A property management team’s work doesn’t stop when they get you a tenant, but even if it did, there’s a long road to leasing! Inspections, background checks, communicating with potential tenants, advertising… it’s a lot. Not to mention the fortnight-to-fortnight management of rent payments and receipts, and following up on any missing payments. If a tenant wants to break their lease, do you want to have to manage the process? Administration and record keeping is one of those jobs that it’s easy to push to one side, but it becomes a massive headache to untangle quickly if the need arises. A property management team has the internal systems and client management software in place to automate record keeping for your property. If you only have one property to manage, these programs would be overkill, but for firms managing multiple properties, their internal record keeping will be all but automated.
6. Do you want to be sued?
You might own the property, but tenants have plenty of rights, and if you don’t have the time to follow up or do your research, you might find yourself being sued. Any money (and probably more) that you might have saved on a property management firm may well go into the pockets of your legal team instead. If you’re not entirely sure of your obligations at law, it might be worth putting that burden on your property management team instead (after all, that’s what you pay them for!).
7. Could you be doing something else… something better?
Chances are you don’t have all of these skills, and even if you could learn them, is that the best use of your time? If you’re only working four days a week, you might figure you have some extra time to deal with anything that might pop up, but would you rather spend that time doing something else? Don’t underestimate the price of enjoying your time-off guilt-free, without having a niggling voice at the back of your head that you should check your emails or keep your phone on.
They may say that you don’t get rich writing cheques, but sometimes there are better ways to spend your time than managing your investments. If you have a lot of properties, it might well be worth managing them all and making it part of your day job, but if you’re just starting out, you don’t need to do it all. Look at it this way, would you do your own taxes? You probably could, but why not ask someone who does it full-time to give it their time and experience instead? Property management is much the same. Remember that you’re not only paying for their expertise, you’re also paying to get yourself some