Dad is FIRE

One dad's journey to Financial Independence Retiring Early

Rental Property Management Company: Pros and Cons

Should you hire a rental property management company to manage your rental house? No, in most cases you did not need to.

What does a Rental Property Management Company do?

  • Find Tenant
  • Screen Tenant
  • Collect rent and record keep
  • Handle late payments and tenant issues
  • Manage the maintenance and repairs

What does a Property Manager Cost?

The rule of thumb is that a Property Manager will charge 10% of monthly rent. Rental House Property Management Companies will also charge one month’s rent for finding a tenant.

These are the baseline costs. Your experience can be more or less depending on a number of factors like how many houses you have and if you take on any of the activities like finding the tenant.

Rental house property managers often have extra fees for other activities. Some of them will be nickel and diming fees, others will be things like you paying for their attorney for evictions.

A Property Manager will not save you money. They are an added expense.

You will still be responsible for paying for all of the other expenses like repairs, maintenance, rental licenses, utilities (unless tenant pays them), real estate taxes, insurance, and so forth. They can help with the book keeping and managing the process, but ultimately they are managing your money. You are paying for the same things you would pay for if you didn’t have a property manager, except you also need to pay for the property manager.

Reasons people think they need to hire a rental property management company

You may think you need to hire a property manager if you:

  • Are not handy
  • Do not want to deal with tenants
  • Think it takes a lot of time
  • Do not know how to find a tenant: Dad is Fire is here to help. Read how to find a tenant.
  • Do not know how to screen a tenant: We created a guide for how to screen a tenant.

Reasons you may actually want to hire a Rental Property Management Company

  • Your rental house is out of town. If your rental house is more than an hour away, then it will be difficult to manage it yourself. This is the perfect scenario to hire someone.
  • You own a lot of rental houses and have a full time job. In this case, consider hiring someone directly and not a third party. Either way though, if you have dozens of houses and work full time you probably need help.

Why you do not need to hire a rental property manager

In general you do not need to hire a property manager.

  • You’re paying for things that are easy.
  • Time spent auditing their spending. The Rental Property Manager is managing your money. Do you trust them to operate in your best interests? Even if you do will they make the same trade off decisions that you would? Sometimes when a faucet is broken it makes more sense to just update the entire vanity so the bathroom is more up to date. Do you want them to call you every time and discuss trade off decisions? If so, why’d you hire them. Owning a rental property is perpetual trade off analyses.
  • You want to charge a premium for rent You can charge a premium for rent by positioning yourself as a better landlord. Can the rental property management company do that? I think this is an opportunity, but they don’t. Currently their models are focused on bottom line and price wars with each other. They want to show you high ROI by controlling expenses.

Bottom-line

I never hired someone to manage my rental houses. But everyone has a different style. Landlording is not difficult if you expect and plan for the roller coasters. When something breaks it isn’t hard to call someone to fix it. When a house is vacant it isn’t difficult to find and screen a tenant. Lawyers are easy to call when you need an eviction. If you want to retire early save yourself the expense of a Rental Property Manager and instead use that money to pay down mortgages.

Leave a Reply

Your email address will not be published.