Landlords, Should You Hire a Property Manager?Posted on November 11, 2011 by
A local real estate investor, who owns more than 20 single-family rental homes, came up to the ranch earlier today. We sat by the fire and discussed whether he should hire a property management company or continue managing his rentals himself.
He loves his rental properties. More precisely, he loves the mailbox money his rentals provide him and his family. Problem is, he’s in his fifties and is tired of managing the properties himself. He wants the freedom to come and go as he pleases.
For the record, this desire for freedom strikes many landlords as they enter their fifties and sixties. It also strikes folks who own rental property and get transferred to another state. What do they do – sell their rental, or keep it and let someone else manage it?
In the beginning, The Redhead and I managed all of our rental properties. As life got busier, we started relying more and more on our contractors. I still install each tenant, but when something breaks, I simply call a plumber, electrician or handyman to fix the problem. After getting their invoice, I go by the property to inspect the work and then mail the contractor a check.
Next year, I plan to spend a lot more time teaching folks how to successfully invest in real estate. This means Kim and I will be traveling a good bit, so we will need more help managing our rentals. We’ve decided to contract with Keith Casey’s company, Sunshine Property Preservation, Inc.
I’ll still be installing each tenant, but when something breaks at a property, the tenant will call Keith, not me. Keith will do or oversee the repair, then send me an invoice. In addition, when we buy a flipper property, Keith will oversee the rehab.
Working with Keith will give us the freedom to travel and teach, but we’ll still be able to maintain our rentals and flip properties.
What if I want total freedom from my rentals, but don’t want to sell them? Then I’d hire a property management company to do everything for me. Normally, the fee most property management companies charge is the first month’s rent, plus between 8% and 12% of the monthly rent.
There is another thing you can do if you want total freedom. Kim and I had a number of rentals that weren’t in our target area (a five-mile circle around the Cartersville, Georgia Wal-Mart). A few years back, we sold these properties – all with owner financing. When we sold the properties, we took back an Option on them.
An Option will allow us to buy back a property at a pre-agreed-to price at any time within a set period of time. By selling a property and taking back an Option that is secured to the property, we are able get the benefits of the property’s appreciation, as well as the buyer’s amortization.
Bottom line: If you are getting tired of the daily grind of being a landlord, you may want to consider one of these management methods to get some of the workload off your back.