Can a Property Manager Control the Hidden Costs in Real Estate?
A key decision that must be made as a real estate investor is whether to hire a professional property manager, or take on the job yourself.
Hiring a property manager is an added expense, which could have a direct impact on your real estate's overall return. In an effort to circumvent the management cost, some real estate investors choose to take care of their properties on their own.
In some cases, that plan is successful. But I have seen far more property owners do it poorly to the detriment of their investment. Property management takes a unique set of skills, and an experienced property manager can help you avoid other, hidden costs in real estate that outweigh the personnel costs.
Repairs are an inevitable real estate expense. In commercial real estate, the tenant might sign on for this liability. In most cases, however, the owner or lessor has the responsibility.
It is important to find a trusted source for evaluating the type of repair needed and to execute it in a cost effective way.
Some landlords attempt to do this themselves. If that is your skill set, great. But most property owners need help. A property manager can take care of repair evaluations and the hiring of qualified crews to do the work.
A handyman might be an acceptable alternative to hiring a full-fledged property manager. Just make sure the handyman has knowledge across many different areas so that he can be the real estate owner's paid advocate and single point of contact.
Also consider the volume of work required. If your handyman has enough work to involve multiple contractors, that economy of scale can yield bigger savings. It also can provide leverage in the timing of work. Make sure your handyman has plenty of volume to create these benefits.
If you do not own enough properties to maximize a handyman's services, partner with other owners or find someone that already has a sizeable client base.
At times, property will be vacant. Someone must allocate spending money on both finding a new tenant and getting a property ready for occupancy.
Each day the property remains vacant is a cost, but putting the wrong tenant into the property can be an even bigger cost. This mostly happens when a tenant fails to pay rent and new, unexpected costs arise as you initiate eviction proceedings. Or, unexpected costs emerge because you need to repair damage to the property caused by an irresponsible tenant. In each case, a property manager can help find a reliable, long-term tenant that mitigates such costs.
In virtually every situation, hiring a good property manager pays for itself. They have already sorted through multiple handyman and contractor services and established trusted partnerships. And, they have systems in place to avoid renting to problem tenants.
In the end, the hidden costs that a professional property manager can help offset will allow your property investment to reach the planned investment returns.