There’s an upside to owning and managing properties. Okay, so you’re thinking about managing your rental property, but you’re not sure if you should handle everything yourself or hire someone to do it for you. Let’s break it down. According to a survey by the U.S. Department of Housing and Urban Development, almost half of the 49.5 million rentals in the U.S. are properties with one-to-four units. Most of these are owned by individuals, and only about 22 percent are professionally managed.
So, if you’re a landlord with a smaller property, chances are you’re the one taking care of things. But what does that really mean for you and your tenants? Let’s dive into the nitty-gritty of managing your property effectively.
Image source: Saigon Intela
What's Property Management?
Think of property management as the secret sauce for your success as a landlord. It’s about making sure you’re getting the most out of your rental and handling your investment like a pro. Now, it might sound like a never-ending job, but there are four big things you need to focus on:
Finding and Screening Tenants
This is like picking the right teammates for your rental squad. You want reliable tenants who’ll treat your place well. So, there are background checks, credit checks, employment verification - the whole shebang.
Keeping Tenants Happy
Once you’ve got good tenants, you want to keep them, preferably beyond even a yearly lease. Happy tenants mean steady income for you and years without having to worry about turning over the apartment. So, you need to build a good relationship, fix stuff when it breaks and maybe throw in a little incentive to keep them around.
Drawing up a Lease Agreement
This is like the rulebook for your rental game. The lease agreement is legally binding, so you want it to be solid. Some landlords get lawyers involved, others rely on experienced property managers to get it right.
Handling the Money Stuff
This is where you get into the financial side of owning and renting property. Budgeting, forecasting, and understanding taxes are all part of the deal.
Image source: Saigon Intela
Why Do People Try Property Management as a Side Hustle?
Renting out properties has always been a favorite way to make some extra cash without doing much. As long as your rent is competitive and you’re not spending more than you’re making, it’s a sweet deal. Plus, in a good market, you can even build up some equity.
But here’s the catch - managing a rental property is not exactly a walk in the park. It involves marketing, managing, dealing with repairs, and crunching numbers. That’s why a lot of new landlords end up hiring a property management firm.
Is Now a Good Time to Be a Landlord?
Well, that depends on where you’re at and what you’re striving to get out of the deal. The rental vacancy rates in the U.S. were at 6.6 percent in the third quarter of 2023, a bit higher than the previous year but still below the long-term average. The rent and interest rates vary across the country, so you’ll need to do some homework on your local market.
The Upsides of Property Management
Working with a property management firm can take a load off your shoulders. They handle things like rent collection, maintenance, and dealing with tricky tenants. It’s like having a rental superhero on your team.
Potential Downsides of Property Management
Of course, there’s no such thing as a free lunch. Property management firms charge a fee, usually between 8 and 12 percent of your monthly rent. So, if your place rents for $1,500 a month, you’re looking at shelling out around $150 to the management company. Also, some landlords like to be in the driver’s seat and make all the decisions, so giving up control can be a downside.
Image source: Saigon Intela
What About the Tenant’s Perspective?
If you’re looking to rent, you might be wondering if it matters whether your landlord is a person or a property manager. Well, it depends on what you’re into. Some folks like the perks that come with big managed communities, while others prefer the charm and personal attention you get from a home owned by an individual.
Should You Hire a Pro or DIY?
Ultimately, it’s your call. Take a look at your cash flow, monthly income, and expenses. Do you want a laid-back income stream, or are you itching to get your hands dirty in property management? If you’re eyeing a real estate empire, a property management firm might be in your future.
In the end, whether you’re the landlord or the tenant, it’s all about finding the sweet spot that works for you.
