In my opinion of owning rental properties for over 10 years, a property manager is an indispensable part of your team! This is not the place to skimp in the name of a profit margin. There are other ways to be frugal.
My first rental property was in San Francisco. I lost money every month due to high taxes and homeowners’ association (HOA) fees. I paid $600 per month for the HOA and I *hated* the people who ran that HOA. They made my life miserable with rules and phone calls about said rules. They fought with my tenants. I think they were secretly demons. But that is a subject for a different post.
So with a $5,000 per year property tax bill, a $600 per month HOA fee, and a $1,800 per month mortgage, I was in the red enough and thought I could not afford another $100 per month for a property manager. But then the garbage disposal broke and I had to beg my poor obliging brother-in-law to fix it. Same story with the refrigerator. Then the hood fan.
That nightmare property was my learning experience. I have since not duplicated that mistake. Here are a few reasons why I will never go without a property manager again!
Proximity! I managed my San Francisco property while living in New York. Thus the abuse of my poor brother-in-law. If you do not live within a short drive of the property, you need someone who can handle emergencies. My father’s wife learned this the hard way while living in California and managing a condo in Indiana. She got a call one day that the garage was on fire. Who the heck deals with that if there is no property manager? You need someone reliable close by who you pay. Relying on the generosity of family and friends is not a permanent business strategy.
Expertise. I have no expertise in screening tenants, probably because I am a sucker. If someone tells me that they can pay the rent, I believe them. If someone gives me a sad story about needing a break, I will give it to them. This empathy makes me a good mom but a terrible property manager. Property managers don’t Eff around when it comes to qualifying your tenants. They don’t want to have to deal with late payments from jerks. I have never had a property manager choose a bad tenant. I, on the other hand, have chosen nightmare tenants myself. One unmarried couple with a dog that left piss stains all over my carpet come to mind. I am doing voodoo on them as I type this.
The tax deduction! The money you pay your property manager is a tax deduction! If you make $800 per month in rent but pay the property manager $80, you only pay taxes on $720. You know the name of the game is maximizing deductions. Use this one! It is a worthy expense.
I have pretty good relationships with my property managers. Most of them respond quickly to text messages if I have a question about a violation I receive from the city or some other one-off issue. All of them send me monthly statements with all expenses itemized. All of them are on my Christmas card list. I like these people and am exceedingly grateful for them. Hire a good one and you will be too!