Is It Worth Having a Property Manager on One Property?
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Should You Hire A Property Manager For One Property?
Investors love real estate investing because of its potential for significant returns and diverse income streams. Through it, they can profit from property appreciation, rental income, and various tax benefits.
Appreciation occurs as property values increase over time, often outpacing inflation, thus building equity for the investor. Meanwhile, rental income provides a steady cash flow, which can be particularly advantageous in covering mortgage payments and other expenses. [1]
On top of these, real estate investors can also benefit from tax deductions on mortgage interest, property depreciation, and operational costs. With strategic planning and management, real estate investments can help build long-term wealth and financial security.
Overall, real estate can improve the risk-and-return profile of an investor’s portfolio, providing competitive risk-adjusted returns. Compared to equities and bonds, the real estate market is one of low volatility, making it an attractive way to diversify one’s portfolio. [1]
With that said, real estate investing typically comes with one big challenge, and that is property management. Property management itself is a collection of challenges that investors need to overcome in order to maximize their property’s profitability. For many property owners who have no experience being a landlord, managing a property on their own can be incredibly difficult.
The question now arises: Is it worth it to hire a property manager for just one property? Here we will explore its pros and cons.
The Role of a Property Manager
In real estate investing, a property manager is a professional responsible for overseeing and managing the daily operations of an investment property. Their duties include a wide range of tasks such as marketing rental properties, screening potential tenants, handling lease agreements, collecting rent, and addressing tenant complaints and maintenance issues.
Property management refers to the daily oversight of residential, commercial, or industrial real estate by a third-party contractor. They essentially take on the role of landlord, handling the day-to-day operations of the investment property. [2]
A property management company ensures that the property is well-maintained and operates smoothly. This includes coordinating repairs and regular maintenance, managing budgets, and ensuring compliance with local laws and regulations.
By taking on these responsibilities, property managers free up the property owner’s time, allowing them to focus on other tasks like acquiring more properties, diversifying their portfolio, or handling their family obligations. The property manager preserves the property’s value while it generates income. [2]
In addition to these operational tasks, property managers also play a crucial role in financial management and reporting. They prepare detailed financial reports for property owners, including income statements, expense reports, and occupancy rates. This helps paint a clear picture of the investment property’s financial performance.
Benefits of Hiring a Property Manager
A property manager’s expertise and professional management help maintain the property’s value over time, making them an integral part of the real estate investment process. Here are some of the benefits of hiring a property manager even if you only have one property:
Time Savings
Hiring a property manager is particularly beneficial for those with demanding schedules or multiple commitments. By handling tasks like tenant screening, rent collection, maintenance requests, and property inspections, property management companies can save investors a lot of time. [2]
These professionals have the expertise to address issues promptly and efficiently, keeping tenants satisfied while making sure the property is well-maintained. Investors can use this extra time to focus on other personal or professional activities, allowing them to maximize their productivity or simply save their energy for other priorities.
Expertise and Experience
Speaking of expertise, property managers are professionals that are well-versed in market trends. This allows them to optimize your property’s performance by handling its day-to-day operations.
A lot of property management companies hire managers that are licensed real estate agents with years of experience. This means they are aware of the ins and outs of the real estate market. It is likely that they are already familiar with how to run a property based on how long they have been in the business. [3]
Not only can they give you solid advice on setting competitive rental prices and maximizing income, they can also handle other tasks expertly. They can conduct thorough tenant screening to reduce the risk of late payments. They also have comprehensive knowledge about legal requirements and landlord-tenant laws. This helps property owners avoid potential legal issues by ensuring compliance with local regulations.
Tenant Screening
Another significant advantage of hiring a property manager is their expertise in conducting thorough tenant screening processes. A good property manager will have a good system in place to vet potential tenants, including background checks, credit checks, and reference verification. [2]
This meticulous screening reduces the risk of renting to problematic tenants who might cause property damage, engage in disruptive behavior, or fail to pay rent on time.
By selecting reliable and responsible tenants, property managers help ensure a stable and consistent rental income. They also have the knowledge and experience in terms of handling tenant issues and legal matters, further protecting the owner’s investment.
Maintenance and Repairs
A property management company can efficiently handle maintenance issues through their established network of trusted contractors and vendors. This network allows them to promptly address maintenance concerns, ensuring repairs are conducted swiftly and at competitive rates. [2]
For individual property owners, navigating the process of finding reliable service providers can be time-consuming. It may even result in higher costs due to a lack of established relationships.
By leveraging the existing network of property management companies, investors can preserve the value of their investment property. Proper maintenance also helps keep tenants satisfied, improving their experience and motivating them to stay for longer.
Drawbacks of Hiring a Property Manager
Just like every other investment strategy, hiring a property manager comes with its own set of downsides and drawbacks that investors need to consider.
For starters, cost is a significant factor. Property managers typically charge a percentage of the rental income. While fees may vary, it often ranges from 8% to 12% of the monthly rent. This expense can eat into your profits. However, if you are only running one property, then this may not be a big enough problem. [3]
That said, investors also need to be prepared for additional fees for services beyond the basic management, such as leasing fees or maintenance markups, which can further impact your bottom line.
If you are working with a property manager, you need to be prepared for potential conflicts with the way they manage your property. You need to make sure your goals are in alignment with the way they operate since you will mostly be relinquishing control over your property. [3]
Property managers make decisions on your behalf, which may not always align with your priorities or preferences. For instance, they might prioritize filling vacancies quickly over holding out for higher-quality tenants. It is important to address communication problems so that misunderstandings are less likely to occur.
While property managers offer valuable expertise and convenience, it’s crucial to weigh these benefits against the potential drawbacks of cost, control, and alignment with your investment goals.
Is It Worth It?
The decision to hire a property manager for one property depends on your personal preferences and circumstances:
- Do you have the time and expertise to manage the property yourself?
- Are you comfortable dealing with tenants and handling maintenance issues?
- Can you afford the cost of property management services?
- Do you value the peace of mind and reduced stress that comes with professional management?
If you find that managing the property yourself is overwhelming or if you live far from the rental property, hiring a property manager can be a worthwhile investment. However, if you have the time, skills, and desire to manage the property yourself, you might prefer to save on the management fees and handle it independently. [3]
The Best Real Estate Investment for Accredited Investors: Multifamily Syndication
While property management is an expense, the pros outweigh the cons for most people. For accredited investors, there are certain investment opportunities that are only available to them that solve some of the most common issues real estate investors face—including property management.
For example, multifamily syndication is a passive investment in real estate that is typically exclusive to accredited investors. This is because accredited investors have the investing knowledge and experience to assess investments that are not available to the general public. They also have the net worth and income to act as a safety net in case an investment does not work out.
The US Securities and Exchange Commission (SEC) allows accredited investors to invest in unregistered securities such as real estate syndication deals because they can properly assess these investments.
Real estate syndication is an investment strategy that involves multiple investors pooling their financial resources together to buy a single real estate property. This is arranged by a syndicator, also known as a sponsor, who creates and executes the business plan from start to finish. As the general partner (GP), they take on most of the responsibilities in the syndication deal. They are in charge of locating the investment property, performing due diligence, securing the loan, and finding investors who will participate in the syndication deal. [4]
Investors take on the role of limited partners (LPs), meaning they have limited responsibilities and liabilities in the syndication deal. They only have to provide a portion of the capital needed to acquire the property. They also pay certain fees to support the syndication deal, but beyond that, they no longer have to get involved in the investment property. Even property management will be handled by the syndicator. [4]
A syndication deal can be done with any type of real estate. However, multifamily syndication is the most popular among investors. This is because multifamily properties are larger and have multiple tenants that contribute to a strong and consistent monthly cash flow.
In exchange for their investment, LPs gain a percentage of the cash flow, which may be distributed on a monthly or quarterly basis. They may even get a share of the equity upon resale, depending on the deal structure. Every deal is different, so investors need to conduct their due diligence and learn all about the profit split before getting into a syndication deal.
Multifamily syndication is an appealing option for accredited investors because it solves some of the biggest problems investors face when investing in real estate.
A syndication deal makes larger real estate properties like apartment communities a lot more accessible since you do not have to purchase the entire property by yourself. This approach is also a lot safer compared to buying a multifamily property as a lone investor. [4]
If you are an accredited investor looking to add real estate to your investment portfolio, you should consider real estate syndication, specifically multifamily syndication. With this investment strategy, you can just sit back, relax, and enjoy the fruits of your investment.
Work With BAM Capital for the Best Multifamily Real Estate Syndication Deals
Just like choosing a property manager you trust, it is also essential to work with a trustworthy syndicator with a track record for reliability and excellence. Work with BAM Capital.
BAM Capital is an Indianapolis-based syndicator that focuses on high quality multifamily real estate properties that have in-place cash flow and proven upside potential. They prioritize properties that are Class A, A-, and B++. They then use their award-winning investment strategy to mitigate investor risk while creating forced appreciation. [5]
This approach has allowed BAM Capital to build up a reputation as a leader in its industry. In fact, BAM Capital now has over $700 million AUM and 5,000+ units. [5]
This syndicator is also a vertically-integrated company. This means BAM Capital can guide you throughout the entire syndication process. They can handle everything from acquiring the properties to renovating and managing them.
No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.
For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, schedule a call with BAM Capital and invest today.
Sources:
[1]: https://www.investopedia.com/mortgage/real-estate-investing-guide/
[2]: https://www.investopedia.com/terms/p/property-management.asp
[3]: https://www.goodlifemgmt.com/blog/pros-and-cons-of-hiring-a-property-management-company/
[4]: https://multifamilyrefinance.com/apartment-investing-blog/multifamily-syndication#important
