Many investors see the acquisition of rental buildings as the perfect opportunity to grow their savings. However, if this initiative is to generate a worthwhile financial gain, the buildings must be properly managed. To do this, you have two options: either entrust this task to a company specialised in property management or take charge of the situation yourself.
Of course, not everyone has the expertise required to deal with the various facets of property management. This is why some people opt for the first option, i.e., to delegate this task externally. But how much will this really cost and is it a good business decision?
Working with a property management company: how much does it cost?
From the outset, it is important to specify that property management companies offer a wide range of services and that the formula you choose will depend precisely on your needs. The services available often include:
- Representation before the Régie du logement (if necessary);
- Maintenance management;
- Management of renovations and/or repairs to be carried out;
- Procedures relating to the signing of contracts;
- Procedures for the recovery of unpaid rent;
- Display of vacant homes;
- Managing complaints or requests from current tenants;
- Collection of rent.
Generally speaking, property management companies calculate their fees on the basis of the number of units per building (the fees are monthly) or on the basis of the building's gross income on an annual basis.
If you choose the former, you can expect to pay an average of $30 per door per month. As for the second option, the majority of companies will charge you a fee equivalent to around 5% of your property's gross annual income. In order to choose one of these options, it will of course be necessary to make some predictions and carry out some calculations in order to evaluate which would be the most profitable.
It's all about profitability
If there is one decisive criterion for assessing the relevance of a business decision, it is its profitability. If you don't have the expertise to manage your property yourself, it's perfectly normal to entrust it to a company that can. However, for people who have the necessary knowledge, it may be worth calculating how much it would cost you over a year to do this.
To obtain a valid estimate, you first need to have a fairly accurate idea of the number of hours required to take care of everything, as well as the approximate rate charged by a company to do so. You can then determine, within an acceptable margin of error, what it would cost you per hour to carry out all the tasks required to keep the property running smoothly, versus what a company would charge you.
However, those wishing to acquire further properties may wish to give the matter more thought. Indeed, if you're actively looking for new possibilities, you could miss out on a golden opportunity by spending too much time on management. When you consider that the latter could save you thousands of dollars, you may well question the advisability of outsourcing the management of your property. It just goes to show that the old saying 'time is money' is not unfounded!
Managing your property: do you have the time?
While profitability is of great importance when deciding whether to manage a property yourself or to entrust it to someone else, there is another equally important factor that should also be taken into consideration: time.
After all, some of us have particularly busy weeks, whether this be due to professional or personal responsibilities. You will therefore need to take into account the time required to meet all of your obligations, and to see whether you are able to devote several hours a month to managing your property.
Bear in mind that this investment in time is a long-term one, and requires a commitment on your behalf. In this respect, you should be aware that disinvestment on your end could have a major impact on the satisfaction of tenants living in the property and, over time, end up undermining the property's profitability.
A lack of property management companies in certain sectors
Although it is almost always possible to work with a property management company should you wish to do so, it is important to be aware that certain municipalities or more remote villages may not have one in their area. So, if you really want to entrust the management of your future property to a company specialising in this field, it would be better to focus your search on another region.
Include management fees in your budget
Some people face a major problem when choosing to work with a management company: lack of liquidity. When deciding to purchase a property, some people may forget to set aside 5% of their gross income to cover this expense. Occasionally, this is due to the owner's initial intention of not outsourcing management-related tasks.
Given the uncertainty, it is suggested that this expenditure be included in the budget as a precaution. This way, if you need the money, it will be available. And if you change your mind and decide to take on the management of your property yourself? Then you can use this money as a salary. It's better to be safe than sorry!
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