Are you a property owner looking to your rental income? Effective management is key. You have two options: manage the property yourself or hire a professional property management company.
While the second option involves a cost due to outsourcing various tasks, it’s important to understand exactly what that cost entails and whether it’s a sound business decision. Here’s everything you need to know before making your choice.
What is a property management company?
A property management company is a business primarily focused in overseeing real estate properties on behalf of property owners, whether they are individuals or organizations.
These companies provide a variety of services tailored to the needs of the property owner. Common services include:
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Representation before the Housing Tribunal (if needed)
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Maintenance management
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Oversight of renovations and repairs
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Lease signing procedures
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Handling the recovery of unpaid rent
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Advertising available units
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Management tenant complaints or request
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Rent collection
While some companies offer only a selection of the services, others provide a comprehensive package. The option you choose will depend on your specific requirements.
Time and profitability: two key factors to consider before hiring a property manager
There are several reasons to consider outsourcing the management of your properties to a professional. However, two factors are particularly important in determining whether it’s the right business decision: time and profitability.
1. Property management: do you have the time?
How much time you can dedicate to managing your properties is a crucial factor. This will directly influence your decision to either manage the properties yourself or hire someone else to handle it.
Managing a property can take up several hours each month and this commitment increases when you own multiple properties. Responsibilities include:
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Respond to tenants
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Oversee repairs
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Manage contracts
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Show available units
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And more.
These tasks are ongoing and consistent, requiring attention month after month, year after year. For those with full-time jobs or other commitments, hiring a property manager can lighten the load and help ensure tenant satisfaction, vital for the long-term profitability of your properties.
2. Outsourcing property management: is it profitable?
In addition to time, profitability is a crucial consideration. When evaluating whether outsourcing property management is the right decision, this factor is often the most important!
If you lack the expertise to manage your property efficiently, hiring an experienced property manager is a wise choice. However, even if you have the necessary knowledge and experience, outsourcing management could still be more profitable.
For example, delegating property management could free up your time to acquire additional properties or pursue other profitable ventures, potentially leading to higher return in investment.
To determine if this option is right for you:
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Estimate your management needs: calculate how much time it would take to manage your properties on your own.
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Compare costs: assess the expenses of hiring a property management company and weigh them against the value of your time at an hourly rate.
By doing so, you can make an informed decision on whether it’s more profitable to manage your properties yourself or hire a property manager.
What is the cost of a property management company?
Property management companies typically calculate their fees in two ways:
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By the number of units per building: fees are typically charged monthly and are often around 30$ per unit.
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Based on the gross income of the property: most companies charge between 4% and 8% of the monthly rent collected.
To determine which of these options is most advantageous for you, you'll need to do some forecasting and calculations.
Budgeting for management fees
One of the challenges property owners face when opting to hire a management company is having the necessary funds.
If you’re unsure about whether to outsource property management, it’s a good idea to budget for these potential expenses just in case. This ensures that you’ll have the funds available if you decide to hire a manager.
Furthermore, if you change your mind and choose to manage the properties yourself, you can repurpose the allocated funds as your salary. As the saying goes, it’s always best to be prepared than to be caught off guard!
The absence of property management companies in some areas: an additional challenge
While property management companies are commonly available in urban areas, they can be scarce or even absent in certain municipalities or remote villages.
If you are determined to outsource the management of your property to a specialized company, you may need to expand your search to a different region with more coverage.
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