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Should You Hire an Income Property Manager?

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This is one of the age-old questions in the wonderful world of income properties.  It definitely sounds appealing to hire someone to manage tenants and otherwise take care of your income property.  After all, no one really wants to be a landlord, do they?  Unfortunately, hiring a property manager is not usually the best course of action for us “small-time” rental property investors.

First of all, whether you like it or not I highly recommend that you manage your own properties for at least 1 year before you consider hiring a company to do this for you.  The reason is that you must understand the ins and outs of how to be a landlord before you can delegate your landlord responsibilities to others, even if you hire a professional management company.  Otherwise, you will be blindly placing your trust in the management company with no real ability to evaluate its performance, which is obviously never a good thing.

Once you have enough experience being a landlord to consider hiring a property manager, you must then figure out if you can afford this monthly expense.  Property management firms often charge as much as 10% of gross rents to manage any given property.  In terms of 2-4 unit multi family homes, unless you got a steal of a deal, this fee is probably going to be difficult to cover.

Another factor to keep in mind is that property managers are easy to find, but good managers are extremely difficult to find.  Many of them cut corners and are not as focused on minimizing repair and maintenance expenses as you might be, which effectively increases your expense base even further.

In the final analysis, if you aim to take the easy way out and hire someone to landlord for you, you might want to reconsider.  Generally speaking, rental property managers should only be considered if you have 20 or more total units.  Smaller portfolios are simply unable to carry the extra property costs in most cases.

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