When you first start shopping for a property manager you might be shocked to learn what many of them charge. We certainly were!
You’ll usually pay between 5 – 10% of your monthly rental income to a property manager plus tenant placement fees which can be as much as one months rent. The price may seem astronomical at first. It certainly eats into your positive cash flow!
When you learn the cost, the desire to manage the property yourself and save money will be powerful. Saving a few hundred dollars each month may not be worth taking on the property management yourself though! Besides the fact that a professional property manager has extensive knowledge of the local laws and regulations, they also have access to the resources required to easily manage a property.
When we first bought our Toronto tri-plex, Julie was doing her MBA and thought she could handle managing the property while she was in school (Julie is shown in the picture above painting that Toronto Tri-plex – you can tell she is loving it!). We wanted to save money, and Julie had a flexible schedule with some free time so it seemed perfect.
We went to the property and met with each tenant, introduced ourselves and made sure we had the proper signed leases in place. After that, we both figured Julie would only have to deal with minor issues as long as the property was occupied.
We were wrong! The tenant on the main floor proved to be high maintenance and called weekly about different things she wanted fixed. And then, two months into owning the property, the frequency of calls from the tenant on the main floor began to increase dramatically. She was upset because as the weather got colder, the tenant beneath her was smoking in the unit and she could smell it. Her son had asthma and this was impacting him.
Julie contacted the tenants in the basement and explained that their lease stated that there was to be no smoking in the unit and that we’d received complaints. They were polite to Julie. However, they didn’t like getting scolded and – according to the main floor tenant – started taunting her teenage son when he would come home from school. They called him a tattle tale and made him feel threatened.
It’s a long story. It dragged out for weeks, but the issues escalated. Soon the two tenants were at war and Julie was receiving 20–25 calls a day. The police were called to the scene twice by the tenants on the main floor. It was a disaster.
And as luck would have it, this was happening during Julie’s final exams! Julie was pretty close to breaking down and couldn’t just tell the tenants to wait a week until her tests were done–she had to deal with it!
Julie pretty much lost it. She’s really a no nonsense kind of person and she hated dealing with other people’s problems. Failing an exam would mean she’d have to repeat a course and that could mean an extension of her degree–which would be time consuming and expensive.
She was fit to be fried. And looking back, it should have been obvious to both of us that Julie was not well suited for the job. She is organized, efficient and focused. Sounds perfect for property management doesn’t it? Well, not exactly. Anything that throws her off what she is working on at the present moment is an annoyance for her. She also doesn’t like talking on the phone. She’d prefer never to pick up the phone at all if she could avoid it. She likes people and she likes problem solving, but she doesn’t really tolerate people who are lazy or rude. Really, she has a lot of traits that make her well suited to HIRE a property manager!
To tell if you could handle the pressures and challenges of property management you’ll want to do a little bit of a self assessment. We’ve created 8 simple questions to ask yourself to see if you think you could handle property management.
- Are you a reasonably tolerant person? Be honest with yourself.
- Do you have any knowledge and experience with doing minor maintenance and repairs?
- Are you able to sell and negotiate? You will have to sell the unit to renters, you’ll have to sell the idea of paying rent on time, and you will have to have the problem solving and negotiation skills of a salesperson in order to handle some of the issues that will arise.
- Can you visit the property on a regular basis? You should stop by at least monthly so make sure it’s convenient and possible to do so. Plus, if you do get a 3am call that requires you get there right away, are you going to be able to?
- Are you comfortable and capable of keeping good records? We’re a little weak at this ourselves, and we likely miss out on tax write offs because of it. It also takes us several days to prepare our books to send to our accountants each year because we aren’t as organized with our unmanaged properties as we should be.
- Are you able to diffuse angry individuals and ease any tensions between them? How do you handle difficult people? When dealing with a difficult person do you get angry and frustrated yourself?
- Imagine the busiest possible day, and then imagine having to handle a call from one of your tenants about a frozen pipe or a broken door lock. Are you going to be able to handle that situation?
- Do you have someone that can be your back up if you take a vacation or go out of town? If there’s an emergency at your property, your tenants need to be able to get in touch with someone that can make decisions about the property.
If you answer “no” or “I don’t know” to three or more of these questions then you should seriously consider hiring help. Property management is a job that requires expertise, skills and resources. It’s possible to do it part time while working a full time job, but there will be days where it’s not easy.
These questions are not exhaustive. There are other things to consider when you make the decision whether to hire a professional or not, but spending a bit of time honestly answering these questions will really help you figure out if you want to be your own property manager. You may find the cost of a professional is worth every penny.