Investing in rental properties can be a lucrative way to make money, but it’s not as simple as it sounds. Being a landlord comes with several responsibilities, from setting and collecting rent to maintaining the properties for your tenants. These can quickly get tedious, so this is where all-inclusive property management comes in.
Hiring property managers can take a huge load off your shoulders, especially if you have many investment properties. However, as an investor, you might be thinking about cost implications. So to help you decide whether property management is worth it, here’s a guide expounding more about it. It will discuss the value property managers bring and how all-inclusive pricing works.
What Does Property Management Entail?
Property management is the supervision of real estate properties by a third party—the property manager. They conduct general administration and maintenance to manage rentals and keep the properties in good condition. Landlords often hire property managers to oversee daily operations and handle possible tenant concerns.
The exact scope of work taken by property managers ultimately depends on the terms laid out by the owner. Generally, their key responsibilities include the following:
- Advertising rental vacancies
- Screening and approving tenants
- Preparing the lease documents
- Setting and collecting rent
- Handling tenant issues or disputes
- Arranging regular repairs and maintenance
- Managing the budget
- Maintaining records
- Dealing with evictions and late rents
Value of Hiring a Property Manager
No doubt, property managers remove the stress and hassle in managing your rental properties. They take over all the necessary work, from marketing your property to prospective tenants to scheduling emergency repairs.
But beyond performing routine tasks, property managers also bring a wealth of skills and knowledge with them. Certain states, including Texas, require property managers to have a license if their job includes showing properties and leasing them to tenants. Thus, they generally have the proper credentials to handle and operate properties.
More specifically, here are some key benefits that come with hiring a property manager:
Stage your rental properties
While you can leave your rental properties as-is, staging them can make all the difference. Property managers can help you with this since they have a good grasp of the market. They understand what customers are looking for, so they can make repairs or improvements to make your property rent-ready and provide tenants with clear building management.
Maximize income potential
Costing is one of the biggest ways property managers can create value for you. They’re knowledgeable about trends and rates in the local real estate market. With this, they can provide sound recommendations on pricing.
Such a benefit can make a huge difference since property owners may often undercharge or overcharge rentals. With an expert on board, you can find the optimal price point to maximize your income.
Broaden investment opportunities
Having inclusive managers handle your properties allows you to focus on growing your investment portfolio. The best part is you don’t need to worry about geographical constraints, which means you can invest in areas with the highest growth opportunity. So even if you aren’t familiar with the location, your property manager will be there to help you in decision-making.
Comply with state regulations
Every state has its set of regulations for landlords and tenants. Of course, it’s extremely difficult to keep up with all these rules, especially if you have properties in different locations. Property managers are much more familiar with the laws and ordinances, so having them on board can prevent issues from arising down the line.
How Property Management Fees Work
From an investment standpoint, one of the most important questions you’ll have about property management is the cost. Property management fees can vary significantly based on factors like property size and the scope of services. To give you some idea, here are common costs involved in hiring property managers:
- Initial Setup Fee. Some companies charge this one-time fee the first time you engage their services to set up your account. The fee will usually be around $250 to $500, which covers the costs to inspect the property and inform your tenants that they’ll be managing your property.
- Monthly Management Fee. The bulk of your expenses goes to the monthly management fees charged for engaging a company’s services. The majority of the time, these are calculated based on a percentage of your rental income. This rate may vary per company and state, but on average, it’s at about 8-12%.
- Tenant Placement Fee. Some companies may charge a tenant placement fee for helping you find tenants to sign a lease in your property. This may be a flat fee worth one month’s rent or a percentage of it to cover advertising your property, screening tenants, preparing the lease, and others.
- Eviction Fee. While this cost comes up less frequently, property managers may sometimes handle evictions or outsource the work to a local firm. Regardless, you’ll have to shoulder the associated costs by paying the eviction fee.
All-Inclusive vs. Customizable Property Management
Another way to understand property management fees is by differentiating between all-inclusive and customizable management. Companies may offer either or both arrangements to determine fees and service coverage.
All-Inclusive Property Management
As the term implies, all-inclusive property management refers to an all-in-one offer that covers all services involved in managing your daily operations. They’ll do all the work needed to keep your property running, so you won’t have to do anything yourself.
Since this package already has a fixed set of inclusions, you pay a single fee instead of getting an itemized list of costs for every service. You agree on this with the company at the start of your contract, so you won’t need to anticipate additional monthly fees.
That said, you’ll likely still need to pay for other expenses like the initial setup costs and potential legal fees in case of evictions or other matters. Again, the exact terms may vary from one company to another, so make sure you discuss this in detail before finalizing your agreement.
Customizable Property Management
On the other hand, customizable property management is more flexible in that you only choose what services you need from the company. For example, you might want help screening tenants but prefer to manage finances and records yourself. In this case, you can customize the services to include in your agreement.
Under this arrangement, companies will often charge a base rate. This is generally lower than the management fee percentage in all-inclusive fees. However, the tradeoff is that you’ll need to pay extra for every service you get.
Benefits of All-Inclusive Property Management
More Stable Cash Flow
One main advantage of an all-inclusive package is you can maintain more stable cash flows since you know how much you’ll be charged each month.
Unlike customizable packages where your expenses vary significantly per month, all-inclusive pricing imposes a fixed rate per month. The only time it changes is if you adjust your rental rates. Thus, it’s much easier to forecast expenses and determine whether your costs ultimately outweigh the benefits.
With all inclusive management, you get full-service coverage. This means you won’t need to do the heavy lifting in managing your properties. Also, instead of thinking about what exact services you’ll need help with, you can rest easy knowing that everything is covered in your package.
FAQs about All-Inclusive Property Management
What is all-inclusive property management?
This is a bundled service package where you pay a single rate to a property management company. In exchange, they’ll take over the day-to-day operations in your rental property. Their scope of work may include finding tenants, collecting rent, scheduling repairs and maintenance, and all other activities needed for general management.
When should you get all-inclusive property management?
All-inclusive management is a great choice for property owners who:
- Need a helping hand since they have multiple investment properties in different locations
- Live far from the property, which makes it difficult to be hands-on when dealing with tenant concerns
- Lack knowledge of the local market or have no experience managing a rental property
- Don’t want to take the responsibilities of a landlord
How much are all-inclusive rates in property management?
All-inclusive rates vary based on the property management company. However, on average, the monthly management fees will be 8-12% of your expected monthly income. Key factors that may affect the percentage include the size, type, condition, and location of your rental property.
Maximize Your Investment Returns with My Hostly’s All-Inclusive Management
Being a landlord is no easy feat, so all-inclusive management offers the perfect solution for property owners who don’t have the capacity or prefer not to take such responsibility. My Hostly offers all-inclusive property management services to help you earn passive income without all the stress and hassle.