Can a Property Management Company Improve Your Real Estate Investing Results?

Investing in real estate can be a valuable way to generate consistent passive income, benefit from property appreciation over time, and balance your overall investment portfolio. However, it can be a challenging endeavor, even for people with significant real estate investing experience. Integrating the services of a Property Management Company can be a game-changer in such situations. 

Finding profitable properties can be challenging, especially in a market with lots of competitive bidders, and dealing with the natural issues that arise when managing properties can be a major headache.

One option available to you is to work with a property management company, which can handle most responsibilities on your behalf. But does this have a reasonable chance of improving your overall results?

What Is a Property Management Company?

Companies like Green Residential, a Houston property management company, are organizations dedicated to helping landlords, real estate owners, and other people in the real estate business manage their rental properties. Real estate agents, property managers, and other personnel can help you with almost everything associated with your property, from initial due diligence to tenant screening and even evictions.

Most people choose to hire a property management company not to increase their results, necessarily, but to save themselves time. Being a landlord is a time-consuming and sometimes complicated pursuit, forcing you to spend hours of time dealing with tenant communication, following up on missed rent payments, dealing with property issues, and more.

Certainly, property management companies can save you time. They can also save you a lot of stress and make real estate investing much easier for you. The question is, do they have the capacity to improve your bottom-line results?

The Bad News First

Let’s start by addressing the bad news, and the proverbial elephant in the room. Property management companies are going to cost you some money. Most property managers charge you a fixed management fee, based on the gross monthly rent you’re collecting from your properties. For example, they might charge you 10 percent of your gross monthly rent, so if you’re collecting $2,000 in rent from a given property, you’ll owe $200 a month in management expenses.

Accordingly, on the surface, it’s almost impossible to be more profitable on a monthly basis if you’re working with a property management company. But there’s more to the equation than just a monthly analysis of profitability.

How a Property Management Company Improves Your Chances of Success

There are some ways that a property management company can improve your overall chances of success, even if you ignore their timesaving and stress reduction benefits.

Property selection

Real estate investors often follow the one percent rule – an informal rule that states that a property is worth considering for investment if it can generate gross monthly profit in excess of one percent of the purchase price. For example, if you’re looking at a $300,000 property, it should be capable of generating at least $3,000 in gross monthly revenue. This is a great rule of thumb, but it ignores countless variables. If you’re going to make more effective real estate investing decisions, you need to factor those variables in. Experienced property managers can help you do this from a rental property management perspective, ultimately allowing you to scout for properties with stronger filters and end up with much more profitable assets in your portfolio.

Consistent maintenance and repairs

As a solo landlord, it’s hard to stay on top of maintenance and repairs, even with responsible tenants who report things in a timely manner. But with property managers on your side, you can handle these issues quite consistently – and mostly hands-free. This can help you keep your property in much better condition (and save money on maintenance when necessary by connecting you with reliable contractors).

Tenant screening

Property managers pride themselves on effective tenant screening, evaluating tenant applications carefully to find people who can consistently pay rent in full and on time. Sometimes, it makes sense to leave your property vacant for longer so that you can find a tenant that’s more profitable in the long run

Tenant retention 

Similarly, property managers focus on tenant retention. It’s much more profitable to keep an existing tenant happy than to abandon them and replace them with someone new.

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Issue resolution. 

Your property managers will work on your behalf to resolve issues as they arise, using communication and compromise to keep your profitability engine running smoothly. If things escalate further, you’ll need to pursue an eviction – the worst-case scenario for a landlord-tenant relationship. But property managers can make this a (mostly) fast and painless process.

For most real estate investors, working with a property management company is a good idea. It has the potential to improve your results, and even if it doesn’t, the costs are minimal compared to the time these organizations save you. 

Do your research to find a team of competent property management professionals in your area if you want to maximize your chances of long-term profitability.