You just purchased your first house! Congratulations! Now what?
Well, you should already have the plan that you developed when you analyzed the house. If you are going to try to rent the home to hold it for a certain period of time to ride the market or to lessen your tax burden, then you are going to need to decide on a management strategy.
My advice is to seek the help of a professional management company. They can help you as soon as you close on the property. Most can even handle the remodel and upgrade that need to be completed to get the home ready for renters.
Why Hire a Property or Asset Manager
The process of interviewing and hiring a property management company can be a little complex and time consuming, but it is a key process in making sure your investment is going to perform as it should.
You can manage the properties yourself. Most people don't take my advice and start out trying to manage the properties themselves. I was the same way.
At first, for some reason, you think that you are saving money by not getting a property management company. Let me assure you, you are not.
You will spend much more money in time and stress than the property management company will charge you. As a matter of fact, I would be willing to bet that once you try to manage your own properties and compare the headache with the cost of the property management company, you will think it is a deal. I do.
There is no way I would manage a property for what my property management companies charge.
How to Pay a Property Manager
How much should you be paying for a good property management company? Well, it depends on what the company is doing for you and how many units you have it managing.
For full service management, which is what I use and recommend, you will pay between 3% and 10% for long-term monthly rentals. Short-term rentals such as vacation rentals will be a higher percentage.
I have as many as 20 single-family rentals with one company and I pay 8% currently. Usually, if you have multiple units, then the company will cut the rate from 10% to 8% for single-family. You will probably need four or more to get the discount. However, I would ask for it with only two.
Do not try to talk the management company down to paying less than the market rate for your property in your area. If you do this, you are shooting yourself in the foot.
If you are a management company and you have several different rental properties in the area and one pays you 8% and the other pays you 6%, which are you going to rent first?
Of course, the one that pays you more. So you see, you are actually hurting yourself when you talk a property manager (or Realtor for that matter) into accepting a lower commission for your properties. Pay them well and expect the best service.
Pay them the market rate, find the best managers in the market, and see what owning a well-run machine is like. You go to the mailbox and get checks! It's a wonderful business