What does a property management company do?
It handles most -- and often all -- of the tasks related to owning rental properties. A property manager oversees tenant turnover, collects rent, screens tenants, runs background checks, performs property maintenance, and does many other things you would otherwise do as the property owner.
If you hire a property management company, you pay a management fee to make most of the headaches of rental property ownership go away.
When you own a short-term rental or vacation rental property, there’s a lot of work associated with keeping the profits coming in. You need to find and market to people who want to rent the property. You also need to handle the basic mechanics of having short-term guests. That’s what a rental management property company does for you.
Handling things like tenant turnover, background checks, and day-to-day upkeep isn't easy, especially if you don’t live nearby. If you can’t easily visit, it’s hard to know if guests left at the proper time. Arranging for check-in is a challenge, too. These logistics can be hard even when things are going well, and they could be too much to manage even if you live close by.
In many cases, people who own short-term or vacation rentals outsource these tasks to a property management company. The company makes sure everything runs smoothly.
Should you hire a property management company?
Before you hire a property management company, take stock of your situation. If you don’t live close to your property, you probably need someone nearby to manage it for you. What would happen if a guest had trouble accessing your rental or didn't leave at the time stated in your agreement? Would you get on a plane to unclog the toilet or help a renter kill a bug in the kitchen?
Even if you live close by, it’s worth considering what you want to be responsible for. Do you want to maintain a calendar of who's renting your property on which days? Can you market the property or clean it between guests? Are you willing to take late-night phone calls asking you to solve problems?
A property management company handles most, if not all, of the work associated with renting out your property. You’ll pay a percentage of the rental price (there’s no standard rate, but 10% is common) and in exchange, the company will generally handle the following things:
- Managing your rental calendar
- Making sure tenant turnover is timely
- Running background checks and screening tenants
- Cleaning between guests
- Solving access issues
- Maintaining the property
- Resolving guest complaints
- Making sure guests leave when they're supposed to
- Any other reasonable issue involving renting your property
And that's just for residential property management. If you rent commercial property, a manager might do even more.
Many property management companies also market your property and help you find renters. That’s more likely if you own a place in a resort area where there's heavy demand for rentals.
If you use a property management company you no longer have to think about your investment property on a daily basis. You're now paying someone to run the property for you. And, since a property management company generally gets paid only when someone's renting, it has a major incentive to find tenants and keep your investment property booked.
Many owners prefer a property management company if they want a passive investment. You'll still have work to do, but it'll be much less than if you manage the property yourself.