Published:
August 4, 2021

Benefits of using a property manager as a co-buy group

Being a landlord is a tough job. Landlords have to wear a lot of hats and wear them effectively. Whether you’re looking to rent your property for short-term or long-term rentals, you and your group will have to organize and manage finances, market your units, handle maintenance requests, manage calendars, manage cleaners, manage and screen renters, and effectively communicate with them, too. It’s a job that requires a lot of experience, confidence, and patience - and a job that few people, let alone groups of people, can do on their own. This is why so many groups hire property management companies. Here’s a quick look at what a property management company is and if you and your group might benefit from using one.

What exactly does a property manager do?

Think of using a property management company as the equivalent of hiring a landlord for your building. They’ll handle just about everything including collecting rent and communicating with renters, screening potential renters, marketing your units, handling maintenance and repairs, managing schedules, managing cleaners, handling permitting and paperwork, and more.

Like any middleman, you’ll have to pay them. Payment comes in the form of various fees, some flat and some as a percentage of the cost of the rent. While it’s not cheap, a good property manager can maximize your return on investment by leveraging their relevant experience, know-how, and applicable skills - ideally making your group’s lives and jobs that much easier. So, to reiterate, a property management company will:

  • Communicate with existing and prospective renters
  • Market your unit
  • Handle the collection of rent
  • Screen potential tenants
  • Manage maintenance and repairs
  • Manage scheduling/renting
  • Manage cleaners
  • Handle short-term rental (STR) permitting and applications
  • Handle evictions

Benefits of a property manager

All property management companies come with pros and cons. So judging whether or not your group could benefit from the services of one, begins with weighing those pros and cons with your group’s strengths and weaknesses when it comes to being effective landlords.

Handling renters

A good property management company will effectively communicate with your tenants. This includes everything from setting rental rates for your units to handling and managing maintenance troubles at 3:00 am or complaints. If communicating and dealing with people isn’t a strength within your group, or simply not a responsibility you want to take on, a property management company can help.

Allocating responsibilities

Speaking of groups, a big hang-up that owning groups routinely run into is the allocation of responsibilities: who will be responsible for handling tenant complaints or working with contractors? Divvying up work amongst owing parties can cause unhealthy conflict, especially when everyone has their definition of what’s “fair.” You can avoid all of those potential obstacles by hiring a property management company that will take on those responsibilities for your group.

Convenience & logistics

Location and distance should also play a big part in this decision. If the building your group owns is far away - far enough to where the distance is a detriment to effectively handling all aspects of the property - then hiring a local property management company is a great idea. Also, good local property management companies will have extensive knowledge of local contractors. This will prove invaluable when your property, inevitably, needs repairs or maintenance. They’ll know which contractors are trustworthy and have established good working relationships with them. Finally, they’ll be able to show up onsite and in-person to help assist your renters and when interviewing potential new ones. Maintaining a healthy, communicative relationship with your renters is a vital part of being a good landlord.

Continuing with simple logistics, the number of units your group is responsible for could also sway your decision. There’s a huge difference between managing a handful of units and managing a hundred units and, odds are, your group doesn’t have the time and resources that a property management company has.

Local regulations

Whether you want to do short-term rentals on Airbnb or Vrbo or do a more traditional long-term lease, you’ll likely have to deal with government bureaucracy. To rent it on Airbnb, you’ll first have to file for a short-term rental (STR) application and gain approval, which can be an arduous process. If your building is part of a government-subsidized housing program, you're not only dealing with the daily responsibilities of being a landlord but you're dealing with the government too.

Does the thought of this send shivers down your spine? If so, then handing the job off to a property management company to handle it is likely the best approach for your group.

Time

Maybe your group is treating this new property as more of a side job, and therefore doesn’t have the necessary attention to spend on being a landlord. A property management company can do all the things that quickly add up to demand a good chunk of time and attention. They’ll screen potential renters, market your units, set rent prices, adjust pricing for your city’s event calendar and season, handle cleaners, and the whole nine yards. We’re repeating ourselves here but for good reason. For professional property managers, managing your property is their full-time job and, sometimes, you just want to pay someone else to do the things you simply can’t do or don’t want to do.

Increase ROI

Hiring a good property management company can help your group increase its overall return on real estate investment. They will help you price your rental efficiently. If it’s priced too high, the vacancy rate will be unacceptable. Price it too low and you’ll leave money on the table. Somewhere in the middle is an optimal point that maximizes your expected revenue from the rental property, and the property management company is incentivized to find it. The optimal point often changes, too, depending on events and time of year. Your property management company will stay on top of it and adjust the rate accordingly.

Marketing

Marketing your property, especially if you’re listing it on short-term rental sites, is not something you can do haphazardly. A lot goes into short-term rentals, like maintaining your listing, adjusting rental rates for special events months down the line, managing reviews, scheduling cleaners, and maintaining an open line of communication with renters. Property management companies are accustomed to managing all of these details for your listing on not only Airbnb but also Vrbo and other sites as needed.

Potential drawbacks

Now, with those positives in mind, we’ll take a look at some potential cons. First and foremost, a good property management company is expensive. You need to weigh the costs of hiring one against the potential rental income your group can expect after hiring one. Despite the cost, you don’t want to settle for a less costly property management company if it doesn’t fit your group or is ineffective at managing your property. So take stock of your group’s finances, and figure out what you need from a property management group, before beginning your search.

If your group wants to maintain total decision-making control of your property - including rental pricing, which renters are accepted, and which outside vendors to hire for maintenance and upkeep - then hiring a property management company might get in the way. This is also important to consider when it comes to your group’s finances. Even after hiring a property management company to oversee your property, you’ll then have to oversee the property management company to make sure it’s operating effectively within your budget. Yes, this kind of oversight isn’t as involved as managing a large rental property, but you don’t want a property management company’s operating costs to eat too much into your rental income. Likewise, you don’t want to be too frugal when choosing a property management company. The safety of your building and renters should be your priority, and when it comes to property management companies you tend to get what you pay for. You want a safety-first, budget-conscious property manager that will also have one eye on not having too much deferred maintenance. The best way to make these decisions is to interview multiple potential property management companies before hiring one. See how they operate and get a feel for the company on a personal level. You can negotiate which aspects of the management process they are adamant about controlling and which aspects they’re comfortable letting your group control.

How to start looking for the right property manager

There are two good starting points for your property management company search. The first is an old-fashioned internet search. Go ahead and search for local property management companies and check out their websites. A website can tell you a lot about a company. Does the site feel and look professional? Is it easy to navigate and find exactly what you’re looking for? A good website will reflect the character and personality of a company. After that, the interviews. Talk to these companies and compare their offerings, their personality, and their potential fit with your group. If anything, you’ll get a better understanding of the landscape of your local property management market. Also, ask them for references and information on their business and strategy. How have they performed for other clients?

Second, the even older fashioned yet highly trusted method is word-of-mouth. Ask everyone you know who might own a rental property, or might know someone who knows someone who does. The opinions and experiences of friends, family, and co-workers will tell you a lot more about a property management company than a website or an interview ever could. You can even reach out to a local apartment association and ask which property management companies they use and would recommend.

When your group co-buys a property, you’ll have two choices for property management: do it yourself (DIY) or hire a property management company. Ultimately, it’s up to your group to weigh the pros and cons of each but, after testing the waters, many groups quickly see the benefits of outsourcing property management services.

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Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market.  While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.