7 Dangers of Not Using a Property Management Company

Do I really need a property management company?

This is a common question among inexperienced landlords. Often, these first-time real estate investors assume it’s best to forgo using a property manager, because they believe it will lead to unnecessary costs. But what they don’t realize is that not using one could actually cost them a lot more.

need property management

There are numerous advantages to using a property management company. When you’re renting out a home or commercial space, you have a lot to think about:

  • Advertising your rental
  • Rental applications
  • Lease terms
  • Landlord-tenant law
  • Screening potential tenants
  • Collecting / processing rent payments
  • Emergency repairs
  • Contractor relationships
  • Painting and upkeep in-between tenants

The list goes on and on—and if you make a mistake in any of these areas, they could cost you a significant amount of both time and money.

Experienced landlords know that a property management company can make all of these processes easier and more cost-efficient. So while you may pay a portion of your rental income for the company’s service each month, doing so will save you a lot more in the long run—and it could prevent a costly disaster.

Let’s look at some of the most serious problems you could face by not using a property management agency.

  1. No one will know about your rental.

An empty rental is an investor’s worst nightmare. When your investment property sits, it wastes money: you pay the mortgage, but you’ve got no money coming in.

By choosing not to work with a property management company, you could be missing out on advertising opportunities to reach a greater pool of prospective tenants. In

many markets, established property managers are the primary resources for tenants looking for apartments and rental properties. They can make sure your rental listing is seen and gets interest.

If you do it on your own, chances are your rental advertising will:

  • Cost you more money
  • Be seen by fewer people
  • Receive less response
  • Take up more of your time to manage
  1. Showing the property will drive you crazy.

Many investors believe that using a property manager is well worth the expense for this reason alone: rental showings!

Let’s face it. Scheduling and managing showings is a pain in the neck. In competitive rental markets especially, it’s virtually a full-time job. Once you post your listing, you’ll have to respond to emails and phone calls non-stop. And to make matters worse, the majority of those inquiries will be from people who aren’t serious about the property anyway.

Then, you have to actually schedule the showings, deal with no-shows and shuffle everything around your busy schedule (especially when scheduled appointments suddenly say they can’t make it). It’s a mess.

Good property management companies have established systems in place to make this process easier and more efficient, so you don’t:

  • Waste your time with un-serious applicants
  • Get bogged down by showings
  • Manage the scheduling whatsoever

The property manager will handle this entire process for you, so all you need to do is sit back and wait to hear that a lease has been signed.

  1. Your lease could be a liability.

Complying with laws is extremely important for a landlord. This is especially important when creating your lease, because it dictates your agreement with the tenant. A poorly worded lease, or an accidental omission of important terms, could come back to bite you later.

The problem is: it’s difficult for even experienced landlords to know all state, federal and municipal laws dealing with tenants’ rights and landlord responsibilities. Many of these laws change over time, and new ones are created.

Without using a property management firm, you create a great risk that you will:

  • Get into legal disputes with tenants
  • Lose leverage as a landlord because of your lease terms
  • Be fined for failing to comply with rental laws

Good property managers understand these liabilities, as well as the laws and best practices for rental leases—so you don’t have to even think about it.

  1. Bad tenants are practically guaranteed.

Have you considered how you will screen tenants? Which background checks will you use? Which are legal and which are discriminatory?

Screening your tenants is another critical component of being a landlord. If you get stuck with someone who has a history of debt, or damage to previous rentals, then you’re in trouble. Before you know it, your new tenant (who seemed like such a nice guy during the showing!) could be missing rent payments and destroying your property.

Property management companies will handle background checks for you. They’ll search for all the most important red flags, such as:

  • Poor credit history
  • Foreclosures
  • Criminal backgrounds
  • Previous evictions
  • Bad feedback from previous landlords
  • Former employers (or lack thereof)

A good property manager knows what to look for. But also, they can typically run these checks for less money than you’d pay, because they get a bulk rate.

  1. Collecting rent won’t be as fun as you think.

In theory, collecting rent should be the best part of becoming a landlord. It’s when you’re actually making money!

But, what happens when the rent doesn’t come in on time? What’s your plan of action?

  • How many days will you wait before contacting your tenant?
  • What’s the grace period before you add a late fee?
  • How long do you wait before knocking on the tenant’s door?
  • How soon is too soon to think about eviction?

All of this should be spelled out in your lease. But that doesn’t mean it won’t be a huge drain on your time, energy and stress level when the situation occurs.

Property management firms can handle collection for you, so that your involvement is minimal. They’ll even deposit the checks and process credit cards for you, so you simply watch the income show up in your bank account.

  1. Repairs will cost you a lot more.

Every once in a while, you get a tenant who seems to never have any problems. Nothing ever breaks. You’ve never get a single call.

 

But this is rare.

 

As a landlord, you should expect things to go wrong at least once every other month for each property you have. And unless you’re extremely handy, the problems will often require you to contact a professional:

  • Roof leaks
  • Electrical outlets not working
  • Appliance failure
  • Leaking pipes

Even the simplest repairs can be costly. A single house visit these days can easily run you a few hundred dollars. Over time, these costs add up and eat into your net rental profits.

Property managers typically have relationships with local contractors that enable them to access much better pricing. You’ll still have to pay for the repairs, of course, but chances are they’ll cost you a lot less. Plus, the management company will handle all the scheduling, so you won’t have to handle anything.

  1. You’ll have a mess on your hands when tenants move out.

When tenants move out, a lot of cleaning and upkeep needs to be done before the next tenant moves in. Even the best tenants won’t save you from this process. A property that’s been lived-in will require thorough cleaning.

You can choose to do the cleaning yourself, or hire an army of contractors:

  • Carpet cleaners
  • Painters
  • Property cleaning services
  • Handymen for small repairs

But whether you do it all yourself or not, this process is going to take time and money.

Using a St Louis property management company can lift these burdens off your shoulders. They’ll handle the cleanings and upkeep in-between tenants (probably for far cheaper than you’d pay yourself). So all you need to do is wait for the phone call telling you a new tenant moved in.

Do yourself a favor: avoid all of these dangers by working with an experienced property management company that can manage your investment for you. You’ll ultimately save a lot of money in the long term, and it will eliminate many of the most common landlord headaches.