Owning and investing in commercial real estate can be quite rewarding. There are various benefits to owning a commercial real estate property. Managing the property, on the other hand, can be rather time intensive and emotionally & mentally straining. Sometimes, deciding whether to manage your own commercial real estate property or hiring a management company can be a tough decision to make.
Managing a commercial property requires a lot of work. Although, doing it yourself may seem like the cheapest option, you could be limiting your savings, profit and investment opportunities. A Commercial Property Management Company is an investment that will pay off by saving you time, money and stress in the long run. Your cost to hire a professional manager may also be expensed out to the tenants depending on the lease types.
You may often think, “Why should I hire a property manager? I can do it myself!” and you’re right, you can do it. The question is, can you do it as effectively as a property manager? Probably not! Managing a rental property involves a lot more tasks. Owning real estate can be a great way to gain financial security, but a lot of work goes into it. From listening to angry complaints about collecting rent from late-paying tenants, there are certain tasks that a property manager can do better.
Recently property owners are migrating towards hiring property management firms that are more than just building operators and rent collectors. They are looking to hire management firms that can assist in leasing and asset management, planning events, optimizing their use of technology, identifying ways to increase NOI and decrease operating costs, and more.
Managing Properties by Yourself
The most obvious advantage self-management has over professional management is the ability to save money. Management costs for an average rental property are usually around 3-5% of the rental income. Using professional property management, on the other hand, can gobble up 10% of your rental income. Some companies even ask for the entire first month’s rent for new tenants!
Not all the benefits of self-managing a rental are financial. One is a meaningful intangible: experience. Whether or not you plan to self-manage your investment properties, it is vital to understand the basics of property management. And there’s no better way to do that than by taking part in this management. Not only that, but having experienced the ins and outs of real estate property management will help you evaluate a management company if you decide to hire one.
Another intangible you gain by self-managing is full control over your properties. You don’t need to rely on anyone or double check one’s work. This also adds on to the previous point of gaining experience. Having more responsibility towards your rental will help you in the future if you invest in more income properties.
Hiring Professional Property Management
Self-managing your investment properties can save you money, but hiring professional property management will save time. The extra costs of professional real estate property management can be worth it if you have enough money available. The extra time you get can allow you to invest in multiple properties, expanding your real estate investment portfolio, and increasing your rental yield.
Hiring a management firm to manage a real estate asset(s) gives the owner the time they need to concentrate on what they do best; the acquisition and disposition of large assets, and the development of a portfolio that meets stated goals, such as geographic or asset diversity, or appreciation and yield targets.
Property management companies can be incredibly helpful when it comes to running your business and managing day to day responsibilities that landlords have. Property management companies can take care of everything from collecting rent to repairs, maintenance, move-out cleaning, and more. Most property management companies will also advertise your available properties, conduct credit and background checks, meet with prospective tenants, give tours of your properties, and draw up leases and other necessary contracts.
Property management companies come in handy in many cases. For example, if you own a handful of rental properties that you don’t have the time or resources to take care of on your own, a property management company can handle as much or as little as you need them to. Or if you live in another city or state, you can hire a local property management company to keep an eye on your properties, make sure your tenants are well taken care of, and make sure you receive your rent check on time.
Frequently, investors seek advice on property management firms from commercial brokers who represent them in transactions. Recommending a qualified real estate manager may be part of your contract with a client or an added service that is especially helpful to out-of-state or foreign investors who are not familiar with property managers in your area.
Hiring a property manager can be a great way to save time and energy when managing an investment property. Property managers have the experience and knowledge necessary to handle all the tasks associated with rental properties, from tenant screening and legal compliance to maintenance issues.
Property managers are well-versed in local laws and regulations regarding rental properties, so they can help landlords avoid potential liabilities. They also know how to screen tenants properly, essential for protecting your investment. Property managers will conduct background checks on prospective tenants, verify their income levels, review credit reports, check references, and more. This helps ensure that only qualified renters occupy your property while minimizing the risk of any legal or financial issues down the road.
A lot of management duties take some experience and skill to perfect. With professional property management, you get help from, well, professionals! This professional help will facilitate all management facets. For instance, real estate investors fill vacancies faster with the help of company management. That’s not all, management companies tend to find the best tenants available, with the help of their detailed screenings and applications. Professional real estate property management is also very beneficial when it comes to the legal aspects of property management. Overall, professional property management will help with anything related to management, at high and accurate levels.
To Manage on Your Own or to Hire Property Management
However, You can decide how you want your management depending on your goals and your type of investment. Using professional property management can work whether you plan on investing full-time or part-time. However, if you were to hire property management, it would be wiser to do so while investing full-time. The perfect example is of a real estate investor with multi family properties, like an apartment building. In this case, the property manager is responsible for all the units. And since multi family properties generate high cash flow, the costs of professional property management become tolerable.
CONCLUSION
So, to answer the question: Should I manage my commercial real estate property or hire a management company? The answer will depend on the investor, but it is certainly possible to self-manage rental properties. However, self-management is more applicable when a real estate investor has a single income property, especially if it is a passive investment. For busy investors as well as multifamily properties, hiring a property manager can be a great way to save time and energy when managing an investment property.
As informed investors we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.
