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So you’ve started out in the investment property game. Your first two properties are steady and producing a good income, your third and maybe fourth are coming online soon. Things are going great- or they would be if you weren’t constantly driving out to the properties to fix leaky sinks and squeaky doors.
We like to think that buy-to-rent properties are the proverbial ‘turnkey’ businesses that send you regular money without any input, but that’s just not true. You might luck out with a property that doesn’t need much maintenance and smart, responsible, self-sufficient tenants who can take on some repairs themselves, or you could get tenants who’ll call you at 3 am because the doorbell doesn’t sound quite right. Multiply that by three, four, fives times and you’ll find that what should have been a way to stop working has become another nine to five (or more.)
The answer is to hire a property manager: a professional with generalist experience in home repair and dealing with tenants who is the first person that tenants call when they have a problem. They can be part time, full time, or even provided by agencies in some larger property markets. They can be a great way to scale up your property portfolio into an empire.
Say your properties have been causing a lot of trouble lately- constant calls, repairs that break the moment you’re out the door, threats of legal action. This is probably when you’ll be considering getting a property manager but take a step back. If you get the repairs right, are they likely to reoccur? You don’t want to hire a property manager only to find that they’re not needed.
There are no hard and fast rules for how many properties you should own before you need to hire a property manager- this is something that you will have to work out for yourself. If you have an office complex or shops, then there is greater reason to get a property manager: your residents will be less forgiving about maintenance issues disrupting their business.
Somebody who has already worked as a property manager would be ideal, as would be somebody already working part-time as a property manager who would like some extra work. You may have to employ somebody who hasn’t worked as a property manager before, in which case you’ll need to find somebody with a good mixture of responsibility, integrity and technical skills. They could have to do almost anything in their capacity as a property manager and be smart enough to know when to call in contractors.
You don’t have to have a multi-storey apartment block to have a building superintendent. Even if you have a few properties dotted around town you can have an arrangement with one of your tenants for them to be the first call from other tenants when something goes wrong. A retired person with time on their hands and some technical skills would be a good fit here. If they are friendly and trustworthy, they can also help with collecting rent and other issues that might come up.
There won’t be too many problems that a property manager can handle with their bare hands: if you want them to be effective, they’ll have to have materials, tools, and a place to work from. They might even need a vehicle or subsidized gas if you have properties in different parts of the region. Some property managers will have their own equipment and transport, so you’ll have to work with them to fill gaps in their inventory to fit your needs.
They’ll also need a budget for supplies and, possibly, contractors for major projects. This could turn out to be a contentious issue for you both, so it’s important for you to have clearly defined processes for spending: who are your preferred contractors? How much can they spend without clearing it with you first? When and how do they submit receipts?
After costing out your property manager’s salary, estimating their expenses and thinking about whether you can justify increasing rent prices, you can make an informed choice about whether a property manager is a right choice for you. If you’ve bought income properties because you want to retire and take it easy, then the investment will be worth it as long as you’re still making enough after expenses. If you’re still relatively active and have useful skills that you can bring to bear on the upkeep of your properties, then it’s probably smarter to save your money, expand your portfolio and only make the switch to having a dedicated property manager.
A property manager is arguably when your property investments go from being a source of passive income to a business. They can be a major asset or a major liability, so let us know if you’re planning on hiring a property manager. We’ve had experience developing investment property in St. Paul and the surrounding area, so we’ll be able to offer helpful advice on building a property empire.