If I didn't have access to a good, competent property management company, I wouldn't have even considered buying rental properties in the first place. That's the honest truth.
Knowing that I can pay a very fair price for someone else to handle ALL of the headaches that rental properties are known for is a total game-changer.
At this point, I'd like you to take a moment and ask yourself two questions.
Would you rather…
A. Create a Permanent Job For Yourself as a Manager of Rental Properties?
B. Retire Early With a Portfolio of Passive Real Estate Income?
Technically speaking, you can't do both because both of these paths are fundamentally opposed to each other—they lead to two different places! If you want to create a permanent job for yourself, you can't retire early. And if you want to retire early, you can't create a permanent job for yourself.
When I started my rental property business, my goal was to take Option B because I didn't want the money to stop coming in once I stopped working. I wanted streams of income for a lifetime.
Advantages of Hiring a Property Management Company
This is where the benefit of a property management company shines. Even so, I've heard the arguments some investors make.
They just bought their first rental house or duplex, and they don't want to give away 10% of their rent revenue to a property management company.
I GET IT.
I'm not saying this is the wrong attitude, but I DEFINITELY think they're missing some essential points.
Just consider some of the benefits that come with hiring a management company:
1. You don't have to deal with any of the tenant headaches.
Most of the time, you don't even need to know who your tenants are! My management company screens each tenant and makes sure they're going to be a good occupant and make their rental payments. They handle ALL of the time-consuming parts of the job, and they deposit money directly into my account every month.
On average, I spend about two minutes per month thinking about my rental properties while the money builds up in my bank account over time. Showings, screenings, house visits, and evictions are all handled by my property manager while I'm comfortable living my life.
2. You don't have to be a handyman.
Management companies are EXPERTS at repairs and maintenance. They know how to do these things quickly and inexpensively because they do these jobs every single day. Generally speaking, your management company will know more about how to streamline this process than you will ever be able to learn on your own. The reason I outsource my property management is the same reason why I bring my car to a mechanic—because I don't need to be the expert when somebody else has spent their entire career mastering this skill set.
3. You can invest in properties anywhere in the world.
Logistically speaking, if you live in New York, there is no reason you can't buy a property in California and turn it into your own personal cash cow. Just because you can't drive by and see it every day doesn't mean it can't produce a significant stream of income AND be managed better than you could ever do it by yourself.
The whole premise of a management company is to allow you to go about your life without having to deal with the hands-on issues of managing real estate. With a management company in the mix, it makes no difference whether the property is across the street or halfway around the world!
4. You'll make better investment decisions.
Your property manager has a vested interest in you doing well. They're in your corner because if you do well, THEY do well. Every time I buy a new rental property, I have many ongoing conversations with my property manager, getting tons of free consulting from an expert who knows the neighborhood a lot better than I do. They tell me what kind of rent revenue I can realistically expect to make (which coincidentally, is almost always less than what the seller told me), what kinds of issues and costs I can expect to deal with, what the neighborhood is really like, and most importantly if they think I'm actually getting it for a reasonable deal. This information, coming from a credible source like my management company, is a HUGE benefit that I wouldn't have access to if I was trying to manage this whole operation on my own.
5. You can side-step the busy work and focus on growing your business.
Do you think Donald Trump maintains his billionaire status by unclogging every toilet in the Trump Tower? Do you think Robert Kiyosaki earned his financial freedom by personally answering every tenant complaint that came up along the way? Of course not. The big dogs reached their level of success because they knew what to spend their time on.
You're the business owner. Spend your time growing the business and leave the most time-consuming (and dare I say, time-wasting?) tasks for someone who can do the job a lot better, faster, and cheaper than you can.
6. The monthly management fee should already be paid for.
Whenever you analyze and purchase a new property, the deal should be designed to support the cost of a property manager (because SOMEONE will have to do the job, even if it's you!) Before you pull the trigger to buy a new rental property, you should always make sure you can afford to cut out 10% of your gross revenue for property management and still show substantial cash flow.
My property management company charges 10% of my monthly rental revenue for their services. And I'll be completely honest—they are such a vital part of the equation that I would pay even more if I had to.
They're worth it! They provide the most important service of all—they allow me to live a life of freedom. And that makes all the difference in the world.
What is your freedom worth? Is it worth a 10% management fee? It sure is to me—and that isn't going to change anytime soon!