Lesson 1 

Using An Outside Property Manager

      Some people want to reap the benefits of real estate investment, but don't want to personally manage their properties.  If you are in this category, there are a couple of issues that you need to keep in mind.
      First, you need to take this factor into account when purchasing the property because you need to include the cost of outside property management in your analysis of the property.  This cost must include not only the management and/or leasing fees charged by a property manager, but must take into account a few other factors.  Costs vary substantially from management company to management company, depending upon (1) competition in a particular marketplace, (2) the degree of services desired, and (3) the type and size of the property.  The range of fees is typically around 10 percent of gross income for a single-family home to 5 percent of gross income for a large apartment complex, with extra charges for special services (e.g., collecting judgments, major rehab supervision)
      Second, when you do your own management, you are on top of maintenance requirements and, if you are handy, can even do some of the work yourself.  You also have control over work that you can't handle or don't want to do in that you can pick your own vendors.  Management Companies either have their own in-house maintenance division or utilize certain independent contractors.  While the costs of either is often competitive with what you can hire, that is not always true.
      Third, a management company will never have the degree of concern about problems (e.g., vacancies) as the owner.  On the other side of the coin a good management company, for which management is their full-time business, can make up for many of these possible deficiencies by being more competent and efficient.
      One advantage to utilizing a property manager is that it puts a third party between the property owner and their tenants.  We all tend to develop relationships that become personal, and those between landlords and tenants must be kept on a business basis.
      If you prefer to be an arm-chair investor, it is imperative that you use care in picking a property manager.  You should first read our Selecting A Property Manager page.  And, even if you do hire a property manager, you should also be knowledgeable about the aspects of management so that you can recognize when your hired manager is doing his job properly and react quickly if he is not.  The remainder of this course will help you gain the knowledge that you need.