Should you hire a management company

Investing in a property to rent it out for cash flow can be quite overwhelming when you do it aside from your normal job / activity. The whole process of becoming a landlord takes time, energy and patience (but I will come back to that subject in another post). Then, you have to prepare the property so that it’s welcoming for the renter, find a renter, collect the rents, check if the place is ok when the renter moves out, and go for another round of fixing up the property if necessary, finding a renter, etc.

If you live close to the property that you plan on renting out, you might decide to take care of the management yourself. The advantage is that you keep control of everything going on and it is probably a cheap option. The disadvantage, unless you actually enjoy doing those things, is that managing and repairing takes up time and energy and it might be worth paying a commission to a management company in order to free yourself from the hassle and enjoy the extra time with your family and friends. This is really your call.

Now, if you don’t live close to your property, don’t think twice, hire a management company! You know how our slogan on shortoncashflow.com is “Learn from our failures”, well, take it from us: we did hire a management company but not until we had fixed up the places ourselves and had our friends find renters. Fixing up and furnishing the place before any renter moves in can be fun but it’s not when it comes up to repairing what your renter broke. We had our friends find renters so that we would save money on the management company’s commission, but the reality is we ended up powerless facing a dishonest renter. Had we made the effort to pay a company to handle rental issues in the first place, we would have saved hassle, stress and, all in all, it wouldn’t have been more expensive.

In my opinion, it’s worth dedicating around 15% of your rental income (18% including insurance coverage and legal protection) to have the services of a management company because, eventually, the time and money you’ll spend on solving problems off location will probably amount to the same, only with extra hassle (note that the prices are based on our experience in a town in Northern France, it might be different in a bigger town or in another country).