In most cases, you shouldn’t hire a property manager for house hacking unless it won’t ruin the profitability of your house hack or make you lose money.
A property manager will handle rent collection and maintenance calls in the home, but hiring one will be an added expense that might be hard to justify, at least while you’re still living in the property yourself.
The benefit of hiring a property manager is that if you’re not handy or want to deal with property level issues as often, you’ll be able to pass many of those responsibilities to someone else. You might be able to avoid many difficult conversations with tenants.
So, sometimes, those benefits are worth the cost for house hackers.
The Advantages of Hiring a Property Manager
Hiring a property manager can spare you from having to deal with many property-level issues yourself. It puts responsibility for handling leasing and tenant management to someone else.
When you hire a property manager for house hacking, you’re buying convenience. In other words, you’re trading money for fewer headaches.
1. It Takes the Onus Off of You
When you hire a property manager for house hacking, your tenants won’t reach out to you when things go wrong.
Instead, you’ll essentially be one of the tenants yourself. It will be your property manager’s job to resolve issues as they arise.
2. You Don’t Have to Be the ‘Bad Guy’
In a house hack, your tenants are often your roommates and, naturally, you’ll want to keep relations with them as peaceful as possible.
Offloading tasks that can put you in hot water with your tenants like rent collection and property maintenance can be especially useful for avoiding an especially awkward living situation.
But, even with a manager, your tenants might know that you own the property. So you might not be able to avoid that issue entirely.
3. You Get Higher-Quality Tenants
A good property manager will carefully screen potential tenants to ensure that you get the best ones for your property.
Your property manager will handle advertising and will show the available unit(s).
Once you have qualified applicants, you can still make the final call for your manager. Your manager will package those applications up for you so you can quickly review them.
Leasing a unit is often one of the bigger hassles of house hacking and real estate in general.
4. You Don’t Have to be Handy
Some of us are handy, and some of us can’t even tighten a loose doorknob!
If you fall into the latter category, then hiring a property manager will pay dividends in the long run. Strong property managers will be well connected to local contractors, or they may even have in-house maintenance staff.
There will inevitably be leaks, breaks, and jams, but it’s your property manager’s job to have these remedied quickly.
You can still fix those things yourself if you’d like. But a manager might be more experienced in coordinating commons fixes that will inevitably come up.
That said, even without a manager, you can still outsource tasks to contractors if you want. A manager can simply help to coordinate hiring individual contractors to fix things.
The Disadvantages of Hiring a Property Manager
Whereas the main advantage of hiring a property manager for house hacking is convenience, the main disadvantage is cost.
Every convenience comes with a price, and hiring a property manager can come with a pretty hefty one.
1. Your Profits Will Diminish
The principal reason you might embark on a house hack in the first place is to save money and hopefully play your cards well enough to make some profit.
It’s a financially savvy way to purchase your first home and offload the cost of the mortgage onto tenants.
When you hire a property manager, you’ll have to sink a considerable amount of money into your house hack.
A typical residential property manager might charge between 8 and 12-percent of the monthly rental value of your property in management fees.
Sometimes there are also additional fees that accrue.
You might have to pay a full month’s rent if the manager leases a unit to a new tenant.
Simply put, the costs add up.
2. You Will Still Get Looped Into Problems
Whether you like it or not, you’ll still have some involvement in problems as they arise because you’re living on site and are invested in what happens on your property.
And unless you delegate all decision making capability to your manager, you’ll likely still need to give the green light on particular fixes.
It’s impossible to completely divorce yourself from issues in your home and, in some cases, this might negate your reason for hiring a property manager in the first place.
How Much Does a Property Manager Cost?
Hiring a property manager for a house hack will often come with a price tag of about 8 to 12-percent of the rental income you charge.
For example, if you charge $1,500 for a room in your house hack, and your property manager’s fee is 10%, you’ll owe $150 per month in management fees.
You might also have to pay leasing fees when a new tenant is placed or an existing tenant renews. These are often as high as one month’s rent.
Be sure you understand exactly what your manager will charge before you ever sign a management agreement.
Depending on the services your property manager offers, this could be well worth the money for some house hackers and for others, it could ruin the deal.
Make sure to run the numbers carefully before you buy the deal, both with an without property management fees.
Should You Self-Manage Your House Hack?
Yes, in most cases you should self-manage your house hack as it will enable you to save even more on your net housing costs unless you are sure you won’t be able to handle the responsibility of managing your property.
The purpose of a house hack is to live rent-free and to take on as few costs as possible. You’re also living in the property already. Unnecessarily adding the cost of a property manager into the mix could be counterproductive.
If you have the time and the temperament and are happy to be involved in day-to-day issues, then it makes sense to self-manage.
On the other hand, if you’d rather keep interactions with your tenants to a minimum, a property manager could be well worth the cost. But this might be hard to avoid in a house hack where you’re often sharing common areas with your tenants.
If you determine that hiring a property manager delivers enough value in the form of peace of mind, then do it!
Ultimately, property managers provide value. The question is whether the value they deliver is worth it for you and your house hack.
And, remember, you could always outsource specific items, like leasing, if you still are willing to manage other things.
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