A Property Manager’s Guide to Outsourcing

2016-03-07

A Property Manager’s Guide to Outsourcing

Because sometimes insourcing is counterproductive.

A business card with the word 'Freelancer' on it.Property managers need a lot of people on their team. At the minimum, an effective property manager needs to be able to prep a new home to make it rent-ready, get a tenant into the home, collect rent, evict problem tenants, provide maintenance of the home through both occupied and unoccupied periods, and provide thorough reports to the owner about everything that happens along each of those steps. That means that, at minimum, a property management office needs:

  • A home inspector,
  • An experienced general contractor with an existing network of specialized subcontractors,
  • A licensed real estate agent,
  • An advertiser,
  • A tenant screening specialist,
  • An assistant or secretary,
  • A handyman,
  • A locksmith, and
  • A lawyer.

The contractor and the lawyer have to be hired; there’s just not enough time in the day for a PM to be their own contractor, and representing yourself in court is just asking for trouble. If a PM has only a few properties, they can admittedly handle most of the rest of the tasks on their own…but who wants to be a property manager’s capacity-exceeded property? Clients looking for a serious property manager are going to want to hire one with a sizable number of properties under management, which means you’re going to need people.

The question, for each role, becomes ‘do I hire one, or outsource that job?’

What’s The Difference?
Hiring someone means giving them a job. Outsourcing to someone means giving them a task.

When you hire someone, you’re essentially committing a certain number of hours/pay to that person. For example, if you hire a handyman, you’re telling them “it’s perfectly reasonable to expect that you can perform handyman functions for me for 35+ hours per week for the foreseeable future.” If you outsource a function, you’re not committing to anything — you’re saying “I may or may not need you to do this for me at any point in time.”

Which Is Better?
That depends on a lot of factors. If you have a dozen properties, it’s not likely you’ll be able to keep anyone but the handyman and the secretary busy enough for them to make a living off of being your employee. If you have a hundred properties, you can easily keep most of that list on their toes all month long. You can also find people who can perform multiple roles – maybe one person to do inspection and take marketing pictures — and hire them part- or full-time depending on how busy you can keep them.

In general, however, there are some aspects of a property management business that are better off outsourced simply because they are erratic. Advertising, for example: if you’re experiencing enough turnover each month that you need a full-time advertiser, you have some serious issues with your business practices. Advertising is important enough that you want to consistently work with the same team, but you don’t need to have that team on your payroll — find a solid contractor, and pay them by the ad. Again, depending on the size of your business, you may find that outsourcing your tenant screening, your home inspections, and even your business functions (i.e. payroll, invoicing) is more efficient than having them performed in-house.

Ultimately, it comes down to efficiency: if you’re paying someone when you don’t have any work that falls within their specialty, you’re probably better off finding an outsourcer who can handle it.

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