The Hired Management Decision for Rental Investors

Photo 1

When Should You Hire a Property Management Company in Arizona?

Rental property investing in Arizona has become much more popular recently. Admired TV shows about real estate investing bear this out. Successful investors add to their portfolios, building cash flow and wealth.


STATUTORY AGENT REQUIREMENT: Arizona Residential Rental Property

In the state of Arizona, an out-of-state owner / landlord of residential rental property must have an in-state "statutory agent" (see A.R.S. Section 33-1902.B), which is different than a property manager. A property manager manages the property, collects rent, pays TPT taxes, etc. However a statutory agent receives notices and legal services of process on behalf of the owner. Should an out-of-state residential landlord fail to have a statutory agent, the landlord is subject to substantial statutory fines as well as legal grounds for a tenant to terminate an existing lease.
Because of this requirement, many out-of-state landlords find it practical to hire an Arizona property manager because they can be more responsive to complaints, requests and any legal representation if necessary.

Most small rental real estate investors in Arizona start with a single rental home. Once they gain confidence, they want to add more. At some point, the management tasks pile up, and the property owners think about hiring them out. It is a big decision, and it should be on your mind earlier when you buy that first home. 
Giving some forethought to hired management helps you budget for it in your deals. Even if your plan is to self-manage at the start, the agreement should include money for an eventual hire. Think of it as paying yourself to manage your property. If you ignore the future cost in present transactions, you have to change your due diligence later. 

You don't have to get the entire cost in early deals, but at least begin to factor in some management expenses. Consider it your bonus for your super management skills. You'll be glad later, as it will be easier to transition into hired managers. For a general estimate, begin to budget toward 10% of rent as a cost for professional management.


Some investors start right out with a hired management company because they prefer to delegate the interviewing and screening of prospective tenants. They also don't want the hassle of dealing with the occupants, and it's worth it to them to have someone else collecting rents and handling maintenance calls.


If you can do a rental property deal with an extra 10% in the cash flow for management, you might consider doing it yourself. When you're checking the ROI at tax time, an additional 10% is a nice bonus.


However, if you're hesitating to buy another rental because you're already working too much, it may be the right time to hire out. Besides, you leverage your equity to buy more rental homes, so why not leverage your time as well? You can relax while you build your rental portfolio.


It doesn't hurt to start early with a property management company. Richard Real Estate Sales & Property Management is a family-owned and operated company who's been in Arizona for 40+ years. Contact Patti for a complimentary property management quote: 623-386-8762 

Run the numbers on your current rental(s), and then factor the services into your deals. A rental property provides an excellent path to wealth and comfortable retirement. Only you will know if and when the time is right to seek outside help with management.

Yes! I Need Your Property Management Services!