For many in real estate this question comes up repeatedly over the years. To be honest, I can’t think of another question that for every good reason to use one, you can find an equally good reason not to use a property manager. In many cases, I think you could reasonably argue that it’s a matter of preference.

That being said, I do think that there are clear situations where it makes absolute sense to use one consistently and other times when I think you as the owner should be managing the property as much as possible. I think there’s a lot of misunderstanding over what a property manager does and doesn’t do. In my younger years, I rented and had the experience of dealing with owners and property managers—sometimes a single manager other times a company that would send out different reps over the year. As a landlord for the past 14 years, I use a property manager for one singular property and directly manage the rest of my properties.

A property manager can be a great asset; they can do as much or as little as you direct them too. They can find tenants, deal with tenant issues, coordinate repairs, pay bills and collect rents. In theory, you could find an individual/company to manage your property to such a degree that aside from the money flowing in and out of your bank account, there wouldn’t be any other evidence you actually owned a property. They’d take care of just about everything. On the surface, that sounds attractive but quite clearly, there’s a cost to this level of service, financial and otherwise.

Of course, a property manager can equally be a great liability. Just as an absentee landlord is disastrous over time for a property, an absentee property manager is just about as bad. An incompetent property manager can cost you tens of thousands of dollars in Rent Board complaints, rent arrears, vacancies and maintenance problems as a result of neglect.

Obviously if you decide to go the route of property management, you’ll need to do your homework to ensure you’re hiring the best candidate. And most likely, despite all you research, you won’t know whether or not you’ve made the right decision until months down the road. As such, whether you’re a novice or experienced owner, it behooves you to have clear communication prior to beginning the relationship and pay close attention to what the PM is and is not doing. Even simple miscommunication can result in expensive mistakes.

Let’s take a closer look at some of the pros and cons of hiring a property manager. The most obvious positive is that it can free up time for you. Depending on your lifestyle, work habits and experience, this aspect of management will vary in its importance to you but for many experienced owners, they simply may have so many properties that it is not feasible for them to manage them directly. And if you’re trying to expand your portfolio significantly, you simply won’t have the time to do it all yourself. Geography might play a role in your decision as well. Owning a property 200km away in a different town may leave you with no choice but to hire. The second benefit, at least in theory, is that you’re getting an experienced hand to watch over and steer your property to better results.

The “experienced hand,” argument is something I don’t think gets examined closely enough. It’s almost always assumed that the property manager has experience that you may not possess and has a level of detached professionalism that will allow him to run your properties properly. I can see this argument easily but I don’t think it plays out in practice as much as we’d like. I must admit I don’t have a ton of experience in dealing with property managers as I’ve preferred to be a hands on owner but what exposure I have had over the years, I’m left with the impression that the skills and results they bring to the table isn’t likely to be all that much better than most landlords. I would argue that no one will care about your property more than you.

I also take the contrary view on property management—if you simply have too many properties to manage yourself, then it is perfectly reasonable to hire professional management. I would make an assumption in these cases that you’re experienced and you know what to look for in property management and know the warning signs of poor management. I would still encourage any owner to watch carefully; after all even if your building is modest, it’s still likely worth several hundred thousands of dollars and as such, it bears careful oversight. Put another way, if I placed $250,000 in cash in a pile in your backyard and weighed it down so it wouldn’t blow away, how carefully would you watch it? If you hired someone to watch it, what steps would you take to make sure that person was watching it properly? Point is, this is your investment, it’s your reputation, and it’s your responsibility to ensure you have the best running property you can deliver.

For beginners and low intermediate investors, I also take the minority view point that you should avoid property management. I can’t tell you how many articles I’ve read and how many real estate seminars encouraging new or junior investors to hire a property manager and pay that manager anywhere from 5-10% of gross rents to manage their new property. I think that in the majority of cases, it’s a ridiculous proposal based on flawed logic. I also think there’s a misunderstanding amongst many junior investors that out of the fee you pay, the property manager will cover repair costs. That is not the case, repairs/property improvements will be charge over and above any ongoing fee. Effectively, the property manager is more or less a middle man, with you at one end and your building at the other.

The argument that these articles and seminars pose as discussed above for junior and low intermediate investors is twofold, the property manager is an experienced hand, while you are not; and you the investor wants to be hands off and not deal with tenant fights or phone calls for a broken toilet in the middle of the night. Personally, I think this logic is deeply flawed.

People talk about real estate being a passive form of investing with little hands on effort required. Some of them go so far as to suggest, all your efforts are front loaded in finding the property but once purchased, it’s simply a matter of collecting rents and paying the bills and mortgage. Nothing could be further from the truth in my opinion. While it is not likely to be a 40hr a week job, it will take up portions of your time, some weeks very little, other weeks a whole lot. For someone to take the time to go out and purchase a property and invest several hundred thousand dollars, it behooves you to spend the time learning the business of owning and running a property properly. If you pass off this task to another, it’ll take you countless years to learn the business. Any form of investing, should have at the heart of it, a willingness of the investor to do the reps, to pay attention, to do their homework. What is wrong with learning the business hands on? How could one ever truly get to know the building and the business by simply writing cheques to others to take care of their investment? And if the investor remains somewhat or significantly ignorant of the building or business in general, how will he know that the people he’s hired to watch over his money, are doing a good job? In my opinion, it makes good sense to find someone to help guide and teach you but you as a new or junior owner needs to pay attention, you need to be hands on and learn the business. Every building, every ownership situation is somewhat unique and given this uniqueness, it provides you an opportunity for some excellent learning and experience, rarely found in books and rarely appreciated nor understood without direct involvement.

You shouldn’t feel that “hands on” ownership is a bad thing. Having to resolve a tenant dispute isn’t necessarily a bad thing either. This is your building, take pride in it; appreciate what you’re learning as you’ll be picking up some very valuable skills—money management, budgeting, conflict resolution, property development amongst many others. Why wouldn’t you want to create, develop, enhance these skills? If you don’t, perhaps this is a form of investing not suited for you. And quite frankly, if you’re writing a cheque to a property manager each month for 5-10% of gross rents, don’t expect to make much of an operating profit anytime soon as that expense will likely push your operating profits to zero or below.

Not to put too fine a point on it, I see far too often, articles and seminars that hint or, in some cases, stick it right in your face, that owning rental real estate just about the easiest thing possible. Well, the reality is significantly different. Being a landlord is easy at times but there are many situations that are difficult, stressful and solutions aren’t always obvious. That is ok, my argument is, experience these situations, deal with them and learn from them hands on. Recognize that the world of real estate isn’t built on black and white answers but rather there are many situations where it is gray. In other words, there are a lot of situations where the answer to your problem will be very specific to the situation. That will mean that in situation A, you may be forced to implement solution B but next time the problem crops up, solution B may not be appropriate whatsoever. Recognize this, be prepared to be creative and have a willingness to keep an open mind and be prepared to change your mind from time to time. Nevertheless, this isn’t a negative, it will be a positive for you and it will equip you with skills to allow you to slowly and properly develop your portfolio. And in the end, that’s a good thing and not something any investor should ever shy away from regardless as to their experience