Do we still have to pay the property manager if we found a tenant via another property management company or any other source?
The manager isn’t earning a commission for bringing on a tenant – you have just aligned the incentives that way.
Now if you have the contract written so that the property manager is paid a percentage of rent collected,
you might be able to weasel out of payment. But that management firm is going to expect to be your collection agent throughout the rest of the lease term, or you probably aren’t compensating them to work very hard for you. Doing an end run doesn’t seem like a very good way to forge a partnership between you and your property management company.
If the contract has you paying the property manager a set monthly fee not related to rent collection, then the source of the tenant doesn’t matter, except insofar as you’ll have to pay a commission to another manager or realtor or somebody else.
That said, when you forego the property manager’s input and processing with a new tenant, you give up a lot of value. Much of the value that property managers deliver comes at the point of tenant recruiting and selection:
- Application screening
- Employment/income verification
- Credit checks
- Criminal background checks
- Property showing
- Move-in inspection and inventory
- Regulatory and legal compliance
Don’t overlook the importance of that last point, because using a professional, trained property manager can go a long way to preventing you from running afoul of any number of state or federal anti-discrimination laws. That is a big part of any landlord’s risk management strategy – or should be.
Furthermore, in the event of something going wrong, your property manager will generally hold an errors and omission insurance policy – designed to protect you, as much as the manager – from mistakes and miscues and any liability that may arise from them. Naturally, the point of leasing is a critical point, because if the tenant later has a claim involving non-disclosure or failure to accurately represent lease terms, it’s going to come down to that point.
If you let a property manager handle it, you have the manager and their insurance policy standing between you and liability. If you try to do it yourself you’re going naked.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.