When it comes to managing properties, there are so many questions and issues that arise— among them is if property management software is worth it. As with anything in real estate, it depends on the situation!
Good property management is essential not only to maintain good tenant relationships but, of course, for the business side as well. It can lower the investment risk and maximize the return on investment (ROI).
For some landowners, investing in a property management software system was one of the best things they did to help their business. The software system helped streamline the tenant management process.
What is property management software?
Whoever is in charge of the day-to-day activities of maintaining a property has a lot of work on their plate. Property management software helps landlords, real estate professionals, and investors keep track of everything from leases, rent payments, and maintenance tasks and moves the bulk of tenant relations online. There are many kinds of property management software to choose from, though they all cover accounting, management and leasing, and operations in one form or another.
The hidden value of this property management tool is that it automates routine tasks and frees up time for landlords to focus on more important things, such as finding tenants and even finding new buildings to invest in. Here are some of the software’s features.
Helps streamline accounting
- Handles all of the accounting, including the general ledger, accounts payable, and rent payments.
- Most systems assist with bank reconciliation and generating financial reports.
- Creates easy-to-read reports for monthly operations.
- Come tax time, it will make it easier to prepare tax statements for the property and vendors.
- It produces timely reports regarding who has paid and who is behind on rent.
- It will generate the appropriate letters to those who are behind on rent.
Can come with a website accessible to prospective tenants
- View all available properties with pictures and descriptions.
- Apply directly online for one of those properties.
- Review terms and policies.
Current tenants can use it too
- Set up automatic ACH rental payments.
- Review their accounts.
- Send maintenance requests.
Help with marketing
- The software can generate ads when a unit comes up for rent, leading to more out-of-state business.
More on property management apps from BiggerPockets
Why property management software?
All of these features help to greatly increase efficiency and productivity for the rental property business. Even better, it can dramatically reduce the number of phone calls both from prospective tenants and current tenants because much of what they need can now be found online.
Be warned, though, using this software requires a lot of upfront work inputting data. It does not automatically know anything about the property. Someone has to input all of that stuff, which can take a significant amount of time. These systems can also be pricey and are not perfect as they are often designed more for a management company than owners or managers.
Confused? Don’t be. BiggerPockets’ guide to property management software will walk you through all the ins and outs—and help you choose the best program for you.
Who should use property management software?
Landlords who manage their own properties should consider signing up for property management software. This makes even more sense for small landlords who do not want to deal with a property management company.
Property management software takes out a lot of the guesswork on how to run a rental property smoothly. Aside from streamlining the business process, you can access the software on any device: laptop, phone, iPad, you name it. This property management tool will also free up more time for the landlord to work on high-priority issues instead of trying to do routine tasks themselves.
Property management software vs. DIY property management
Unless a property owner has years of experience managing rental properties, the DIY route may not work out as well as they hope. There are plenty of legal liabilities that they may be unaware of, and the learning curve may be steep depending on the type of property. That does not mean that landlords should run and get a property management company (getting to that next). That could cost an arm and a leg, plus it does not make sense for rental properties with 10 units or fewer.
As with any tool, property management software is meant to make running a rental business easier. Managers who don’t use this type of software probably have dozens of spreadsheets and their own system to keep track of payments and leases. Unless they are super organized, things may fall through the cracks. And ultimately, that may lead to costly problems.
Being a landlord can be fun—if you do it right
No matter how great you are at finding good rental property deals, you could lose everything if you don’t manage your properties correctly. Being a landlord doesn’t have to mean middle-of-the-night phone calls, costly evictions, or daily frustrations with ungrateful tenants.
Property management software vs. hiring a property management company
Property management software is the approachable middle ground between DIY property management and hiring a property management company. The cost of the software averages out to a couple of hundred dollars a month. This is still more cost-effective than hiring a property management company, which usually charges a percentage of the rent (among other things).
Plus, the software helps automate the management process, allows the landlord to be in control, and, depending on the software, it may have resources landlords can use like educational materials and customer service.
Is property management software worth it?
It depends. If the landlord has a good accounting system in place and only a few properties, it may not be worth it. But once they acquire 15 or 20 properties or hate the hassle of developing and posting ads or dealing with the accounting, these systems start to make economic sense. Then it may be time for landlords to look into this wise investment.
Landlords should make sure to shop around and ask for recommendations on which software to invest in. There are many different companies out there, each offering different bundles of services and different pricing structures—some are even free! Landlords should test drive a few to see which is more user-friendly and matches their property type. After a few weeks of research, they will find the one that best fits their needs and will never look back.