Manager vs. Yourself
So you’ve just invested in a new rental property and are all set to become a landlord. But before that, you need to make a major decision. Should you consider hiring a property manager or manage your property yourself? While a few real estate investors have found huge success managing their properties themselves, others have had better results using management companies. Here is a quick look at the advantages and disadvantages of each approach to help you decide.
Hiring a property manager
If only property management was as simple as showing up at your tenant’s doorstep on the first of every month to collect rent! But sadly, that’s not true.
Property management comes with a lot of demands and responsibilities.
A property manager has to be keep himself updated on relevant tenant and landlord laws, interview prospective tenants, show the units, prepare leases, carry out credit and background checks, deal with maintenance issues…and that’s just the beginning.
Without doubt, hiring a property manager will free you from the headache of doing all this on your own. Especially when you have a lot of properties, you live far away from your rental property, you have another full-time job, or you would rather spend your time on improving and expanding your business. Most experts put the magic number at five. If you have more than five properties, own several older properties that require regular maintenance or don’t have the time to give them the attention they need, then you should hire a property manager to do it for you. A property management company can also help you with taxes and deductions and the related paperwork, making your life that much easier.
Hiring a qualified professional may also be a good idea if you don’t have the expertise or knowledge to put together the necessary infrastructure to manage your properties. For instance, are you aware of fair housing regulations and local, state and federal property management laws? Do you have some marketing experience to help you advertise your properties and find new tenants? Do you have standard operating policies to deal with various situations that you may face while managing your units? Do you have staff or contractors to handle maintenance issues? Of course, hiring staff to manage your property again comes with its own set of employer responsibilities and obligations such as payroll, workers compensation, and so on.
Many real estate investors also don’t relish the prospect of waking up in the morning to a tenant complaint or dealing with mountains of paperwork day after day. If you are not a people person or hands-on management and interacting with tenants on a daily basis is just not your thing, then you will definitely be better off hiring a professional to look after your properties.
Working with multiple vendors and contractors can also be a tough challenge at times for landlords who are new to rental property management. The wrong partnership can end up costing you time, money, and the trust and goodwill of your tenants.
For sure, choosing a property management company is not an easy task- or one to take lightly. But the right decision can help you increase the value of your property and derive more income from it than ever imagined.
Managing the property yourself
Managing your properties yourself, while costing you a lot of time, will help you keep a close eye on the day-to-day operations, and save you some money on property management fees. If your property is new, it may also not have any maintenance or repair problems in the early years, making it easy to manage it on your own.
To start with, you will have to spend a considerable amount of time coming up with documents such as applications and leases, and defining standard processes and policies that tell you and your tenants what to expect in common property-related situations. If you are tech-savvy, you can also purchase landlord property management software that can help you keep track of payments, leases, and tenant and contractor contact information.
Moreover, if your rental properties are not just an investment for you and you actually look forward to interacting with your tenants or handling routine management tasks, then you may even enjoy doing it. Just make sure that you always keep yourself informed about the various tenant/landlord laws and fair housing rules. You should also have an experienced landlord attorney on retainer to help you deal with complicated legal situations that may arise such as lease disputes or evictions.
However, one major disadvantage of managing it yourself may be the difficulty in assigning an actual value to your time spent on various management activities. This can become especially relevant if you plan to sell your property in the future and other investors want to know how management expenses will affect the net operating income.
Also, you need to have some marketing knowledge to market your properties effectively, find new tenants, and keep property vacancies at a minimum. This is, perhaps, the toughest and most time-consuming part of managing your own property. A property manager, on the other hand, knows how and where to market his properties so that he gets new tenants in the shortest possible time.
Moreover, an experienced property management company has established screening processes and guidelines that help them weed out potential troublemakers at the application stage itself, whereas a newbie landlord can find it very difficult to protect himself and his property from rental scams targeting owners.
In short, if you have multiple properties, managing them can quickly become a full-time job leaving you with very less time to focus on other business opportunities or enjoy and appreciate life outside of your investments.
Remember, the success of your real estate investments depends greatly on how well they are managed. Doing it the right way can help you reap a lot of benefits.