It is the age-old question every landlord must face: Should you manage yourself or hire a property manager? It’s not an easy question to answer and it depends on all sorts of different factors including your available time, money, inclinations and personality.
To help make that decision, it is helpful to look at all the pluses and minuses to either managing or self-managing. In that spirit, here are the top five advantages of each.
Hiring a Management Company
1| Save Time
There is only so much time in a day and every second you spend managing your properties is a second you can’t spend looking to buy more, or just relaxing for that matter. This is a major opportunity cost you will incur if you manage yourself.
2| They Know More About Management (usually)
Specialization is a key component of any advanced economy. Not surprisingly, property managers specialize in property management. (At least any that you should consider hiring do.) There will be a steep learning curve if you decide to take it on yourself and you should expect to make a good number of mistakes in the process.
3| Structure Already in Place
In the same vein, property managers already have the key structures and systems in place that you would have to build from scratch. Most property managers already have leasing agents, maintenance techs, an attorney they’ve built a relationship with and a list of other vendors. They also have all the forms and paperwork; such as a lease, 72-hour notice, etc. as well as a property management software and policies and procedures. Finally, they will be more familiar with landlord-tenant law. These are things you would have to put together if you decide to manage yourself.
4| Outsource Headaches
A lot of things about property management are not exactly pleasant. Hearing from an angry tenant about how some maintenance item wasn’t fixed right or hearing anther sob story about why they can’t pay rent is exhausting. With a third-party management company, they hear these stories and you don’t.
5| Easier to Say “No”
It’s often harder to say “no” to someone directly than through a third party. If a tenant makes a ridiculous request, it can be harder to say “no” to that tenant directly than to that tenant through the property management company when your manager contacts you about the issue. And in property management, you will need to say “no” quite a bit. This point is especially important if you are on the more sensitive side.
And here’s the scorecard for managing yourself.
Managing Your Own Properties
1| Save Money
This one is pretty obvious. Most property management companies charge eight to 10 percent of the monthly rent as well as half to a full month’s rent for a newly signed tenant. That’s all money you get to keep if you manage yourself.
2| Gain Experience
Nothing teaches faster than just doing it. And that’s as true for property management as it is for anything else. Getting your hands dirty is the best way to learn about it. Furthermore, this knowledge can translate to other sides of real estate. If you start to realize that it’s particularly difficult to manage in a certain area, that can help you decide that it may be better to look elsewhere to buy as well. This is something you might miss with a third-party property management company .
3| More Control
Quality control is always a challenge with third party vendors. Indeed, we have had several bad experiences with property management companies that had poor standards in everything from maintenance to turnover to tenant screening. These things can really come back to bite you. Even if you outsource your management, you still need to “manage the manager” to make sure these things don’t slip. It’s a lot easier to make sure they don’t slip if you do them yourself.
4| Avoid Being Ripped Off
On a similar note, some property managers aren’t just incompetent, they’re dishonest. One property manager we know went to prison after it became apparent he was robbing Peter to pay Paul and using tenant deposit accounts to pay out owner distributions. Even with such shenanigans, he was still almost six months behind on paying out owner distributions. A lot of owners lost a lot of money when that house of cards came crumbling down. It’s not always this dire, though. It may just be that the property manager takes kick backs from certain contractors. Regardless, that money comes out of your wallet.
5| You Care the Most
Finally, and probably most important, no one will ever care about your properties as much as you will. If one of your houses is vacant, that is of the utmost importance to you. To a manager, it may just be one of ten vacancies they need to fill. This difference in motivation can be a major determinant in how well your properties perform.
No matter what you decide to do, it’s important to put pen to pad and come up with the positives and negatives for each approach. Hopefully, this has helped you organize your thoughts and decide whether managing yourself or hiring a third-party property manager makes the most sense.