Managing Your Rental Property: Hiring a Property Manager vs. Self-Management
Real estate is a smart addition to any investment portfolio because it is generally stable and can yield years of passive income. Property almost always appreciates, making it even more attractive to investors.
However, while renting out real estate is a lucrative opportunity, there are responsibilities involved that owners should consider as they transition into the landlord role. Do they want someone else to manage operations, or would they prefer to take care of the daily aspects themselves? Keep reading to discover the essential considerations when determining whether to hire a property manager or manage a property yourself.
Why Hire a Property Management Company?
Many owners ultimately decide turning to a property management company to run the operations of their properties is the best move due to the extensive benefits this kind of partnership offers.
Property Managers Handle the Nuts & Bolts
Managing rental properties can be a significant time investment. If the owner has other responsibilities or is involved with multiple projects, handling day-to-day operations may be too much to juggle.
Keeps Properties Occupied
Running one or more rental properties or multi-family homes involves numerous tasks before and after each tenant signs a lease. Marketing the property and occupying vacant rentals is an important objective. Someone must manage advertising, set rental rates, perform tenant screenings, prepare leases, and collect rent.
Manages Tenant Issues
Aside from getting properties rented, someone must handle unexpected events—for instance, fielding complaints, completing preventative maintenance, making repairs, moderating tenant issues, enforcing leases, and initiating evictions.
Connecting with an experienced property management company can ensure nothing falls between the cracks and eliminates owners from dealing with potentially stressful situations, things experts are prepared for and trained to manage.
The Cons of Hiring a Property Manager
Property management offers many benefits, but investors should be prepared to trade off a few things for the convenience property management offers.
Loss of Experience
Owners who distance themselves from day-to-day operations don't get the chance to gain the experience associated with being a property manager. Some owners are content with this distance, while others may want to learn the nuts and bolts if they eventually decide to take on the task themselves.
Inexperienced Property Managers
Like any industry, there will be companies that may disappoint in service or expectations. If this occurs, the benefits of having a company run rental operations are negated. Plus, poor property managers can create conflicts with tenants and lead to undesirable vacancies.
Every property management company will charge a fee. Most are fair, but their other services may drive up the price. For instance, if they handle maintenance in-house, this might be more costly than hiring a contractor on an as-needed basis instead of having a salaried employee waiting for work. These drawbacks can mostly be offset by solid vetting of property management companies to partner with and putting specific terms in contract agreements.
The Benefits of Self-Managing an Investment Property
It's not uncommon for owners to opt to become hands-on landlords. Individuals who take this route find they'll enjoy several benefits.
Get to Know Tenants
Landlords often have the opportunity to get to know their tenants. Over time, landlords can develop stronger relationships with occupants to provide that "personalized" touch, which could result in a lower turnover of tenants.
Self-management of rental properties offers a high degree of control over day-to-day operations, which some owners prefer. They get to intimately know everything going on with properties and know what to expect or how to mitigate problems.
Getting involved with running rental properties' actual nuts and bolts provides a solid landlord experience. Owners learn how to perform small DIY jobs, navigate options to find the best contractors, and learn more about state laws, ways to expand, and other business strategies to help them grow their wealth and potentially invest in more real estate. Some owners much prefer being heavily involved with the operations of their properties and enjoy autonomy.
What Investors Should Prepare For When Self-Managing
Much like other professions, self-management of properties can lead to challenging situations. New landlords should prepare themselves and know what to expect to avoid burnout and other challenges.
Being a hands-on landlord is a big commitment because tenants will be directly contacting owners as the point of contact. This may mean 3 a.m. phone calls, heat or A/C outages, managing difficult tenants, and ensuring everyone is living amicably. Other stressful situations include tenants breaking leases or dealing with evictions.
Those managing properties and the tenants who occupy them must thoroughly understand laws and ordinances, including Fair Housing laws, Fair Credit Reporting Act, applicable state laws, and local regulations.
Setting Correct Prices
Real estate rental prices will need to align with the current market. If a landlord sets the rent price too high, finding tenants will be challenging. However, setting it too low can result in lost profits. Investors who don't prepare to handle these and other issues that crop up during any day will often turn to a knowledgeable property management company.
Is It Better to Hire an Expert or Self-Manage Rental Properties?
Deciding to partner with a property management company or act as a landlord is a very personal decision for any investor because each approach has advantages and drawbacks. Factors to consider include personal ones, such as whether the owner already has a full-time job, doesn't live locally, or prefers to keep business/personal lives separate, to name a few. However, by weighing the pros and cons of each option, investors have a solid guide to help them determine the best path to take.