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Should I Manage My Own Rental Property or Hire a Property Manager?

by Jason Hanson on March 26, 2012 · 5 comments

  
hire property manager

There are many good reasons to manage your own rental properties. First, there is the common saying that “nobody cares about your property as much as you do.” That’s true and nobody will likely try harder to find and keep good tenants than you will.

Another reason to manage your properties is because it will save you a good amount of money. Most rental companies will charge you 10% of the monthly rent. Therefore, if you’re renting a place for $1,500 a month, you’ll have to pay the company $150.

Of course, the biggest amount of money comes every time the rental company brings you a new tenant. Companies charge anywhere from half of the first month’s rent to the entire first month’s rent when they bring you a new tenant.

But despite all of the benefits of managing your own rental property, I recently told my brother-in-law to hire a property manager for his home that he needs to rent. He is an accidental landlord that just got a job in another state and has decided to rent out his house in the meantime because he plans to come back to the area.

He knows very little about being a landlord and doesn’t really want to be bothered by the house. The only reason he was considering managing the place himself was to save money. But I told him that this is one of those times where trying to save money will likely cost him a lot more in the future and that he needs to hire a property manager.

First, my brother-in-law is going to be far from his house. He won’t be able to check on it and won’t be able interview tenants, which is one of the main reasons I told him not to do it himself. Another reason is because he doesn’t understand that being a landlord takes work and is not something you can do half-hearted. He’s the type of landlord that would attract professional tenants who take advantage of him and live in the house rent-free as it takes him forever to evict them.

The bottom line is, there are certain times to manage your own properties and times when you need to hire someone to do it for you. If you’re going to be 10 hours away from your property and if you want very few headaches from you property then I would definitely hire a rental company.

To tell you the truth, if you live down the street from one of your properties, but still don’t want to put in the work to manage it smartly, then you should hire a property management firm too.

Photo: Christopher Sessums

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{ 5 comments… read them below or add one }

Karen Rittenhouse March 26, 2012 at 6:17 am

Excellent article, Jason.
I managed my own properties (about 50 of them) for over 5 years and, because so many people asked if I’d manage theirs, I now own a property management company. I am, therefore, intimately familiar with both sides of the concerns and decisions.
No matter what decision a property owner makes, it’s imperative that they be informed/educated. As you said, managing a property is, basically, a full-time job and not to be entered into lightly!

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Arthur Garcia March 26, 2012 at 4:46 pm

It is true that no one will take care of your property as well as you do, but I don’t want to spend my free time showing vacant properties and handing the day-to-day call. I have a full time job.

I’d rather focus the extra time growing my business and raising capital. I think in the long-run (at least in my case), I’ll be more effective and have more freedom of time.

Plus, if you get enough rentals, you can use leverage (scale) to get better pricing. My partner and I combined our portfolio of rentals to negotiate 6% PM fee. Hard to beat that.

Thanks for posting!

AG

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Steve March 26, 2012 at 10:06 pm

The other option that makes sense for some is paying a pro to place a tenant and handling the day-to-day management on your own. Managing is a lot of work.

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Sharon Vornholt March 27, 2012 at 7:30 am

A lot of folks I know that have grown their rental portfolios to a sizeable number or properties have come up with another solution.

They create their own property management company as a secondary business. They hire someone to manage the day to day work (so they are still not doing that dreaded job), and they still pay the property management business 10% or whatever the typical percentage is for managing their properties. But the difference is that they own the business so in actuality they still keep the money. It’s one more profit center for them. I don’t remember the exact way they have structured the entity, but I do remember that it is set up to take the best advantage of the tax situation for that type of business.

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Amber April 2, 2012 at 2:52 pm

We have several rental properties and have rented on our own and also used a property management company. It really comes down to personal preference and if you have the time to invest yourself. But if time is money for you a property management company is the way to go.

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