Landlording & Rental Properties

Why Managing Your Own Properties is (Almost) Always a Huge Mistake

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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Being a landlord seems to be the go-to for many real estate investors new to the game. However, I can’t stress enough that from my personal experience, this has been the worst decision that I ever made as a real estate investing newbie. This is simply because now that I have been able to witness it firsthand, I can finally understand exactly how much work, effort, and sweat goes into managing your own property. Therefore, trust me when I say that I am totally convinced that this so-called “passive source of income” is far more active than it seems.

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Time is Scarcer Than Gold

Managing a property all by yourself without the help of a property management company will occupy so much of your time, and the thing is, the amount of time that you put into chasing after rent, screening for potential tenants, and fixing the broken sink, you could easily have used to either educate yourself, perform research, or invest in new properties. So while you might be able to save money managing the property firsthand, you will be losing time, which is your most precious asset. Sadly, time is often placed on a lower pedestal to wealth. However, it is important to keep in mind that while you can always generate income, you can never make more time.

Related: Investors: Believe Me, You CAN’T Afford Property Management. Here’s Why.

Living Life Like a Medical Resident

If you want to take on life as a landlord, you will have to brace yourself for some tough times ahead. You have surely heard stories about terrible tenants who completely destroy your home or run off without paying, getting evicted and so forth, but the truth of the matter is, even good tenants can be a real handful!

If you are the landlord, if the sink decides to play up during dinner time, who will the tenants call? You. If you are the landlord, if the electricity suddenly goes out in the middle of the night, who is in charge of fixing it? You. Every little problem with the property is always the landlord’s responsibility. So essentially, being a landlord means that you will always be on call — day in and day out. There is no holiday or designated “break time” for you, as you never know when a problem will suddenly occur.

Still don’t want a property manager/management company to handle all the ups and downs for you? Well, be prepared to embrace being the first one who gets a phone call, even if it means interrupting your much-needed beauty sleep at two o’clock in the morning.

The Nice Guy Syndrome

The truth of the matter is, being a landlord requires guts. You have to be strong, persistent, and (almost) mentally unbreakable. However, the vast majority of us probably relate more to the everyday “nice guy” — as in, you’ll far prefer being an understanding landlord than one who enforces rules with a mighty fist if they ever come head to head with a difficult situation.

For example, imagine having a tenant whose lived in your rental for the past three months who suddenly loses their job — and their mother just passed away. They ask you to let them stay and promise to pay you back once they find a new job. However, four weeks pass, and they haven’t found a job yet. Tell me, what do you do? Sure, it might feel good to play the nice guy, and you might not have the heart to insist that they move out, but being a landlord involves making tough choices — even ones that you don’t like.

Getting Organized Will Make You A Better Investor

Related: 80 Smart Questions to Ask BEFORE Hiring Your Next Property Management Company

Remember, this is a business so you have to treat it that way. If you don’t have the heart to play the “bad cop,” then let the property manager/management company handle it. It will take a huge load off your mind (literally).

All in all, being a landlord isn’t a bad thing per se, but it isn’t something that you should leap into without some prior education. It is mentally tough, time consuming, and requires a whole lot of DIY. So if that doesn’t sound like something you’re into, then don’t jump on the landlord bandwagon, and instead, try looking into some other options that are available out there!

[Editor’s Note: We are republishing this article to help out our newer readers.]

Investors: Do you believe in self-managing your properties or hiring it out? Why?

Let me know with a comment!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Dave Chow Investor from KS
    Replied almost 2 years ago
    I have seen quite some landlords who have been successfully managing their own properties for years without paying PMs. It greatly contradicts posts like this. I guess the title of this post would make more sense if everyone is having properties more than 100+. But still good to have those information if face scaling property units up.
    Matt Altrich Rental Property Investor from Lenexa, KS
    Replied almost 2 years ago
    As a new investor, I would never pay a PM company to manage a handful of (local) doors. In my opinion, that is foolish and a waste of money. I also invest in quality homes (that I would live in) so it’s relatively easy finding great tenants. Toilets are not randomly breaking at 2AM. It’s challenging to understand the business if you’re not involved and you’ll easily be separated from your profits.
    Frank Greco Rental Property Investor from Atlantic Highlands, NJ
    Replied almost 2 years ago
    I manage my own (22) and do it very well (if I may say so). I agree you have to have a certain mindset and stay focused. You have to be fair, firm, non-emotional and act within the confines of the law. I think it all comes down to training, your ability to read people and diplomatic skills. It’s been tough at times but I’m thoroughly connected to the properties and have had tenants that moved out to come back after spending some time with my competitors. Thanks for posting an informative article!
    Rob D. Investor from Riverside, California
    Replied almost 2 years ago
    Self manage here. Once in a great while I may get a late call. I have my own handyman, electrician and a plumber. Rarely do I get such emergency calls. Most calls are mundane something broke and I’ll get someone out there non emergency calls. Sorry but most PMCs are horrible. They charge a lot of money, have crappy service people and do bad jobs managing. They will suck all the profits out of your investment. They could care less if you make any money. If I were to use a PMC it would cost me a minimum of around 12,000 dollars a year. That’s a big chunk of money. That’s just the maintenance fee of 8%. Not counting any repairs or fee me to death charges. They simply go by numbers and place anyone in your rentals. You really think they care if that tenant trashes your place? Or they will do anything about it? As for agents most say they screen, but they really don’t. They write these letters as if they personally know the applicants but really know as much as I do about them. I had these agents present these “great” tenants and when I start digging they wouldn’t pass muster. I wouldn’t trust any agent or PMC with my properties. If you’re managing anything over 6/7 properties you would have a few tradesmen on stand by in case you get swamped. If you have 30-100 you would have tradesmen to take care of them. I couldn’t imagine a investor building up 100 units and not having a crew of tradesmen. That coordinating would be your job. Even if you are into expanding you can hire some answering service to field calls. Someone to do the accounting of receivables. All my rental payments are electronic. Due by the 1st. Anything after the 4th is late and fees apply. Sorry but this article is nothing more than a cheer for getting a PMC to manage your investments.
    Anna Kovacs
    Replied almost 2 years ago
    I worked for a property management company and used the services of another briefly. No way would I trust a PM to care for my rentals. I saw every stupid thing they did, and the poor owners knew no better.
    Owen Franks Attorney from St Petersburg Fl / Cambridge UK
    Replied almost 2 years ago
    I fired my PM last year, at lease renewal. They got so much of the legal side of it wrong it was embarrassing. But they were also useless in so many other ways. Now I self manage, and the property is overseas. Here’s an example of what happened yesterday – I got a message from the tenant saying the oven kept tripping out the electrics, so they couldn’t cook. It was 9pm their time, 4pm my time. I sent a message to my appliances guy, and asked him to go over the next day and to schedule the appointment directly with the tenant. I woke up this morning to find that all had been done whilst I had been sleeping. Problem solved. Happy Tenants. If the PM was still in place, the tenant would have left a voicemessage at 9pm. The PM would have picked it up this morning. They would then tell me what the problem was and suggest they contact the appliance guy. They miiiight then call the appliance guy immediately but more likely it would have gone to the back of the ‘to do’ list for the day. When they finally do bother to reach him, he’ll already be out on jobs and so will have to schedule it for Monday instead. Email tennis ensues. And a weekend without being able to use the cooker = unhappy tenants. When I took over the management, I came up with a system that would work for me. Here’s what I did: 1. Set up a WhatsApp group between my self and my tenants (a married couple) so that I would be easily available to them and told them that they should message me for any issues. This is especially useful considering the time difference between us. 2. I gave the tenants my list of service people (plumbers, electricians etc) and said if for any reason they can’t get hold of me, if the issue was urgent they could use their judgement and call the appropriate service person on that list and that I would cover the call out cost. I had already cleared this with my service people. Even if they made one call out every week it would be cheaper than paying the PM. 3. I set up gmail to automatically send scheduled emails to the right person at the right date for predictable things e.g there is a regulatory requirement to have boilers serviced every year in England and Wales. Mine must be done by 5 July. So on 4 June my gmail automatically emails my plumber saying ‘Hey Joe, I’m due another service at the property this month. Are you able to liaise with the tenant to find a date that suits you both? She is CCd?” Problem solved. I set all this up at lease renewal. The above is all completely reliant on having sensible tenants. Obviously its hard to know if they really are sensible, but picking the right tenants is key here. I’m moving on to my third property soon, and if I find this system doesn’t work as well at a bigger scale I think I will add a Virtual Assistant to help iron things out…