{"id":178088,"date":"2024-10-08T12:10:15","date_gmt":"2024-10-08T18:10:15","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=178088"},"modified":"2024-10-08T12:10:18","modified_gmt":"2024-10-08T18:10:18","slug":"pros-and-cons-of-being-a-self-managing-landlord","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/pros-and-cons-of-being-a-self-managing-landlord","title":{"rendered":"The Pros and Cons of Self-Managing Your Rental Property (From Two Experienced Investors)"},"content":{"rendered":"\n

Does this scenario sound familiar?<\/p>\n\n\n\n

\u201cI distinctly remember a conversation I had with my boyfriend shortly after submitting an offer on my very first rental property. We were sitting at his son\u2019s Little League baseball game, and my mind was wandering (if you\u2019ve ever watched a Little League baseball game, you understand). I turned to my boyfriend and said, \u2018What happens if they actually accept my offer on that property?\u2019 <\/em><\/p>\n\n\n\n

The truth of the matter was, I was a 28-year-old with not even an ounce of rental property or landlording experience. All I knew was that I was over working a 9-to-5 W-2 job and thought that real estate investing could be my path out. Ever the black-and-white, straight-to-the-point kind of guy, my boyfriend responded with, \u2018You\u2019ll figure it out.\u2019 Little did I know how true that statement would turn out to be.\u201d<\/em><\/p>\n\n\n\n

That\u2019s Amelia McGee, co-author of The Self-Managing Landlord<\/em><\/a> <\/em>with Grace Gudenkauf, explaining her anxiety and fear as a soon-to-be DIY landlord.<\/p>\n\n\n\n

To Self-Manage or Not To Self-Manage\u2014That is the Question<\/h2>\n\n\n\n

Like many first-time real estate investors, Amelia found herself diving into the world of property management with little experience and plenty of uncertainty. Self-managing a rental property can be daunting, but it also offers significant benefits\u2014greater control, potential cost savings, and hands-on learning. However, it comes with its own set of challenges, from tenant management to handling maintenance issues. <\/p>\n\n\n\n

Based on real-life experience and insights from Amelia and Grace, we\u2019ll explore the advantages and challenges of being a self-managing landlord.<\/p>\n\n\n\n

The Benefits of Self-Managing Your Rental Property<\/h2>\n\n\n\n

Self-managing your rental property offers unique advantages that can significantly enhance your investment experience and increase your profits. Here are four key benefits of self-managing that can positively impact your bottom line.<\/p>\n\n\n\n

1. Cost savings<\/h3>\n\n\n\n

One of the most significant advantages of managing your rental property yourself is the potential to save a considerable amount of money. Property management companies typically charge 8% to 12% of the monthly rent for their services, along with additional fees for tenant placement, maintenance, and lease renewals. By self-managing, you can avoid these fees and keep more rental income for yourself, thereby increasing the profitability of your investment.<\/p>\n\n\n\n

Let\u2019s look at an example from The Self-Managing Landlord<\/em> that shows how much you may need to pay a property manager. In this scenario, we assume a property is rented for $1,700 a month and was purchased for $170,000\u2014following the 1% rule<\/a>.<\/p>\n\n\n\n

Service<\/strong><\/td>Cost<\/strong><\/td><\/tr>
Account setup fee<\/td>$300, one time<\/td><\/tr>
Management fee<\/td>$170 per month (10% of monthly rent)<\/td><\/tr>
New tenant placement fee<\/td>$850, one time (50% of monthly rent)<\/td><\/tr>
Maintenance fee<\/td>$100 per request (assume three per year)<\/td><\/tr>
Annual total<\/strong><\/td>$3,490 ($290 per month)<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Looking at the breakdown here, you can see that after setup, management, placement, and maintenance fees, you can expect to pay about $3,500 yearly in property management fees. That’s more than two months’ rent!<\/p>\n\n\n\n

Granted, that cost will reduce in the second year, assuming the tenant renews their lease. However, these charges will still eat into your cash flow potential.<\/p>\n\n\n\n

2. Quality control<\/h3>\n\n\n\n

When you self-manage, you have direct control over the maintenance, tenant selection, and overall condition of your property. This is especially important for ensuring your investment is well-maintained and your tenants are satisfied. Property management companies often manage multiple properties, so your rental might not get the attention it deserves. <\/p>\n\n\n\n

The Self-Managing Landlord<\/em> explains why some mom-and-pop landlords may be dissatisfied with the quality of service they receive from property management companies:<\/p>\n\n\n\n

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The most common recurring issue I hear from investors who are using a property management company is that they don\u2019t feel like their property is getting enough attention, or that the property management company doesn\u2019t really care about them after their contract is signed.\u00a0<\/em><\/p>\n\n\n\n

Let\u2019s think about this from a macro view of the property management industry. Most property management companies are only making $100 to $200 of recurring revenue per month on every property they manage. These are thin margins in the grand scheme of things. In order to run a profitable business, pay their employees, and cover other business expenses, these property management companies need to onboard hundreds of clients, which in turn spreads their efforts out too thin. <\/em><\/p>\n\n\n\n

This issue is further exacerbated if you only have a few properties with the management company. Their main priority is going to be their bigger clients, so the smaller you are, the further down the \u2018call back\u2019 list you\u2019re going to be.<\/em><\/p>\n<\/blockquote>\n\n\n\n

3. Better tenant relationships<\/h3>\n\n\n\n

This level of control allows you to build relationships with your tenants, leading to longer retention and reduced costly turnover<\/a>. Direct communication fosters trust and respect. Tenants appreciate landlords who respond quickly to maintenance requests and are approachable when issues arise.<\/p>\n\n\n\n

Also, by being more involved in the tenant screening process<\/a>, you can ensure that you select responsible tenants who are likely to stay long-term and take care of the property.<\/p>\n\n\n\n

4. Build valuable skills<\/h3>\n\n\n\n

Managing a property on your own teaches you a wide range of valuable skills, from handling maintenance and repairs to negotiating leases and managing finances. These skills can be beneficial, not only for your rental properties, but also for future business ventures. <\/p>\n\n\n\n

In fact, in the book, Amelia shares an experience about how she partnered with other investors to purchase a $500,000 property. They brought the cash for the down payment<\/a>, and she brought her skills as a successful DIY landlord. It was a win-win for everyone.<\/p>\n\n\n\n

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