Self Management or Property Manager

20 Replies

My wife and I are about to put our home up for rent. This will be our first foray into landlording. I am torn between self managing or going with a property manager. The only thing that concerns me about self managing is the legal side of things. I am not worried about handling the maintenance calls or any of that. Is it best for newbies to start with a property manager and give up some of the profit as a learning cost?

THe most important things:

1) Paperwork and tenant rights.  Good paperwork is your best defense

2) Maintenance - You have a contractor that can handle stuff?

I think if you're uncomfortable, I'd hire a SFR manager and spend a a year to learn everything. Cheap tuition.

I work for an HVAC wholesaler, so I have a lot of connections with good contractors for many different issues. I am definitely leaning towards your suggestion of using a an SFR manager for a year. It seems like the cheapest way to learn.

I would self-manage. Budget for PM so you aren't in the red when the time comes to hand it over, but you need the experience when you're starting out. 

Thanks for the advice. I just purchased Brandon's book "The Book on Rental Property Investing". I am going to read that and see if it gives me a little more confidence on the subject.

@Kasey Rowe we self managed until we got to 25 units. I will warn you though if it’s your house that you’re putting up you’re going to be emotionally attached to it and that will make this process worse. Your house is now a business assets and not the house you loved when you lived there. Our first eviction was emotionally draining in the first few times we turned over houses that we had spent a lot of time getting ready and we’re trashed was also draining. Now it’s just part of the business though. The first house is the hardest they get easier after that

Here is what I'd tell you if you were in Atlanta.

My job as your PM is to make your asset grow, profitable, and equitable. I'm not emotionally invested and can see the bigger picture that self-managed owners cannot.

Most importantly, there are lot of expenses, a PM should help you mitigate them with their knowledge and practices.

Personally, I attack the big three:

1. Legal Action
2. Eviction
3. Turnover

If you do what we say I can keep you from unnecessary legal expenses, like lawsuits. Stringent application criteria, and really deep diving the applicants reduces the chance of putting the wrong person in the wrong property. Proper tenant responsiveness and overall good and respectful treatment leads to longer leases and more renewals.

I have the vendors, the experience, and the resources, plus I send you nice monthly and EOY documents your accountant will love.

Peace of mind.

This is probably in the book, but ensure you do tenant screening.  I think it starts with that. 

Line your contractors up before you need them, maybe a tour of the property, so they know where things are and such, so when the times comes to call them, there is little effort needed. 

Property Manangement software could be too much for 1 unit, but if you plan to have more units, consider it.  There are many low costs ones out there.  Maybe demo some.  This will help with communication, documentation, and rent collection. 

You may need to change your insuranceon the home to a Landlord policy as well. Ensure there is enough liability coverage.

"This will be our first foray into landlording. I am torn between self managing or going with a property manager"

Things go sideways with a tenant, as a landlord you get ZERO leeway.  Plus good paperwork with proper notice/delivery is your best defense.

Hire a prop mgr and watch them like a hawk to learn how if you don't know how now.  Consider their fee as tuition.

If you are still going to live nearby, you can definitely self-manage. Just get a good team of contractors to handle repairs. You can always turn it over to someone if you are having trouble.

Personally, if you will be living within an hour of your rental I would self manage.  However, before you rent your home, read your local tenant\landlord laws and if possible, take some classes from your local rental owners association. This will give you a solid foundation.  Then jump in and try to be the best LL you can be.  

I personally have not found property managers to be worth the fee.  But! I invest in the town I live in.  

Good luck no matter your choice! 

Assuming you do the right way, both ways work just fine. Also, one way or another you got to pay. If you self-manage, you are giving up your time (and some money probably) educating your self and managing. Nothing wrong with it, just know that it's not free. 

As long as you are willing to learn, have time to manage, and think you'll enjoy managing (or at least don't hate it,) then you should self-manage.

@Kasey Rowe I may seem a bit biased from my current perspective, but coming from a family that owned rentals before I even had to think about a real job, I can safely say: get a good PM And learn from them as much as you can, learn from them, but give yourself time and don't go into it without a seasoned pro helping or guiding you along the way. It can become a cluster before you know it, as my parents experienced.

I would go the self-manage route. If you're nervous about the legal, you can always consult with an attorney. What in particular are you nervous about? The lease, tenant-landlord ordinances?

No one is going to care about your rental as much as you are, plus the hands on learning is priceless. If it gets overwhelming you can always hire property management as your exit strategy. 

As a PMC, we see two conflicting issues when a DIY landlord hires us take over:

1) POSITIVE EXPERIENCES: the ones that better understand the challenges of dealing with tenants, maintenance and city inspectors. So, they better appreciate what we do for them and we have quick, efficient conversations.

2) NEGATIVE EXPERIENCES: the ones that try to micro-manage us because we don't do things the way they did. Yes, because we manage hundreds of doors, we don't immediately drop everything to take care of their one or two units. It goes into a queue with every other property. On the otherhand, we have better procedures than they did and we know that calling a past due tenant every day is not going to get the to pay. 

If you decide to DIY manage for awhile before hiring a PMC, try to be the 1st type and not the 2nd type:)

I know I may be a bit biased, but I've always operated under the premise that by first self-managing your rental, you learn more of the ins and outs of rental management (ie. what works best for you and your rental; screening tenants in a way that's best for your business while still following FHA guidelines; costs, expenses, etc). This way, down the line, if you were to hire a property manager once you're portfolio becomes to big to self-manage, you know which things to look for; additionally, property manager fees can be fairly steep (sometimes taking anywhere from 6 to 10% or more; many also include fees like 1 months rent in addition to). I think it comes down to what you feel is best for your business as this point. A lot of other solutions out there though if you do go the self-management route! @Kasey Rowe

@Jazmin Carranza  I always had a little issue when someone says, "no one is going to care about your rental as much as you." Just with many things in life, it's not one size fits all. 

There's no doubt some property management companies are bad, but many other companies sinncerely care about the properties they manage. You can say the same thing about those who manage their own properties. Some are slumlords, and some take great care. 

@Soh Tanaka I agree, there are a ton of slumlords out there who could care less about providing quality housing and care more about their bottom line. My perspective is coming from the high volume many property managers are expected to have. Although they have great intentions and do genuinely care about your properties, property managers are human and when you have 300+ units to manage, mistakes are inevitably and/or they're just burnt out and are trying to be more efficient with their time to keep up with the workload (especially during the summer). For example, they might pick a more expensive contractor vs getting multiple bids to save on time, or they may never (or rarely) ever set foot in your property or drive-by. As an owner, I want to make sure I'm getting the best price and quality for my asset and I want to visit my properties at least twice a year. Most property managers are reactive vs proactive, but of course there are always exceptions! 

@Jazmin Carranza I understand what you are saying. When it comes to property management, at some point, bigger does not necessarily translate to better, and I think that is the reason why we don't see a successful national property management company out there.