To Manage or Not to Manage: 5 Important Considerations To Ask Yourself

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For many investors, the idea of managing their own rental property seems crazy. Why would you bend over dealing with tenants when you can pay somebody else to do it for you? On the other hand, there are those investors who shun the idea of giving away 8-10% for someone else to process a monthly check and take a few phone calls throughout the year. Regardless of which side of the fence you are on, determining whether or not to manage your own investment properties is an important exercise.

There are many reasons why an investor might choose to use property management rather than self-manage. Making this decision takes careful consideration. Here are some points to deliberate when analyzing whether or not you should hire a property manager for your investment properties:

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1.) Do you have margin in your daily routine?

 

For many investors, the question of whether or not to use property management comes down to available time. While many people think of property management in terms of processing checks, it can involve much more.  Property management often also involves dealing with bounced checks, phone calls about late payments, leaking toilets, angry neighbors, etc.  When you decide to manage a property yourself, you are essentially deciding to set aside time to deal with any and all issues arising from that property. It’s important that an investor take an honest assessment of their available time before taking on this responsibility.

2.)Are you able to take emergency calls and coordinate repairs?

 
Along the same lines as having margin during your day to manage a property, are you comfortable taking calls at night and on weekends in the event of an emergency?  One of the benefits to using a property manager is the comfort in knowing somebody else will deal with the flooded basement in the middle of the night.  In addition, a property manager has the resources and connections to get repairs done quickly.

Related: When Is a Landlord’s Maintenance Emergency Truly An Emergency?

3.)What is your proximity to the property?

With many investors investing out-of-state or in other local markets, the idea of self-managing becomes even more impractical. While some investors are able to do it, I find it somewhat difficult to manage a property that you don’t have the ability to drive to quickly.

4.) Are you comfortable screening potential tenants?

 Before you can even begin the management process, you have to screen potential tenants to live in the property.  It’s important to have a method for screening tenants as well as a framework for what factors would disqualify a potential tenant from getting approved.

Related: The Ultimate Guide to Tenant Screening

5.) Do you mind dealing directly with your tenants?

 This may seem like a silly question, but I think it’s actually one of the most important questions to ask yourself. In my opinion, it takes a certain amount of thick skin to manage your tenants well.  Many renters are well versed in the art of manipulation, truth bending and excuse making to pay rent outside of the agreed upon due date . I’ve seen many investors with bleeding hearts get taken advantage of by tenants who knew which strings to pull.  One of the great things about using property management is that you don’t have to get personally involved. Sometimes it’s better to let a third party manager be the “bad guy” when things go south with your tenant.

Don’t get me wrong, I actually do believe in self managing investment properties. However, I know many investors who simply don’t have any business managing their own investment properties. 8-10% really isn’t that much to give up if it can free you up to pursue other ventures or investments.

Do you manage your own properties? Why or why not? Let me know in the comments below.

Photo: wvhomes

About Author

Ken Corsini

Ken Corsini G+ is the host of the Deal Farm Podcast (on iTunes) and has 10 years of full-time real estate investing experience. His company, Georgia Residential Partners buys and sells an average of 100 deals per year and has helped hundreds of investors around the country make great investments in the Atlanta market. Ken has a business degree from the University of Georgia and a Master Degree in Building Construction from Georgia Tech. He currently resides in Woodstock, Georgia with his wife and 3 children.

27 Comments

  1. There was a comment on a forum post earlier this year from an owner that has tenants who believe he is the handyman! That way he can go in (with notice) and change smoke detector batteries, make small repairs and have a look around. He also gets to hear comments from the tenants that help provide insight into whether they are happy or not. Sneaky, but clever.

    There are a few PM’s in our area that will provide screening and leasing services only, with the owner providing ongoing service. This seems like a good option to tackle a few of your list items.

    • don’t know if I’d manage even if I lived closed. It’s worth it to me to shut my cell phone off at night, and be there when potential tenants don’t show. It also frees up time to do other things that may be more profitable or expansive.

      • Ken Corsini

        Amie – I think its great that you recognize it’s better for you personally to have some freedom from the managements headaches associated with renting properties. I think it can make a lot of sense – especially if it frees you up to pursue other things that may be more profitable than the small amount of money you might have saved by managing it yourself.

  2. Landlords often under-estimate what it takes to properly manage their properties and avoid legal situations. They are often blinded by the small management fee and only explore management after getting into legal trouble for non-compliance and or if they have to move to another state.

  3. In my mind, one of the biggest benefits of using a property manager is their opinion, perspective and recommendations. These guys know the neighborhoods better than I do, they understand rent and vacancy rates better than I ever will, and they can fix problems WAY faster and cheaper than I ever could. A good manager will pay for themselves with the value they bring to the table. Mine does!

  4. Good information Ken. I also like to use property management to verify rents. Many sellers will tell you how much rent they are receiving but have very sloppy bookkeeping. They cannot verify rents. With a property management company you have a non bias third party who can verify rents for you if you ever decide to sell your rental as a cash flow property.

  5. Matt McGaffey on

    I do both. I find that the following play a role in my decision:
    -The type of property: at this point, I don’t think a multi-family property is something I want to manage full-time. A SFH I am much more comfortable with knowing that I will spend less time managing the unit.
    -The area: if the property is in an area that I am not familiar with (as Seth mentions), I think the value of a PM is greatly increased.
    – Proximity to where I live: I won’t manage a property that is more than 30 minutes from my house, especially if traffic is a factor. To me, this is where I feel my time gets wasted most, so prefer not to force myself into that situation.

  6. I have been managing my own 3 to 4 units in addition to a full time job for 25 years. Now, I’m retiring and adding several more. I simply would have a hard time trusting a property manager and I have known others who have gotten burned by really bad ones. No one cares about your property as much as you do. Landlording isn’t rocket science. Do you have a home? Do you coordinate repairs, and pay bills for your home? Tenant selection is an art, I’ll admit. I have always been good at it and have always had great tenants. I would not trust anyone to do as good a job as me, or to care as much about my bottom line as me.

    • Ken Corsini

      Kim – That’s great that you have the margin, know-how and comfort level managing your own properties. If you’ve got the ability and motivation to do it yourself – it’s a great way to stay more connected and in control of the investment … not to mention saving a few bucks!

  7. I guess it also depends on the scope in which you plan to own properties. It may be a funny comparison, but sometimes I think of it as, “Does Donald Trump go around fixing the broken toilets or fielding those types of calls? Is he taking around each tenant?” No, because he’s more involved in spending time doing the business of real estate ownership (among other things, he’s not my personal idol just an example.) Conversely, I think it’s fine if you are local and have a few units located in vicinity of each other if that’s how one chooses to do it.

    I’ve seen other successful entrepreneurs say as well, the most valuable thing you have is your time. It’s one thing you can’t buy back when it’s gone. I self-managed for a few years when the tenants lived at my own property or when I moved a couple of hours away. After I hired a manager because I thought I was moving, I realized even more how true that is.

  8. I have 6 rental units, and self-manage in addition to a full-time job. I select my own tenants, collect my own rent, and take care of my own problems. So if there were to be problems, I would have nobody to blame but myself. Many months I only spend 10 minutes or so just going to the bank and depositing rent checks. I can’t see paying over $500 per month for 10 minutes worth of work. And for those months that are more, it’s not enough time to even come close to justifying that much of an expense.

  9. I echo Seth’s comments above. When I bought my first rental property in the summer of 2012, I knew nothing about the world of REI (thankfully I found BP not long after!) and decided to leave the managing to a pro. But even now, a year later and knowing a heck of a lot more, I feel the 10% I pay my PM is still worth it.

  10. This is always an interesting conversation.
    Lots of different opinions and varying degrees on both sides.
    My experience has been that management companies all do 2 things.
    They will all offer to place tenants for a high one time fee (usually a months rent) and they all will collect rents and send you a “net” check and some type of report.
    All other level of service seems to be optional or varies from manager to manager.
    I think where most self management types get hung up is that it isn’t THAT hard to place a tenant so that is a huge savings, and it is hopefully a rare time commitment.
    Then paying 6-12% just to collect the rent seems crazy when you see how often their is nothing else to do. Also since that fee doesn’t include repairs so you still pay all those plus the markup.

    I’m actually a big believer of taking myself out of as many things as possible, but I do manage all my units myself but utilize a group of contractors, handymen, and other people to take care of all the hands on stuff.
    BTW I never answer a call from a resident. I train them to email or I listen to the message and will answer when I have been able to think about the issue and I have time to deal with it.
    There are very few real emergencies that can ever happen that should not go to 911 first.

  11. Keith Weinhold on

    Time is our most valuable resource.

    I hear others agree with this, then they go manage their own properties. If I can “buy time” by hiring a manager, why wouldn’t I? I regret that I self-managed my investment properties the first five years. I should have only done so for a year or two in order to understand management. What else I could have done with that time rather than fixing faucets and having run-ins with tenants about late rent! Everything from learning to surf in Maui years earlier to learning how to find the best investments sooner.

    I own an 11-unit building and 8-unit building, both within 30 minutes of my home. They are and always will be professionally managed. The manager collects the rent, leases vacant apartments, manages all tenant relations, takes all phone and repair calls, coordinates contractors, itemizes all my expenses, and electronically deposits my owner draw into my account monthly. The 8% combined management and leasing fees are also tax deductible.

    Some don’t want to hire a manager because they say then they’re just “managing the manager”. I agree…and managing the manager is much easier than managing every individual tenant.

    Above all, value your time. We’re in a rare investment vehicle because it can be made passive. Be an investor, not a landlord. Some choices are just easy.

    • I think this is the root of the differences. Time. And, there is nothing wrong with that. I am the kind of person that has the value of my time calculated (off hours and full time hours) to the T. Everyone lives/jobs are different. Their commutes are different, their jobs are different, and their outside committments are different. If you have a very demanding full time job, and everytime you travel there are traffic concerns, and outside of full time work you have other activities (family, friends, social, etc), and have enough cash in the bank or cashflow per investment property to facilitate this, the choice becomes really clear on whether you pay that 8-10% each month. However, if any of those factors are not there (you’re cash flow is very low, traffic isnt a concern, you invest in state, and not an active a social calendar), then doing the work yourself makes complete sense as well. So, each of us our unique in how those factors affect us in order to make that call.

  12. It can be worthwhile to manage your own property IF you have your hand on the pulse of the market. Being connected to the local market, including its vendors, maintenance personnel and leasing agents, remains critical to great property management for daily issues as well as long term viability. While being geographically close is optimal, I’d argue that being connected is more important. Invest time to build local relationships so you can rely on an army.

  13. Winston Risser on

    Great Post Ken .
    I hire a PM . I really value being flexible and being able to travel if I need to . I love finding the property and funding a deal . But I really don’t enjoy property managing at all. I just find it costing me more money than paying someone cause it really goes against my personality type. I really think it comes down to can you actually properly manage your rental ? Do you have the skill set ? Do you count your time to answering calls ? Doing paper work ?

    For me no. And for some people it works amazing to manage there own.

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