Professional Property Management vs. Self-Management: A Look at the Pros & Cons

by | BiggerPockets.com

If you have never owned a rental property before, the thought of doing so can be as tantalizing as this:

Rental Income – (Mortgage + Expenses) = Profit

What is not often factored into the equation is the actual management—or what you could call landlord duties.

On the face of it, managing property may seem like a breeze. But don’t be fooled. It’s nothing like shooting fish in a barrel. Looking for tenants to lease the houses, chasing rental payments, and addressing the maintenance aspect can be nothing short of time-consuming, if not overwhelming.

If you are a real estate investor or buyer, you have two options when it comes to managing your property. You can either DIY (self-manage) the property yourself or appoint a third party professional (property manager) to look after the property for you. The question of which between the two makes for the better option has no right or wrong answer. It all depends on an individual investor’s circumstances.

To best tackle this question, perhaps it would be nice to outline the advantages and disadvantages associated with each, then leave the final decision to you.

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Related: 20 Questions to Ask a Prospective Property Manager

The Pros

Self-Management

  • The best thing about managing your own property has to do with the fact that you get to save on property management fees.
  • There is a saying that goes, “If you want something done well, do it yourself.” This applies in the case of rental properties, as being the owner of the property, you can manage it better than anyone else could.
  • Self-managing the property also means you have a bigger say on tenant selection. You can personally evaluate the application forms and speak with the potential renters yourself.
  • Since the property is yours, you go the extra length to ensure it is tenanted. Meanwhile, property managers have multiple properties to manage, meaning yours will not always be top priority.

Property Management

  • A property manager may come as an added cost on your list of overheads, but one of their biggest selling points is that they do make your work easier and minimize stress.
  • Property managers have a good understanding of the market and are well aware of the nuts and bolts of property management. They can help you find optimal returns on your investment, the market conditions considered.
  • Emotion is always bound to get in the way of owners when it comes to handling some critical situations, but property managers can be relied upon to handle deviant tenants, as well as any damage to the property.
  • Property managers usually oversee management of multiple properties, which has led many of them to either take up or team up with professional maintenance services, in the process eliminating the need to “outsource” labor every time there is an issue. Ultimately, good maintenance management bodes well for your bottom line.

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Related: Why I Fired Property Management—And Began to Manage My Own Investments

The Cons

Self-Management

  • Managing a property is not the easiest of tasks. It calls for a good amount of commitment on the part of the owner due to the need to carry out constant management tasks like chasing late payments, ensuring the welfare of the tenants, performing time-to-time inspections, and so on.
  • As a rental property owner, you may not be privy to up-to-date, vital information that a property manager may have. This may prevent you from making informed decisions which could have an effect on not just your revenue, but also carry legal implications.
  • Property managers have access to a wealth of real estate resources that are key to effective marketing of the property. This is not something that can be said of self-management, which could ultimately impact your rental returns.

Property Management

  • No matter how professional, there is always the chance that a property manager will not manage your rental property as well as you would like, particularly when they’re overseeing multiple properties.
  • When entrusting your rental to a property manager, you could end up in the hands of an incompetent property manager—or one who is not honest. Some could overcharge for maintenance, and others might even collect extra money from tenants to line up their own pockets.
  • There is always the question of cost when it comes to hiring a property manager. They usually take a cut from your rental income, and a professional management company will usually pocket 5 to 10 percent of the rent per each unit they manage, in addition to other fees.

There are others who charge a placement fee for every new tenant they bring on board, and this often equals one month’s rent. Additional costs for maintenance might also be levied, so these are all things you need to be reading from the same page with your property manager before entering into an agreement with them.

Do you choose to manage your own properties or outsource the work? Why?

Comment below!

About Author

Nasar Elarabi

Nasar is a corporate failure who was saved by Real Estate. Nasar is now a Wholesaler, Rehabber and Landlord in the Charlotte area. Nasar may have just barely graduated college but can flip a house like an acrobat. Nasar’s work can also be found at RealEstateDoru.com.

9 Comments

  1. Aaron R.

    You absolutely need to emphasize and reemphasize that a professional property manager can save you on major and licensed repairs.

    $25/hr for an licensed plumber/electrician
    employed by the Property Management Company is way better than $175/hr. Handyman rates are not as extreme but still have a great savings with professional PM.

    When you add all of it up, the yearly cost per property is dwarfed by the overall cost savings from repair work. Hire quality PM or don’t hire at all.

  2. Curt Smith

    As a self manager of 38 rentals that are scattered all over North half of GA, most are distant managed. We learned some by good sense and planning and some by learning from others. I strongly recommend this national landlord teacher: David Tilney, he has classes in FL area and else ware. Very good landlording training.

    70% of your landlording headaches are self inflicted by buying the wrong house in the wrong location and then putting the wrong tenants in. See my how to buy a bullet proof rental portfolio off my profile, 1st paragraph. Easy landlording experience starts before you buy the house. See: https://www.biggerpockets.com/files/user/sweetgumga/file/how-to-buy-a-bullet-proof-rental-portfolio

    Atlanta is where we have the highest property management fees, worst deal for the investor turning over property to PMs. 10% fee, full month rent on turn over, biggest mark up on repairs and they even offer fake repairs too often too. LOL. Yes PM’s have many ways to make money; putting bad tenents in who leave, then a full month to put another tenant of questionable quality for another full month. Then they charge cost+profit on repairs,,, too many stories of fake repairs, and over repairing.

    Ok, to be fair I hear of good PM’s. I’ll be honest too, PMing is a hard job. I made my property management role easy (Maytag repair man esk) by deeply DEEPLY understanding where the PM problems come and figuring out how to not have those problems… IE hire good tenants who never break stuff, fix minor things, pay on time, and NEVER CALL me, ever, and also never move out. Who couldn’t manage a ton of rentals if you figure out how to hire good tenants like this? LOL… Read my paper for tips.

    Investors, landlords having a rotten time of it haven’t figured out what is the root of their problems… It starts with buying houses in weak areas, few jobs, no growing jobs, so there’s few good tenants with good jobs, little “drama” etc. Good and growing jobs begets good tenants, brings few landlording problems, and in time a happy investor.

    Buy and hold investors will not need property management if they figure out how to buy houses that good tenants want to live in, and over time stay forever and be no problems. Why focus on property management??? Focus instead on learning your trade of landlording so well that you have no problems!!!!!

    So many don’t think of turning the problem upside down! Why are you having property management problems, tenant problems, that you ponder out-sourcing basically an unmanagable problem to someone else to do better at (not).

  3. karen rittenhouse

    Nasar: I have done both, self manage and use a property management company.

    I love using property managers because I leverage my time to make the most money I can every day. I make no money managing properties.

    However, like any industry, most managers suck (can I say that on BiggerPockets?). So, know going in that you must manage your manager. And, most want at least a year contract with you but know that, if you’re not happy with the manager, you can fire them at the end of your contract and try someone else. Keep trying until you find a good manager – they are out there.

    Thanks for your post.

  4. Cindy Larsen

    The question is where can you find a competent trustworthy property manager? I have been self managing for about 4 years now, and don’t find it that hard to do well using tools like mysmartmove.com, cozy rental manager and zillow rental manager. I am up to 18 units now. The real problem (in washington state) is finding competent contractors; from toilets to painting to complete remodel.

    That said my next round of buying rentals will be from retirement funds: so Inwill be forced to outsource Property management (I think, the tax law is not crystal clear, to me, at least) so where do I find a Property manager I can trust to manage my retirement funds properties?

    Anyone have a recommendation? Near Olympia, WA.

  5. Nathan G.

    Bad property managers exist. So do bad tenants. How do you avoid them? You educate yourself on what a good one looks like and then screen them until you find a good one. Far too many Landlords hire the first PM they find (or the one with the lowest advertised fees) and then can’t understand why they’re so bad!

    Educate yourself on what a good PM looks like. Then figure out how to screen them and find a good one. You’ll have a much better life in the end!

  6. Louise Hamilton

    Couldn’t agree more that it depends on your situation Nasar! My husband and I recently purchased a property in Santa Rosa Beach Florida and while we would love to manage it ourselves to save money and give it a truly personal touch, we just didn’t find it feasible. Investing out of state like we chose to do presents some challenges and this is definitely one of them, however we felt that the opportunities that the listing presented were worth attempting to overcome them. Luckily we found a great vacation rental management company that specializes in local luxury homes, and we felt their approach and services they offered best fit what we were looking for. While we may not be making the maximum return from our investment the reliability and reduced headache make it worth it.

  7. Rob Cook

    Curt, I could not agree with you more! Well Said!

    I have over 50 rental units, and only self manage when I cannot find/hire a good Pro PM. As a result, I have learned a lot on the fly, and made/make many mistakes. Your approach is spot on. You cannot make a good landlord situation when you do not have good tenants. So pealing this onion back to the core, as you did, is very smart and effective. Our biggest expense as landlords is turnover. How can we best reduce this expense = better tenants – ones who do no damage and have stable jobs and lives which allows them to stay put once in your rental.

    The opposite, how to Maximize your turnover expense, clarifies this position. E.g., if you let bad tenants into your rental, it is just a matter of time before that poor decision results in turnover and damages.

    And finally, my own experience with low cost rentals has proven out that it is generally much better to have fewer GOOD rentals, than many bad ones. And here nothing is more important than property selection up front. If you try to stay in B class areas, you are much more likely to minimize tenant problems and turnover expense, PLUS, much more likely to experience price appreciation (pushed by Owner Occupant demand). In C class areas, you lose ALL of those advantages. Yes, it is easier to buy into C class areas as an investor, but that comes with a long term cost we often overlook while basking over our “great deal” on a fixer upper in a crappy hood.

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