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Manage Your Property

Self-Management vs. Property Management Company: What’s Right for You?

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self management or property management

Who are you going to pick to manage your property?

For those interested in real estate investing, it may seem as simple as:

Rental Income – (Mortgage + Expenses) = Profit

However, what’s often left out of the equation above is property management—or landlord duties. On the face of it, managing a property may seem like a breeze. But don’t be fooled. There’s a lot to it. Looking for tenants to lease houses to, chasing rental payments, and addressing maintenance necessities can be nothing short of time-consuming—if not overwhelming. Investors really need to consider all the factors before deciding what to do about self-management vs. property management.

Self-Management vs. Property Management

Whether you own property or you’re interested in buying a property, you’ll need to consider how you want to manage it. There are two options:

  • Self-manage the property and take care of all aspects of the rental process on your own.
  • Appoint a third-party professional, or property management company, to look after the property for you. 

The question of self-management vs. property management has no right or wrong answer. It all depends on an individual investor’s circumstances and preferences. 

Here are the services of a property management company or a self-manager:

  • They take care of finding and placing tenants in the investment property.
  • They take care of property emergencies and repair calls from the tenants.
  • They coordinate with the handymen to get the repair fixed.
  • They carry out regular property inspections to ensure that the tenants are taking good care of their units.
  • They take action against the tenants if they aren’t paying rent or adhering to the terms and conditions of the contract.
  • They handle the eviction process if necessary.
  • They collect monthly rents and deposit them into the landlord’s account.

What Is Property Management?

Property management comprises various aspects of taking care of a rental property. Depending on the number of rental units, property management is either a solo pursuit or handled by a team. These are the duties most common in property management:

Acquiring tenants

A big part of managing a rental property is acquiring tenants. If you want to collect rent, you need to have tenants living in your units. Knowing how and where to acquire tenants can ensure that your units are always occupied, keeping your cash flow steady.

Collecting rent and handling evictions

Collecting rent from tenants is another responsibility of a property manager. If you want to manage your own properties, you’ll have to set up a payment system that works for you and your tenants. A direct deposit approach is recommended when possible. 

A property management company will deal with collecting rent and working with tenants to ensure the rent is paid on time. Property managers also have to handle evictions if they arise. You’ll need to be familiar with the eviction laws in your area if you want to handle this yourself. 

Manage tenant requests

When tenants request repairs or have maintenance issues, the property manager will be responsible for managing the requests. Having a system in place for taking care of issues with rental properties is vital for a property manager to ensure things are handled in a timely and fair manner.

Take care of accounting

A property manager needs to be good with numbers, as they have to provide accounting services. Part of managing a property is knowing when to raise the rent and how much to raise it. Determining this will mean crunching the numbers to compare the market rental rate to the rental unit in question to find out what the right rent price is. Property managers have to ensure that all expenses are paid and that maintenance costs are taken care of.

What Property Self-Management Involves

What property self-management involves differs from what hiring a property management company involves. There are pros and cons to managing your own rental property, but it might depend on how many properties you have. Let’s look at the pros and cons of self-management:

The pros of self-management

These are the best parts of self-management:

  • Saving on fees: When you manage your own properties, you can save on management fees that property management companies charge. 
  • Doing things yourself: For those who believe in the saying, “If you want something done well, do it yourself,”self-management will be just the thing. 
  • Choosing tenants: Self-managing the property means having more say in tenant selection. The landlord can personally evaluate the application forms and speak with the potential renters. 
  • Ensuring the unit is rented: Since the property is yours, you’ll go the extra length to ensure it is tenanted. While property managers with multiple properties may be spread too thin, meaning your property won’t always be their top priority.

The cons of self-management

These are some downsides to self-management:

  • Takes commitment: Managing a property isn’t easy. It calls for 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 regular inspections, and more.
  • Poses legal ramifications: An experienced property manager is privy to up-to-date, vital information necessary to run the business smoothly and legally. Depending on the investor’s experience, they may not have data to make informed decisions, which could have an effect on their revenue and carry legal implications.
  • Requires marketing: Property managers have access to a wealth of real estate resources that are key to the effective marketing of the property. This is not something that one can say of self-management, which could ultimately impact rental returns.

What Using a Property Management Company Involves

Using a property management company also has its pros and cons:

The pros of property management

A property management company can offer the following pros for real estate investors looking to grow:

  • Easy and stress-free: A property manager may come as an added cost to the list of rental property overhead, but one of their biggest selling points is that they make work easier and minimize stress for investors. 
  • Understand the market: Property managers have a good understanding of the market and are well aware of the nuts and bolts of property management.
  • Build a wall between you and tenants: Emotion is bound to get in the way of owners when it comes to handling some critical situations. Property managers can be reliable in handling deviant tenants and any damage to the property so you don’t have to be involved.
  • Oversee maintenance and problems: Property managers usually oversee the management of multiple properties, which has led many of them to either take up or team up with professional maintenance services. This eliminates the need to “outsource” labor every time there is an issue. Ultimately, good maintenance management bodes well for the bottom line.

So, basically, property management companies do it all, and they are paid a monthly fee for that. This may appeal to newbie investors since they would not have to learn the ropes. However, this is contingent on finding a property management company to carry out this job well.

The cons of property management

Hiring a property management company to oversee your properties could result in these cons:

  • Poor performance: No matter how professional, there is always the chance that a property manager will not manage the rental property well, particularly when overseeing multiple properties.
  • Troublesome employees: When entrusting the rental to a property manager, it could end up in the hands of an incompetent or dishonest employee. Some could overcharge for maintenance, and others might even collect extra money from tenants to line their own pockets.
  • Loss of revenue: There is always the question of cost when it comes to hiring a property manager. They take a cut from the rental income, and a professional management company will usually pocket 5% to 10% of the rent per unit they manage, in addition to other fees.
  • Pay for fees: You might have to pay a placement fee for every new tenant the management company brings on board, which often equals one month’s rent. Additional costs for maintenance might also be levied, so these are all things to consider, and the investor needs to be on the same page with their property manager before entering into an agreement.

Tips for Self-Managing a Rental Property

If you decide that self-managing your rental property is the right option, then use these tips to help you find success in caring for your properties:

Know how to market your property

Marketing your property to potential tenants is the best way to get it rented faster. You need to know where the most effective places to advertise your property are and target those areas. It’s important to know where renters are searching for homes so you can place your ads where they’ll be seen.

Calculate a fair market rental rate

Compare the rental rates in your unit’s neighborhood to those that are similar to the rental unit you’re offering. Does your rental property have more amenities or fewer amenities? Is it closer to the park or school or further away? These things will affect how much you can charge over or under the current market rate to stay competitive.

Keep the property clean and maintained

When you manage your own property, you’ll be responsible for keeping it clean and maintained. Whether it’s getting trees trimmed or the gutters cleaned, you’ll want to plan for regular maintenance. The better you keep up your properties, the easier they are to rent or sell when you need to. 

Screen tenants before signing a contract

Doing a background check can’t eliminate all problems with potential tenants, but it can reduce problems you may face by renting to certain individuals. Before you sign a rental agreement with a tenant, have the possible renter screened. Even if all you do is meet with them before they move in, it can help ensure you’re renting to the best possible tenants.

Learn to get a property ready for tenants

After your tenants move out, you need to know what to do to get the property ready for the next tenants. If the previous renters left the place in tip-top shape, you could have it ready to go in just a few days or weeks. Units that get left in more disrepair may require more time to prepare. Be ready for a loss of income during transition periods.

The Value and Cost of Property Management vs. Self-Management

One of the big deciding factors when choosing between self-management vs. a property management company is how much it will cost. If a property management company isn’t going to provide enough value for the work you have to do, then you may want to hold off on hiring one. On the other hand, if you have several properties that you aren’t able to handle on your own anymore, then a property management company might be exactly what you need.

You’ll have to look at your income from your rental properties and compare it to the fees that the property manager charges. If the amount will eat into your profits too much, then you’re going to want to hold off on hiring a property manager until it’s worth it. For some rental property owners, a property manager may be worth taking smaller profits to avoid the headache that managing your own properties can bring.

A property manager can handle rent collection, finding tenants, and ensure that maintenance issues are addressed right away. They do all of this without having to contact you. Of course, you need to understand which services the property management company provides and what your responsibilities are as the property owner. This ensures that everyone understands their obligations right from the beginning.

When weighing the value and the cost of self-management vs. property management company, make sure you think about the goals of your company. If it’s worth your savings in time to pay a property management company, do your research and find one that will help you meet your real estate investing goals.

How To Decide on Property Management: Self-Management vs. Property Company

If you’re lucky enough to find a property management company that meets your expectations and runs the rental smoothly, you’ve found yourself a great deal!

However, it can be difficult to find a management company that cares about your property the way you do. The fact of the matter is, most of these property management companies do not have a vested interest in your property because most of them do not own any property in the same neighborhood. They might not even own property at all.

They are just doing their property management jobs. They’ll fix it, they’ll send the bill. But at the end of the day, they may not be committed to finding quality tenants or ensuring that the property is treated well. They won’t be there to help you increase profits or inform you about good market conditions, such as appreciation. 

But don’t feel like you have to manage your own investment property or that you can’t trust others. Just ensure that your chosen property manager has some vested interest and understands your objectives. Plan to meet with them regularly, check on the property, talk to customers, and decide what’s best for you.

Most importantly, you do not need to put up with property managers you are not satisfied with or those costing the business too much money. Create boundaries and stick to them, keep in touch with the property manager regularly, and follow through if something doesn’t feel right.

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