Property management is rewarding work, but it can take time and some legwork– not the passive income many real estate investors brag about regularly. If you have the capacity to handle your own rental units, you should consider it — you can save yourself some time and aggravation by getting everything done right the first time. While it’s useful to have property managers as an option, you can learn to do all aspects of property management yourself, so long as you’re willing and able to follow rules that apply to landlords and rental properties.
Avoid Property Management Fees
Most property managers charge 8-12 percent of the monthly property rent value to manage a property. That means you’re spending ~$250/month on a $2,500 per month unit, which digs into your profit. If you’re able to manage the property yourself, you can avoid this fee. Additionally, property managers often stipulate a minimum contract (which may match the lease term), renewal feels, onboarding fees, listing fees, and more. They can legally apply markups to all maintenance costs as well.
The initial onboarding fee is usually at minimum half a month’s rent. This could get costly, and if you want to stay competitive, you’ll want to avoid passing that markup onto your tenants.
Additionally, property managers generally charge:
- Vacancy fees: Flat fees monthly when the property is vacant.
- Eviction fees: Hundreds of dollars per month in fees when a tenant must be evicted.
- Termination fees: Fees due when you end the contract with the property manager.
Unfortunately, some property managers even charge whenever they have to do a property visit, or do agency-style billing on top of monthly fees, billing you for the time it takes to manage your property and related costs each month.
Retain More Direct Control of Your Property
If you like to be in control of who is renting your property, responding to urgent repair requests, and ensuring the property and any improvements meet local requirements, you know it’s getting done right when you do it yourself. A property manager’s mistake could be costly, especially if they are not as familiar with the local rules and regulations. You’ll be in control of the following tasks:
- Screening new tenants: Choosing responsible, clean, hardworking tenants is one of the most critical steps you can take to ensure your property isn’t damaged beyond normal wear and tear. While a property manager is incentivized to simply fill the spot, you understand that having a vacancy for another month is nothing compared to the cost of eviction proceedings, property damage, and tenants who cause problems for you by being bad neighbors.
- Managing relationships with tenants: When you communicate directly instead of using a middle manager, you’ll have a pulse on what’s going on in the property and in your tenants’ lives. With direct communication, they might feel a little more comfortable letting you know if a problem might arise — or they might report problems, like malfunctioning appliances — before they become worse and more costly, or cause damage to the property. Without someone interceding, your communication should happen quickly, too.
- Maintenance, repairs, and upgrades: You can directly manage upgrades to the property, repairs done on the property, and any maintenance requests that come along. This will help you control costs and ensure you’re the decision-maker when it comes to making choices that will ultimately be reflected in the property’s value. As the property manager, you’ll also be able to monitor utilities, trash pickup, and communications with other service providers related to the home. This will help you avoid surprises when it comes to the condition of the home, utilities being turned off, etc.
- Dealing with local authorities: Whether it’s local property tax, domestic disputes in the property or neighborhood, or conforming to local rules and regulations, you’ll be able to deal directly with the local authorities, which can prevent major misunderstandings. Ensure taxes get paid and laws get followed by handling this communication yourself.
- Home Ownership Association (HOA) relations: If your rental property is part of a community that has its own HOA, you’ll want to deal with them directly and receive notices personally. As the property manager, this should fall to you. Without an intermediary, nothing should fall through the cracks. Something minor like the wrong color paint or improperly maintained plants can cause quite a stir in communities with HOAs. When you receive a notice, you have to respond immediately and/or take corrective action to avoid fines, and that’s not something a tenant or hired property manager might necessarily prioritize.
The more you’re able to be involved personally with your property, the less risk is generally involved in managing it.
Test Your Interest in a Real Estate Investment Career
Real estate income and property ownership are often touted as “passive,” but to be effective at it and to avoid paying more fees than you should if and when you do eventually decide to hire a property manager, you need to know how to handle all property management aspects, and that’s active. If you’re not sure whether owning multiple properties is for you, you can always test your interest in a real estate investment career by personally managing your first investment property.
Pros and Cons of Managing Your Own Property
There are lots of upsides and downsides to managing your own property. If this sounds like something of interest to you, here are a few things to consider:
- Pro: Opportunity for barter — If you rent to someone who provides services you need, you might be able to provide them with a discount on their rent in exchange for services. This could include child care, pet care, maintenance on other properties, and more.
- Con: Vacations are tough when you manage your own properties. If your tenant has an emergency in the middle of the night when you’re on a tropical island somewhere… you still have to help them, or leave the responsibility with someone local who will get the job done.
- Pro: You can rent to people you know. If you’re just renting out one property to begin with, it’s likely that you’ll find someone you know in your personal network who needs a place to stay. You’re much less likely to get an unruly or destructive tenant this way, and more likely to find someone who will pay rent on time and remain cordial.
Con: There’s a big learning curve. Mistakes can be expensive if you’re doing this yourself, especially when it comes to taxes. Make sure you surround yourself with the type of support and resources you need.
Bottom Line: Property Management Provides Experience and Control
If you want to stay aware of what’s happening with your own property while gaining the expertise needed to manage multiple rental units, it’s a wise idea to manage your own rental units, especially if they are all on the same site. You’ll be able to streamline communication and save yourself time and money. Plus, you’ll be a source of direct communication for your tenants and local authorities in case problems arise. If you have the ability to do so, strongly consider managing your own properties.