Property Management The right way.
Property Management V.S. Self-Managing – How to Make the Right Decision for You
So you’re investing in some real estate and you want to manage it in the easiest and most cost effective way possible. There are pros and cons to both that are worth exploring. Everyone’s situation is different.
Ask yourself the following questions when deciding whether or not to self-manage.
Does property management fit in the budget?
A good average for property management fees is about 10% of the gross rent. You may not have considered the cost of property management when choosing to invest in a property. If the income you’re making on the property each year is too small, you may actually find that you break even on the property by hiring a property management company. Hopefully in that case it’s just a small property that you have invested in like a house, but if it’s a 30 unit multifamily building you may not have a choice.
Do you like working with people?
If you’re going to self-manage, people are going to be your business. Everything you do will involve human interaction. If you have difficulty handling a customer service role, you might want to hire a property management company instead. It’s in your best interest to ensure that your tenants receive quality customer service whether it is yourself or a management company because your tenants are your income. Make the decision based on who is going to fulfill that need the best.
Are you willing to stop work/sleep/vacation?
Think back to all of the miniature crises that have happened in the last 10 years of your own life. Think of the times your plumbing had problems, your water heater stopped working, the heating went out on a frigid winter day, the air conditioner stopped working on a dangerously hot day, you misplaced your keys, and so on. Now take that number and multiply that by the number of units you have. That’s about how many annoying, schedule burdening, can’t-put-this-off emergencies will happen to you over a 10 year period of owning the property.
Will managing your properties/investments be your full-time job?
Depending on how many units you manage, it might be a full time job to manage your properties. Some real estate investors try to self-manage and have a day job as well. With 5 units or so, this might be possible, but the line will need to be drawn somewhere. If you have 20 units or more, you might be fooling yourself that this is going to be a piece of cake. Your time estimate is likely too small. Many who make this estimate incorrectly find themselves working into the night to get everything taken care of for their properties. Consider all of these things that you will have to cover on your own:
Following up on late rent payments
Will you stay up-to-date on FCRA, Fair Housing, and Local Housing Laws?
This is an investment of both time and mental energy to ensure that you are treating your tenants fairly and maintaining all safety standards. Failure to adequately provide safe housing in a fair and equal way can mean completely removing the return on your investment through a lawsuit. The Fair Credit Reporting Act requires proper procedures for running background checks, particularly when pulling credit information, in order to make a decision such as the permissible purpose of tenant screening. A comprehensive view of F.C.R.A. Meanwhile the Fair Housing Act requires equal treatment and opportunity for tenants in your rental properties. You will also need to do personal research for legislation in your state, country, and city. If you self-manage without taking the proper precautions to protect yourself, then using a property management company is not a cost, but a benefit because you greatly reduce your liability.
Tools Make Self-Managing Easier:
There are more resources than ever to aid you in your property management. Should you decide to do it all on your own, The RRD is a helpful tool for keeping it all together.
Tenant Screening – Get a full package of information covering credit, rental, criminal history, and more.
Incident Reporting –involving your tenant’s last residencies including skips, evictions, property damage, and more.
Vendor Database – If you don’t have a list of quality vendors that you can rely on for general needs and emergencies, you should give this list a try!
Insurance – Get a free quote for insurance.