Rental Investment vs. Self-Managed Rental.
Weather you already own rental property, or you are planning to own rental property, you should consider the option of hiring a property manager. Although not every rental owner needs a property manager, it is in your best interest to understand what a good Property Manager can do for you. First, let me tell you the difference between a Rental Investment property and a Self-Managed Rental property.
- A Rental Investment is a real estate asset you purchase hoping it generates income and appreciates in value over time. A rental investment requires a Property Manager for the administration of the asset.
- A Self-Managed Rental is also an real estate asset but it is not an investment, it is a job or a business. Therefore, you are the property manager and your income is compensation for perfoming that job.
Misconceptions About Property Managers
My first question when I meet a self-managed rental property owner is:
Why haven't you hired a Property Manager yet? The most common answers are:
- I want to save that money
- I like to be in control
- It doesn't take much of my time, I don't have to do much
These are common misconceptions. Let's look at each of them in detail.
I want to save that money
On the surface it may seem that self-managing your rental property will save you money. Yes, you don't pay the management fee, but this is a miscalculation that doesn't take all variables into account.
From a wider perspective, not having a property manager will most likely cost you more than the perceived savings. Experimenting with rental property management or learning on the go can be an expensive endeavor for many reasons. For instance, you have a higher exposure to avoidable repairs, appliance swapping, property damages, penalties, tenant lawsuits, and evictions, just to name a few.
A Property manager's fee is usually between 8-12% of the rent. In return you get a bookkeeper, lease enforcer, supervisor, cost manager, rent collector, and customer service for your tenants. This is exactly what you need to keep your rental investment property productive, compliant, maintained, and your tenants satisfied.
I like to be in control
If you have a hard time giving up control of your rental property, maybe you should consider one important fact. A good property manager will provide 24/7 access to reports and data of your rental property. As a result, you'll be able to see the performance of your investment at any point in time - work orders, state of repairs, lease agreements, financial reports, and more. Truly, a property manager gives you better control of your investment.
Another downside to self-managing rental properties is that you become your own obstacle, a micromanager. For this reason, you can't expand and diversify your investment portfolio when you are too busy being a landlord. Remember, if you work on your rental property, you have a job, not an investment.
It doesn't take much time, I don't need to do much
Maybe being a landlord doesn't take too much of your time, but that doesn't mean you are doing it properly. We all have limited time and skills, yet the amount of time and skills required to manage a successful rental property is often underestimated. Ask yourself these questions:
- Am I doing "all" a property manager should be doing? (See the list in the next section)
- Am I doing it correctly and in a timely manner?
- Am I compliant with regulations?
Assuming you answered "yes" to the previous questions, ask yourself what your opportunity cost is. That is to say, evaluate what you are giving up in order to be a self-managed rental owner:
- Could I be more productive doing other work?
- Could I be doing other activities I enjoy?
You may have a job already, or you may own a business or maybe you are retired. Regardless of your main source of income, unless you plan to be a full time landlord or property manager it is more efficient and productive to spend your time on your real job or business, your family, your hobbies, and investment planning.
What a Property Manager can do for You
These are some of the services that you can expect from a property manager.
- Rent Collection
- Late Rent Collection
- Handle Tenants' Requests
- Lease Administration
- Post Violation Notices
- Tenant Online Portal
- 24 hour Emergency Support
- Routine Inspections
- Tenant Credit/Criminal Check
- References and Employment Verification
- Move in/out Inspections (Reports and Media)
- Secure Renter's Insurance
- Pay Vendors
- RFI (Request for information)
- RFP (Request for proposal)
- Vendor Screening
- Contracting Vendors
- Schedule and Supervise Vendors
- Maintenance, Repairs and Improvements
- Regulation Compliance
- Investor Online Portal
- Financial Reports
- Cost Management
- Monitor Insurance Coverage
- Appliance Tracking
- Process Mail
- Accurate Bookkeeping
- Rental Commission Discounts
- Maximize Rental Income
- Electronic record storage
Implicit Benefits of Using a Property Manager
Besides the obvious assistance that a property manager provides, there are added benefits to having a property manager.
- Peace of mind
- Focus on yourself and your family
- Focus on investment planning
- Faster growth of investment portfolio
- Lower risk exposure
Do you need a property manager?
The short answer is that if you want your rental property to be an investment, you need a property manager. But If you want another job, then you should self-manage your rental property.
I hope this information helped you determine if a property manager is right for you. There is a saying that the two happiest days of a boat owner's life are the day they buy a boat and the day they sell it. Don't let your Rental Property turn into an unwanted asset. A competent Property Manager will make of you a proud, successful, and worry free rental investor.
See you soon!