One of the most important decisions when purchasing a rental property is determining whether you are going to self-manage the property or hire a property manager.
The answer may be a no-brainer for real estate investors with multiple properties across the country, but what about investors with fewer rental properties or those who are just getting started?
In this article, we will explore the full range of considerations for investors trying to decide whether to hire a property manager or self-manage their rental properties.
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What is involved in managing a property?
Managing a rental property includes the following major tasks and responsibilities:
- Maintaining the property
- Attracting tenants
- Complying with legal and financial obligations
It may sound straightforward, but each responsibility is multifaceted.
If you’re considering managing a rental property yourself, you’ll have to ask yourself whether you’re willing to handle tenant emergencies or evictions, keep detailed financial records, and stay informed about local, state, and federal laws.
Generally, self-managing properties is the easier choice if you have a passion for the work and enjoy it. Otherwise, a property manager may be the better solution.
What is the role of a property manager?
While you’ll be responsible for all the ins and outs of your property if you self-manage, a third party will handle these responsibilities on your behalf if you choose to hire a property manager.
Their primary goal is to ensure the property runs smoothly, tenants are satisfied, and the owner’s investment is well-managed.
A property manager will handle everything from attracting and screening tenants to handling repairs and renewing leases.
Property managers are typically compensated through a percentage of the property’s rental income.
Considerations for self-managing a property vs. hiring a property manager
Now that you have a general overview of self-managing a property vs. hiring a property manager, let’s dig into the specifics of the roles.
It’s common for property management companies to charge anywhere from 6%-12% of your monthly rental income, plus expenses for repair or maintenance items.
These additional costs can be difficult to swing for investors with fewer rental properties and will reduce your monthly income.
If you self-manage a property, these additional costs and fees vanish—but come with their own price.
For some investors, the greatest disadvantage of self-managing a property is the time commitment.
Attracting and screening tenants, daily property maintenance and upkeep, collecting rent, and remaining up-to-date on the legal side of things will fill up your days.
If you’re hoping to grow as an investor, your growth may be affected by the amount of time you need to manage your properties.
If you think everything we mentioned above sounds like fun, you may be the perfect person to self-manage your rental properties.
Investors who would enjoy this type of work and intend to stay local to keep up with their properties may find the process rewarding and appreciate being in control of every aspect of their rental property.
Landlord-tenant laws surrounding selecting tenants, handling legal documentation, and collecting rent can be complex for those who aren’t interested in digging into the details — or those who don’t have the time to do so.
If that’s the case, hiring a property management company can be a smart solution. The alternative can lead to legal trouble.
The size of your property is a crucial factor in your decision to self-manage vs. hire a property manager.
If you own two single-family properties, self-managing may be a simpler and more efficient solution.
But if you own two or more multi-unit properties, the work involved in managing the tenants alone can be too much.
Professional management may be beneficial for larger properties or multiple properties, simply because it’s too much work for a single person.
Some real estate investors choose fix-and-flip or rental properties because they love performing home maintenance, repairs, and renovations.
For others, it’s their least favorite part of the job.
Ask yourself the following questions to determine whether the maintenance and repairs aspect of your rental property is something you’re willing to do:
- Do I have the time to dedicate to handling maintenance requests and coordinating repairs?
- Am I willing to be available for emergencies that may arise at any time?
- Do I have the necessary skills to perform basic maintenance tasks or assess the quality of repair work?
- Can I readily visit the property to address maintenance needs and oversee repairs?
- Do I have a good understanding of local housing laws and regulations related to property maintenance?
- Am I willing to invest time in finding, vetting, and managing relationships with contractors and subcontractors?
Good property management companies have numerous connections, resources, and years of experience to help clients.
Essentially, the considerations for managing tenants boil down to these factors:
- Your comfort level in handling tenant conflicts and concerns
- Your ability to find qualified tenants
- Your willingness to stay informed about local housing laws that protect both landlords and tenants
Some investors prefer to self-manage because they desire direct involvement in carefully selecting the people who will occupy their properties.
There is a lot of trust involved in allowing a company to manage the goings-on at your precious investments.
What’s the right decision for you?
If the answer still doesn’t seem straightforward for your unique scenario, consult with other real estate professionals to help you determine what makes sense.
Often, hearing about the successes and failures of others’ investments helps us to determine the best course of action for ourselves.
Ask your network what they did with their first few rental properties—and what they wish they had done.
Ultimately, the right decision for you depends on what you are willing and able to do, as well as the number of properties you own, the size of your properties, and your location in relation to your properties.
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A key member of your real estate investment team is a private money lender who can provide the flexibility and speed you need for your investments.
Marquee Funding Group is a full-service mortgage banking firm specializing in hard money loans.
We are your trusted investment partner — offering lending options for those in a wide range of unique financial scenarios.
We can help you get funding fast for your next rental property.
Photo by Andrea Piacquadio