Property management vs. self-management
Whether one owns property or is interested in buying a property, there are two options for managing. One can either DIY (self-manage) the property or appoint a third-party professional (property manager) to look after the property. The question of which is the better option has no right or wrong answer. It all depends on an individual investor’s circumstances.
To best tackle this question, perhaps it would be nice to outline the advantages and disadvantages associated with each, then the final decision is up to the investor.
Are you stuck working IN your business rather than ON it? Then maybe it’s time to explore what a good property manager could do for you.
The pros of self-management
The best thing about DIY-ing property management is saving on management fees. And for those that believe in the saying, “If you want something done well, do it yourself,” dipping their toes into self-management will suit them well. They will feel better that they can manage it better than anyone else could.
Self-managing the property also means having a bigger say in tenant selection. The landlord can personally evaluate the application forms and speak with the potential renters. Since the property is theirs, they will go the extra length to ensure it is tenanted. Meanwhile, property managers with multiple properties to manage may be spread too thin, with your property possibly not always the top priority.
The cons of self-management
Managing a property is not the easiest of tasks. It calls for a good amount of 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 so on.
An experienced property manager is privy to up-to-date, vital information necessary to run the business smoothly. Depending on the investor’s experience, this may prevent them from making informed decisions, which could have an effect on not just their revenue but could also carry legal implications.
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.
The pros of property management
A property manager may come as an added cost to the list of overheads, but one of their biggest selling points is that they make work easier and minimize stress for investors. Property managers have a good understanding of the market and are well aware of the nuts and bolts of property management.
Emotion is always bound to get in the way of owners when it comes to handling some critical situations. Still, property managers can be reliable in handling deviant tenants and any damage to the property.
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 process to “outsource” labor every time there is an issue. Ultimately, good maintenance management bodes well for the bottom line.
Here are more services that a property management company offers:
- They take care of finding and placing tenants in the investment property.
- They take the emergency 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.
So, basically, they 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 good enough property management company to carry out this job.
The cons of property management
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.
When entrusting the rental to a property manager, it could end up in the hands of someone incompetent or dishonest. Some could overcharge for maintenance, and others might even collect extra money from tenants to line their own pockets.
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%–10% of the rent per unit they manage, in addition to other fees.
Others charge a placement fee for every new tenant they bring 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.