Should you manage your rental? We unveil the answer to that question and spoiler alert, it may shock you.
Nearly 37% of households in the US were renting their home in 2016.
The number of people renting is increasing while the rental vacancy rate is decreasing. The law of supply and demand tells us that that means there’s money to be made in owning a rental property. But what about in managing that rental?
If you’re thinking you’d like to manage your rental, you might want to think again. For your rental property to be a true investment, the job of managing your rental should be left to the professionals.
But don’t just take out word for it. Read on to learn why property management is the best way to care for your properties.
Perceived Benefits of Managing Your Own Rental
People who are new to owning rental properties opt to manage their rental because it gives them control over their property. They have a hand in whatever happens at their property and can control maintenance schedules, oversee costs, and personally handle any issues that arise.
Taking care of your own property management also gives you full disclosure in terms of who lives in your rental. You’ll be able to select them as you see fit, and you have direct contact with the people living in your space.
But perhaps the biggest reasons people opt to manage their rental is to try and cut costs.
When you first get into the real estate rental industry, you’re likely handling one or a small number of properties. You’ve invested in these properties in order to make a return. And to maximize that return, you’re probably thinking that you can handle property management on your own.
You may think you’re saving money by avoiding a property management fee. But your lack of experience could be costing you in other places. For this and other reasons, property management is best left to the professionals.
Why You Shouldn’t Manage Your Rental
For most investors and people building a real estate portfolio, self-management costs time and money that is better spent hiring professionals. But we’ll describe all the reasons you shouldn’t manage your rental in more detail below.
Your Rental Income Covers the Cost of Property Management
Depending on the rental rates in your area, you might be able to easily cover the cost of property management. If you can charge enough rent to cover your mortgage payment and then some, then spending that extra money on a property management company is a no-brainer.
The Time Investment
If you think all you have to do to manage your rental is pick up a rent check at the beginning of each month, think again. Managing a property is a part-time job, at the least, and you have to be available to your tenants 24/7.
Part of that job is being proactive. You have to make time to perform regular maintenance and prevent future problems. Not checking on things until they become a problem can be costly.
But beyond the preventative and on-call work you have to do around the property, you’ll also need to be a jack-of-all-trades when it comes to marketing, leasing, legal compliance, inspections, and accounting. To manage your own rental, and do it successfully, you’ll need to be versed in all these areas.
Rentals Are an Investment
Assuming that you rent a home or apartment for the purpose of generating an additional income, your rental property is your investment. Once it’s up and running, this income never stops coming in. It can help you retire or become your full-time pursuit when you have enough properties.
Most people see this type of investment as passive. Meaning, the money keeps coming in without any effort as long as the property is rented. But if you’re managing your own rental, the income stream is no longer truly passive.
In this case, you have a part-time investment and a part-time job (and one you’re always on call for). If you ever plan on expanding, self-management takes you away from focusing on ways to generate more revenue. Hiring a property manager restores the passiveness of your investment and allows you to grow.
Managing Your Rentals Is Not a Good Business Model
Similarly, if you plan to grow your rental properties into a business, then managing them yourself is a poor business model. Why? Because self-managing is not scalable.
Finding ways to scale your business is the most important part of being a business owner. If your business is real estate and rental properties than you need to acquire more properties in order to scale. And while self-managing one or two properties might be feasible, you won’t be able to manage 20 or 30.
This is why, in order to scale, you have to hire a property management company. To grow your business, you need to be focused on the bigger picture instead of who needs an electric socket fixed.
Lack of Expertise Leads to Big Problems
Again, being a landlord is more than just picking up rent cheques. You’re responsible for everything from hiring contractors, to screening tenants, and marketing your rental. Lack of expertise in any one of these areas can cause disaster.
For example, not knowing the legalities of rental properties may lead you to unknowingly violate Fair Housing Laws. You may not know what to look for when it comes to tenants and end up with intentional damage, or drug and crime activity. You could even impact your profits because of improper rent collection policies.
To manage your rental, you need experts in all of the above and more. In the long run, it will save you time and money in avoidable mistakes.
Third Party Costs
Unless you’re an electrician, plumber, and general contractor all in one, properly caring for your rental is going to cost you in third-party costs. You’ll need help with maintenance, landscaping, cleaning, and repairs. And without the connections of a property management company, you’ll end up paying full price for these services.
Need Help Managing Your Properties?
Many people new to the rental industry think they’ll save time and money by managing their own rental. But the opposite is actually true.
If you choose to manage your rental, you’re more likely to find it difficult to scale and run into problems with laws and tenants. In the long run, choosing to manage a rental can cost you both time and money in avoidable mistakes.
For these reasons and more, you should consider hiring property management. If you’re looking for property management, check out more info about our services and fees here.