Pros and Cons of Self-Managing Your Rental Property
Self-managing your rental property is different from owning a rental property. If you own a rental property, it’s likely that you have a good way to make money. And you might think it’s just a simple thing.
However, rental property management is not a simple task. You need to commit to carrying out several managing tasks such as tenant screening, rent collection, conducting a regular inspection, evictions, and others.
People mostly buy rental property as their passive income. They don’t intend to purchase it to have a full-time job, but with all the duties, commitment, and tasks of managing a rental property, it seems that you’ve got a full-time job that you need to dedicate your time and effort. However, there are pros and cons to self-managing your rental property.
Pros of Self-Managing Your Rental Property
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You will have overall control of your investment.
You’re responsible for all the tasks and duties when you self-manage your rental property. And you’re the one to decide what’s best for your rental business. Moreover, there’s no third-party between you and your rental income.
- No need to pay property management fees.
If you self-manage your rental property, you will save 7 to 15 percent of your income by not paying property management fees.
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You will have the opportunity to learn and gain experience running a rental business.
It will become easier for you to develop your skills and learn in running a rental property. However, there are some drawbacks initially, but it can help you be more competent in running a rental business. And it can also be easier for you to have an expansion of your rental business later.
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More reasons to manage your property efficiently.
Since it’s your investment, you will be motivated to work hard and grow your investments. And you can grow your rental business on your vision. The success or failure of it will depend only on you.
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The rental property will be in good hands.
You’re the owner, and at the same time, managing the rental business, and there’s an assurance that the rental property will be undoubtedly taken care of.
Cons of Self-Managing Your Rental Property
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It’s often a very demanding job.
If you have a full-time job, it’s hard for you to manage your rental business properly. There are a lot of tasks that you need to pay attention from maintenance requests, to addressing tenant complaints, rent collection, and others. In some instances, you need to respond to their emergency issues at 3 am.
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You need to find tenants for your rental property.
You need tenants to have an income to pay the mortgage and the other expenses of running a rental property. If you’re not a property manager, you don’t have any idea where to advertise and find tenants for your rental property.
Property management companies were knowledgeable on where and how to advertise, so qualified tenants would be attracted to rent on your property. Some companies would advertise in different forms, such as print and online.
Not just advertisements, property management companies will also take care of the tenant screening. The potential tenant will have to fill up the rental application and undergo screening and interview. And that gathered information would be used to have credit checks, employment verification, and necessary background checks.
But if you self-manage your rental business, you’re the one who will conduct all the screening and interviews as well as the necessary credit and background checks. And if you don’t have enough experience and knowledge to do those tasks, you will likely get the bad tenants, which is someone who:
- don’t pay rent on time
- don’t take care of your property
- is a burden to other tenants
- not easy to reason with if there’s an issue on the property
Moreover, property managers also have the skills, expertise, and workforce to handle many applicants quickly and efficiently. Therefore, they can spot good potential tenants out of the pile of applicants.
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You will have to collect the rent.
If you self-manage your rental property, you are the one who will set the rental rate and do the rent collection. Unlike hiring property management, they know the market value rent rates and can set the appropriate rates.
If you set the rate overpriced, you will have a hard time renting it, and the property will be vacant for months, and you will lose money. On the other hand, if the rental property is underpriced, there would be a negative impression that there’s no good or something wrong with the property.
And when it comes to rent collection, tenants who don’t pay rent on time need to follow up on the late payments. Some of them will appeal to your emotions since they know that you are the owner and can final approve. They will give you excuses and convince you to pay their rent late.
Another thing is that if you live far away from your rental property, traveling to the property just to collect rent will take so much of your time. And hiring a property manager will save your time and effort. Most property management company uses software or have an online payment option for the rent.
And if there’s a late payment, the property management company will definitely charge them a late fee, or worse, it can violate the lease agreement; they will give the tenant an eviction notice.
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You must deal with legal issues.
Self-managing the rental property will also allow you to deal with tenants, which requires contract management, lease agreements, rent collection, fees, and security deposits. There are specific laws that vary in different states in handling those matters. And as an owner that self-manages its property, you’re responsible to follows those laws.
On the other hand, if you get a property management company, they are knowledgeable and familiar with the landlord-tenant laws. And they are the ones who will handle complaints, permit issuance, and point out violations. They will also resolve complaints and disputes of tenants.
Getting a property management company will reduce your risk of legal issues in the future. And they are aware of every legal implication and process like eviction. Moreover, they are more updated with the changes in the landlord-tenant laws like in the recent changes due to pandemic.
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You have to address maintenance issues.
There are instances when tenants will call you in the middle of your sleep just to fix a broken pipe or clogged toilet. However, if you have a property manager, they can contact their available maintenance personnel 24/7 to resolve the issue.
If there’s a major problem, they will call a professional or outside contractor to fix the problem. The maintenance personnel can also conduct regular preventive maintenance to avoid any issues in the future. And as a result, the tenants will be satisfied and happy since the owner hires someone to take good care of the rental property.
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You will manage tax records.
It’s difficult for you, especially if you don’t have enough knowledge about taxes and accounting. But if you have a property management company, they will also provide you with a monthly statement of rent collection and expenses. They will also give you a quarterly statement, and every year-end, you will receive an annual profit and loss statement and tax information.
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You will have to face eviction issues.
If you have a bad tenant, it’s more likely that you will have to deal will expensive and extensive legal proceedings to evict the tenant. And another thing is the cost of marketing to get a new tenant.
It’s ideal to hire a property management company since they will handle all the responsibilities of finding good tenants, collecting rent, and reducing eviction costs.
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Some of your mistakes can be costly.
Truly self-managing your rental property will let you learn and acquire experiences. But it is also a way of experimenting with your rental property. Several mistakes can result in massive losses, and worse will be closure. And that’s the last thing that you want to happen.
So it would help if you hire a professional property manager instead of self-managing your rental property. In that way, you will discover a few things from them until you have the confidence to do it by yourself. It’s also more cheap and safe, and you will also enjoy other benefits of owning a rental property.
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There’s a possibility that you may end up spending more than you should on running and maintaining your rental property.
You have to reduce your expenses to get a better and higher investment return. So it would help if you explored your tax benefits, got discounts from vendors and service providers, avoided legal disputes, minimized maintenance expenses, and others. It’s challenging if you’re a first-timer.
But a reputable property management company has the knowledge to do and minimize the cost of operations. They also have a partnership with local vendors to have an opportunity to get discounts.
Conclusion
Managing a rental property is a complicated job. You need to learn and understand many things, like legal requirements and obligations. Self-managing a rental property can be an option, especially for those who can handle several workloads and understand legal accountability. But there’s always a risk that is involved.
So if you don’t want to take the risk and have a smart move, you can always hire a property management company like ProRealty Property Management. Therefore there’s an assurance that you can have a good return on your investment.
