To self-manage or not? That is the question.
Many owners consider managing their rental property themselves. It makes total sense. Heck, that is how I got started! There are some pros and cons to consider when choosing to self-manage or not. Let’s look at them and help you decide.
Pros to self-management of rental property
- Cost savings: Not paying a property management company its fees is the most obvious benefit to self-management for owners. In addition to the monthly management fees there can be lease-up fees, renewal fees, and many other fees that can be charged to an owner.
- Quality of service: Most property managers manage portfolios of 50-100 units. It makes sense that a small, personal portfolio can be attended to with greater care than one that is professionally managed. Plus, with a little skin in the game, there is an added incentive to make all the right moves.
- Experience: If you are a long-term player in rental real estate then getting in the trenches is the best way to gain experience.
Cons to self-management of rental property
- Multiple hats: A property manager has to wear multiple hats. He/she needs to be a writer, marketer, interviewer, accountant, lawyer, handyman, and contract analyst, to name a few.
- Time: Most self-managers have other jobs, family, hobbies, and other distractions to living life. When a rental issue comes up it is usually when the landlord’s plate is already full of things to do. Juggling priorities can be stressful and result in bad decisions or open up liability.
- Legal: Nowadays jurisdictions are passing landlord-tenant laws so frequently it is tough to keep up with them.
- People skills: This is probably the single biggest roadblock to successful property management. Being able to read prospective tenants and choose the right one is critical. De-escalating sensitive situations with tenants is another big item that most people have little experience with.
Summary
In conclusion, it is safe to say that self-management offers many benefits, but isn’t for everyone. If you have a passion for real estate and want to consider it a lifetime pastime, then self-management can provide you with quality service, experience, and cost savings. The passion will help you persevere through the mistakes that are sure to happen.
If your main motivation is to save money then you will be better off hiring a professional property manager. Property managers make mistakes, too. No one is perfect. But typically a property manager will make fewer mistakes that cost far less. Why is that? Because the property manager has the experience and the processes. It is like an insurance premium — you pay a little extra to protect you from much more expensive incidents from occurring.
About the author: Peter Nelson has been managing rental real estate for over 39 years. He started out with his own rental portfolio and in 2011 offered his expertise to other landlords on a fee-based service through his property management company. Peter owns 9 units in single-family homes and duplexes, plus a 12-unit apartment building. All of the properties are in Western Washington.