I’ll give a fair review on managing a rental property on your own, versus using a property management company. I’ll review the pros and cons of doing it yourself.
I’m Kyle at TrueDoor Property Management, and you should know that I am a property management professional. I do have bias towards using a management company, but I am want to provide useful information to rental property owners. I do believe that there are good reasons to use a property management company and good reasons why you should do it yourself. Let’s start with the pros of self managing.
Pros for DIY Property Management:
The number one reason for self managing your rental property is that you save money. Using a property manager will cost anywhere from 5%-10% of gross rents each month. If you are concerned with cash flowing on your investment, you can save that management fee each month, which could be the difference between breaking even and turning a profit. A property management company will charge a monthly fee and typically charges a leasing fee for finding the tenant.
Another reason to self manage is to maintain tight control over your rental property. Self managing landlords can handle each interaction with the tenant however they prefer. A property manager is going to use their own judgement in many situations, then keep you updated. Some rental property owners want to handle each situation on their own because they prefer to have control over every detail. Here at our property management company, we have a few clients that use us to find the tenant and arrange the lease and move in. We then turn the management over to them.
Similar to the benefit of control is the pro of direct communication between you and the tenant. I’ll point out that this one is also on the con list. If you don’t like to delegate, then you will not like using an intermediary between you and the tenant.
A pro to DIY property management is that you can sometimes find cheaper maintenance providers. A professional property manager uses licensed and insured maintenance providers. We do this because it’s our job to protect the property from vendor and tenant lawsuits and bad work. Maintenance providers that are licensed and insured have more costs to run their business making the end price more expensive for the property owner. A DIY or self managing landlord might be willing to take more risk by hiring maintenance providers without credentials or insurance. Although I can’t recommend this approach, I can say you will get cheaper maintenance pricing.
Get Rent Faster
Self managing landlords also get their rent money a few days sooner than if they used a property manager. When a tenant pays the rent you have to wait for the check or epayment to clear. A property management company will collect the rent, wait for it to clear, then pay any bills you have (ie, maintenance, HOA dues, etc). You typically get the rent money by ACH between the 10th and 13th of the month. If you collect the rent yourself, you can have a cleared payment in your bank 3-4 days sooner.
Learn a new skill
Another reason to do it yourself is to gain another skill. If you have the time, learning to manage property can be a satisfying experience. If you like a challenge and want to try something new, you might enjoy taking on a project.
Don’t get stuck with bad managers
A big pro to DIY property management is that you don’t get stuck with a bad property management company. There’s a lot of good property management companies out there, but beware of the bad ones. Do your homework, check online reviews and make sure the person you choose has a lot of experience.
Cons of doing your own property management.
I believe the biggest downside of self management is the amount of time it takes. Let’s break down property management into 2 pieces, filling the vacancy and managing the tenant after they’ve moved in. To find a tenant you will prepare the property for the market, do the advertising, do the showings, answer lots of questions all day long, process applications, create and arrange leases, do a detailed move-in inspection, arrange keys on the move-in day, and many other tasks. Even if you have the skill to do this well, it’s going to take a lot of time.
After the tenant moves in, you will then need to collect rent payments, chase after late rents, deal with lease violations, deal with possible issues with neighbors, do inspections on the rental property, renew leases and do rent increases, and have many difficult conversations with the tenant. The biggest time killer is arranging maintenance and emergency repairs that occur at the worst of times. Self managing often takes more time than landlords expect.
Another con is the emotional stress that comes with a possibly adverse relationship. The tenant/landlord relationship is often strained. DIY management means tough conversations and negotiating directly with the tenant instead of having an intermediary property manager.
Many new landlords avoid DIY property management because the learning curve can cause some expensive mistakes. Everything is fine, until you run into a complicated issue such as mold, a fair housing complaint, non-payment of rent, or a lease violation. You can handle these on your own, but you’re likely to make some costly mistakes along the way.
California’s legal atmosphere
A big con to self management is the legal atmosphere in California. It is becoming increasingly difficult to navigate the legal landscape between landlords and tenants. Housing providers need to understand the laws and how to avoid problems.
In conclusion, there’s a lot of good reasons to do it yourself and many reasons why you might not want to. I recommend taking a look at your goals with your rental and deciding on option that best serves you.