To self-manage or not to self-manage?
That’s a question many landlords ask themselves when buying a rental property.
Or, it’s the same question many landlords ask themselves as they scale their rental business.
According to the National Association of Realtors (NAR), more than 70% of rental investments between 1-4 units are managed by the owner. The rest are managed by a Property Management Company or an individual agent.
We’ve seen hundreds of investors who, for a various reasons, chose to hire a property manager.
At the same time, we’ve seen investors do very well on their own.
So, at the end of the day, not every landlord needs to hire a property management company, but there are times when it makes perfect sense.
We’ve broken down the top reasons why rental property owners decide to hire a property management company into four main categories. If you relate to any of the categories or reasons, it could be beneficial to continue your research on how a property management company can help you with your rental properties.
So, why do real estate investors hire a Property Manager?
1. YOUR TIME BECOMES TOO VALUABLE
Everyone’s time has value assigned to it. And we’re not just talking monetary value.
Here are three examples:
One: You Scale Your Rental Business. You start to scale your rental business and the main part of your job, the part that gives you energy and where you find you’re most valuable, is assessing deals and working with your Realtor to find that next property.
Trouble is, you have a vacancy, and you need to show the property, or you need to call a Tenant to find out where their rent payment is, or you need to call contractors to get bids on an exterior paint job.
See the problem? Suddenly, instead of spending your time on high-return activities (like buying another house) you are spending your time on relatively low-return activities. So, a logical solution is to hire a property manager to handle those day-to-day, and often time-consuming tasks, so you can focus on bigger-picture stuff.
Two: Your Family Changes. You buy your rental properties in your 20s because you’re determined to build your wealth early and while you have both the time and energy to do it.
Then, you get married and then have kids. Your time now has constraints.
Those kids get a little older, and each has after-school activities and events on the weekends that you really want to attend.
The value you assign to spending time with your family now outweighs the time spent showing properties and other landlord duties. Again, hiring a property manager now makes sense.
Three: You decide it’s time to retire. When someone is ready to retire but doesn’t want to sell their investments, they hire a property manager and fully enjoy those golden years.
This won’t be the case for everyone who retires with a rental property, but it might be more probable for someone who wants to move or travel more now that they have entered retirement.
2. LACK OF EXPERIENCE OR KNOWLEDGE
Once you invest in a rental property, you are now a business owner, and treating your investment like a business requires you to have both experience and knowledge of everything you will be responsible for.
There’s so much that goes into managing a rental property.
All of those responsibilities can be difficult to organize into an efficient system.
Here are just a few:
Fair Housing Laws. You will have to understand various laws and regulations, including Fair Housing Laws and everything else set by the City and State.
Knowing what you need to follow is helpful for creating a lease agreement and having a clear understanding of what you will be responsible for as a landlord and what your Tenants are legally responsible for.
Part of this includes a thorough and consistent Tenant screening process, and putting together a well-written lease agreement will help ensure you have individuals who are responsible.
Rental Marketing. This process includes everything from listing your home on various sites or social media accounts to handling all leasing requirements.
You’ll want to keep vacancy times as low as possible, so being able to market and lease your home efficiently will help you to minimize loss.
Tenant Relations. Although there’s a long list of items you are responsible for, the last thing that is at the top of the priority list is being able to handle Tenants.
The last thing you need is a Tenant who won’t follow the lease agreement when it comes to paying rent and keeping the property in either the same shape or close to the same shape you left it in.
With everything that goes into being a rental property owner, a landlord might choose to have a more hands-off approach and outsource almost all responsibility to a company.
It makes their lives easier and less stressful if they know everything will be taken care of by a company that has the resources and experience to manage their assets efficiently.
3. THE LOCATION OF YOUR PROPERTY IS TOO FAR AWAY
Although managing a property you don’t live close to isn’t impossible, it can make it more difficult. There’s a reason why more than 95% of our Clients do not live in Indiana.
If you are only an hour away from your property, it’s definitely doable, but you’ll have to figure out how far is too far when it comes to managing it on your own.
Depending on how far away you are from your investment, you might feel better employing someone local to manage the property.
There are also some cases where investors relocate. Someone who used to manage everything with ease might not be able to anymore if they move to another city or state.
People who decide they want to travel more could be in a similar situation where they easily handled everything before, but now that they’re not always around, it’s become stressful.
Another group of investors that will almost always hire a property management company are out-of-state investors.
With today’s technology and resources, people can purchase properties in pretty much any area that they want to invest.
All of the investors who are no longer within a short traveling distance from their rental properties usually find it easier for a local company to take over.
The local company will have a better understanding of the area, making it easier for them to market in, and they also have knowledge of the laws set by the state and city.
4. FEELING OVERWHELMED BY THE RESPONSIBILITY
Feeling overwhelmed is common for a lot of landlords. It can sometimes be a headache to handle everything that goes into managing a rental property, particularly when an investor is actively trying to add to his or her portfolio.
Although you might feel overwhelmed now or later, that doesn’t always mean it’s time to hire a property management company.
However, if you’ve felt overwhelmed for a while or you’re ready to have someone else take over to lessen the stress, then it’s definitely worth considering.
Experienced and new landlords can both feel like they bit off more than they can chew when it comes to handling their investments alone.
Investors who have grown their portfolio and reached the maximum amount of properties they can self-manage will hire a company to either take some of the properties to minimize the workload or they’ll have a company take over the entire portfolio.
Another item that can get to be too much is maintenance.
Someone who has an older property or one that simply just needs more care than others often gets bombarded with service requests and maintenance items that can become worse if they aren’t taken care of.
Being able to manage all of the maintenance issues without the right connections and resources will make it extremely difficult to keep your head above water.
Property management companies typically have a network of general contractors and maintenance companies that can complete most maintenance issues within a reasonable amount of time.
As a landlord, there is a list of things that can get overwhelming. For instance, having long vacancy times, not being able to find good Tenants, and so on.
Getting a system in place that can help everything flow more easily will be beneficial to someone who is self-managing. Or, there’s always the option of having a company that already has a system in place to manage the properties instead.
If you choose to self-manage your property, that’s great. If you choose to have a company manage your property, that’s also great.
Keep in mind, that if you decide to hire a property management company, it’s important to know that the company you choose has the right systems in place and the knowledge to be responsible for your assets.
The last thing you need is another headache on top of the one you already have.
T&H Realty is always happy to help rental property owners with any questions they have, and we also want to ensure that we are the best fit for you before moving forward.