Years back, a small real estate investor, who also happened to be an attorney, contacted Evernest about property management services. Up to that point, he had managed his properties on his own.
But as an attorney, he realized his time spent self-managing was worth far more elsewhere.
That’s the value of property management vs. self-management; more time and fewer headaches.
But working with a property manager isn’t all rainbows and butterflies. Self-management and working with a property manager each have benefits and drawbacks.
So below, we’ll evaluate the pros and cons of each option. We’ll also look at the tenant’s point of view and why the right property manager is ultimately better for your tenants.
What is Self-Management When it Comes to Rental Properties?
Self-management means that you handle all the day-to-day operations your property requires. That’s everything from collecting rent to receiving and reviewing applications to handling maintenance and more.
If you self-manage, you’re officially a landlord — meaning you own the property you manage.
Self Management Pros
- Learn by doing: You learn a lot about real estate investing and management by “getting your hands dirty” in the management process. This can help you better evaluate property managers later if you hire them. It can also help you become a property manager if that’s your career goal.
- More control: You completely control your properties when you self-manage. You can create your own business processes, decide how maintenance/repairs are handled, review applications and speak with tenants, and pick the software solutions you want for your business. If you don’t like delegating to others, or researching property managers, this is a huge plus.
- Closer tenant relationships: Cultivating strong tenant relationships can be fulfilling in its own right. From a business perspective, getting to know your tenants helps keep them around longer since they’ll have a positive view of you, their landlord.
- Cost savings: Self-managing removes the need to pay a property manager from the equation. This can be helpful at first, but as you’ll see, the money you save self-managing will soon be eclipsed by other factors.
Self Management Cons
- Time: Handling several properties on your own is possible if you’re diligent about the properties you pick and the processes you create. However, you’re only one person. There’s a limit to how many properties you can handle, even if you’re the greatest self-manager in the world.
- Stress and inconvenience: There are ways to reduce the impact your property management has on your personal life. But there is always the chance your tenant has a pipe burst at 2 am, meaning you have to climb out of bed and handle it.
- Knowledge base: Yes, you learn on the job. But you still have to learn those hard lessons. Some of these can take a long time to master. As a result, you may not get the greatest potential returns out of your properties through self-management for a while.
- Legal compliance: There are tons of laws and rules to follow, from the Federal Housing Act to Tenant Rights to state and local laws. Breaking these can open you up to costly lawsuits and reputational damage.
What is a Property Manager?
A property manager partners with you to handle the leg work of keeping up with your investments. You simply collect your cash flows minus property management fees.
The term “property manager” generally denotes a company that a landlord hires to take on day-to-day tasks.
Property Management Pros
Many investors soon realize how valuable the right property manager can be if they want to grow their portfolio and earn the most returns.
Here are some crucial reasons to consider hiring a property manager:
- More time: The most obvious benefit to hiring a property manager is the time you win back. After all, many get into real estate to create financial freedom; you can’t have that if you’re managing your properties around the clock.
- Expertise and experience: Property managers bring years or even decades of collective experience to the table. A good property manager has dealt numerous times with any issues you could face and knows how to address them. Also, property managers are dedicated to keeping up on the latest management best practices and new laws.
- Fewer vacancies: Property managers know how to keep tenants happy so they stay around as long as possible. If the tenant ever leaves, property managers know how to market your property and onboard new tenants quickly to minimize vacancies.
- More scalable: Property managers make it much easier to grow your portfolio and expand from single-family homes to multi-family properties and apartments. This allows you to grow your wealth and income much faster.
- Separate your investments from your personal life: No more getting up at 2 am to fix pipes. No more driving out to your property on the weekend to do showings or fix issues. The property manager handles all that, so you can enjoy your personal time and earn real estate income.
Property Management Cons
- Extra costs: Property managers cost money. No getting around it. This might not be worth it when you only have a couple of properties. But cost becomes less of a worry once you have a large portfolio of properties.
- You risk hiring the wrong one: The wrong property manager can cost you tens of thousands for many reasons. You must invest time and effort in learning what makes a good property manager and interviewing several.
Self-Management vs. Property Management: The Tenant’s Perspective
Self-management lets you build a close relationship with your tenants. This can help you keep tenants around longer.
But consider this: What if something happens and you’re out of town, unable to deal with the issue?
Tenants want prompt and professional responses from the main point of contact for any issues that arise.
So what happens if, for example, you’re on vacation several states away? Or if you own properties in another state? You can’t just fly out to your property in an instant. Your strong tenant relationship alone won’t save you here.
However, a local property manager is on standby for these matters. The tenant won’t care who they’re interacting with, as long as their point of contact resolves issues quickly and efficiently.
Sure, there’s always the risk of hiring an incompetent third party to handle certain matters for you. That means you must research what makes a good property manager and interview several. The time and money you spend finding a good property manager isn’t a cost but an investment.
The Verdict: Self-Management vs. Property Management
Self-management works well for many brand-new property investors. It can be especially helpful if you don’t have a lot of capital to kickstart your investing just yet or if you like to do things yourself.
Self-managing quickly teaches you what to look for when buying properties and how to handle issues. The latter can pay off later, whether you hire a property manager or become one yourself.
However, real estate investing is a business. Like any other business, you can only wear all the hats for so long. At a certain portfolio size, you’ll have to hire a property manager to keep growing and not become overwhelmed. The fees you pay them will be well worth the time you save and the expertise they bring to the table.
Regardless of where you are in your journey — if you’re tired of the self-management hassle, Evernest is happy to take on the hard stuff for you. We manage over 6,000 properties for owners and investors, so you can rest assured your properties are in experienced hands.
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Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.
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