As a new landlord or distinguished owner, you will always be confronted with the question – should you hire a property manager or should you manage the property yourself, DIY? There is no right answer to this question, but rather a requirement to engage in self reflection and to understand the pros and cons of each. Only after this contemplation, do we recommend that you make your decision.
Why so much thought? The challenges that come with both can create a sizable financial burden if done incorrectly. Here we have provided a line of questioning to ask yourself, which outlines the advantages and disadvantages of DIY vs hiring a property management company. Here are 8 questions to help you decide which path is best suited for you.
1. First and foremost, ask yourself, what is your personality type?
Would you enjoy the day to day of working with tenants and contractors? Are you comfortable discussing topics related to management, such as late payments and overpriced services? This is a very important question because if you are someone who tends to let people slide on payments and work, you will be at risk of losing income. A property manager can take care of all of the discussions and issues, while you simply enjoy the passive income.
2. Do you have the necessary knowledge, skills, and abilities to manage a property? Have you managed a property before?
The way that your property runs essentially determines the revenue your property will make you. Therefore, it is very important to ensure you have the knowledge, skills, and abilities to be successful. If you have managed a property before, you are familiar with the challenges that may arise. However, for those of you who are new, you will want to ensure that you are up to date on the market and current laws. For example, you need to confirm that your rental rates are at market, and that you are not below market – this could lead to potentially high loss. Property management companies jobs are to be current and active in the market, and understand the laws associated with home ownership. Hiring a company can reduce the risk of landlords potential liabilities and losses.
Another aspect to consider is related to how you can identify and manage potential tenants. It is highly recommended to complete background and credit checks for potential tenants. A background check can ensure the safety of you and your neighbors property, while a credit check can provide a financial reference. These are expenses that a private landlord will have to incur; however, if you are working with a property management company, they will often cover these expenses as part of their services.
3. Are you available during business hours?
Managing a property can be a full time job, especially with more units. If a water pipe bursts, are you available at any time to assist? Many individuals with full time jobs find that managing their own property can be intrusive to their personal time – they find themselves constantly overworked and pulled in two directions. Those with employment outside of investing and owning real estate may benefit from hiring an outside company to manage their property or properties. Not only can it save money, but it can also save you from a headache. If you are going to do it yourself, be sure that you have the availability or flexibility to take care of unexpected problems.
4. How far are you from the property?
If you have fewer tenants, being a distant landlord is a possibility. However, with more tenants, an increased amount of problems may arise. If you live far from the property, ask yourself if you will you be able to provide timely and adequate service to your tenants? You as a landlord have a responsibility to fulfill, that requires time and effort. If you are living far from a property, it could create challenges that could be avoided with a closer proximity.
Tenants also have the tenancy to feel less responsible for a property when the landlord lives far away. If you are a long distance landlord, and you are managing a property yourself, be sure to take the proper steps to ensure your security – this includes having an airtight lease agreement and only leasing to qualified tenants.
5. What about vacancies?
The most time consuming aspect of managing a property is filling in vacancies. If you have no issues finding tenants, and you have found solid, long term tenants, this will not be an issue. However, if you find yourself struggling to fill vacancies and keeping tenants, hiring a property manager could be beneficial. Property management companies have resources and connections that assist in filling vacancies. They also manage the ads and correspondence with potential tenants. When it comes to maintaining full occupancy, an individual who does it themselves can spend much time, energy, and resources – the long term question would be to ask if doing it yourself instead of hiring a professional is offsetting the costs incurred in these moments?
So once you have an understanding of the market and have tenants identified, the next step to management will be maintenance. There are a few ways to approach this challenge. If you do it yourself, you can either literally, fix any maintenance problems yourself, or hire an outside maintenance worker to be your go-to guy. Hiring a maintenance worker can reduce overall costs by removing the property manager, and give you a break for not having to learn all about electrical outlets, plumbing, etc. However, if you do hire a maintenance worker, you must be certain that there is an existing trustworthy relationship. As the landlord, watch the expenses and time that it takes for problems to be resolved.
On the other hand, if you hire a property manager, they are responsible for taking care of these issues, and often times the time that it takes to resolve the issues is included in your monthly fee to them. As the landlord, you should only be responsible for covering building costs.
7. Are you familiar with tax laws?
Owning real estate provides opportunities for tax deductions, and it is important to be familiar with the tax laws so that you are not losing money through negligence – or worse, setting yourself up for tax fraud. Your accountant can often help you with this aspect, but a property management company may be able to provide you with unique insight on benefits of owning real estate that otherwise could have been overlooked.
On the contrary, you want to be sure that you are reading and understanding the laws correctly as to not place yourself in a position to be identified as committing tax fraud. Not reporting on an income or reporting tax deductions above the permitted amount could place you at risk with the government – all in all, just be familiar with laws and always consult with a professional.
8. Lastly, can you afford a property manager?
If the answer is yes, then no harm done – hire a property manager. If you are uncertain, it is recommended to take a deep look into the pros and cons of each scenario.
Now you choose – DIY or hire someone else…
Do you have a full time job? How many properties do you own? Are you familiar with the fair housing act? Do you know how to effectively market a property? What are your operating policies? These are just a few more questions to consider.
If you are up for a challenge and interested in learning the ins and outs of owning, operating, and managing real estate, give it a try! Doing it yourself can provide individuals with confidence knowing that their assets are in their own hands.
But if you are hesitant about staying up to date and being a responsive landlord, try out a management company. They can walk you through the steps and ensure that your properties are managed smoothly. Just like any other investment, be sure that you find a company with a well known reputation, possibly one that is recommended by a fellow investor. With time, if you want to take on the challenge of managing the property on your own, go for it.
At the end of the day, the decision is based on personal preferences. If you are an investor looking for the highest possible return, an in depth cost analysis may be needed. If you are purchasing real estate because you love the business, do it yourself. Or meet in the middle – if you own multiple properties, hire a company to manage some, and manage the others on your own. Just ensure that whatever your decision is, it meets your personal needs.
Last Tip – Get Legal Representation
Whether you do it yourself or hire a management company, it is always recommended to have a landlord attorney on retainer – this is one investment that is well worth the money. Owning and managing real estate can be a gamble – tenants could leave unexpectedly, natural disasters or accidents could destroy the property, or local laws could change. With the every changing dynamics of the real estate industry, and with the various factors that could affect your asset, do not risk losing it all by lack of having appropriate legal representation.