Most landlords choose the DIY property management route. They would rather have that extra 10-12% coming into their wallets instead of a property management company, even if it means dealing with every problem themselves.
This approach definitely has some advantages, but there are some steep costs to pay as well. This is especially true as your portfolio grows, as more properties (typically) demands more and more of your time.
Here are a few things to consider before you dump the property management company.
1) Do You Know Local Real Estate Laws?
Every state, county and city has their own real estate laws. Even though some concepts and ideas are shared from one entity to another, it’s still a good idea to keep on top of the laws where your properties reside. You don’t exactly need to memorize the laws, but have an idea on which ones effect you as a landlord.
A good property management saves you from having to stay on top of this. They’ll likely have a few other contacts in the industry, including lawyers. Before you do anything that can get you in trouble, your property manager could help steer you into a safer direction.
Of course, you can always start networking with a real estate lawyer yourself to take out the middle man!
2) Do You Want to Deal with Broken Toilets at 3 am?
…we all know this is kind of a landlord myth. Even when you’re a DIY property manager, you will almost never have to deal with an emergency like a 3am busted toilet. But the idea is that same- things will break, and it’s now up to you to fix them.
Obviously that can mean several things:
- You hike over to the house yourself to fix it
- You hire a contractor (plumber, pest control, electrician, etc.) to do it for you
- You have a handyman you’ve worked with before go (attempt) to take care of it
- You ask the tenant to take care of it, and you’ll reimburse them for the trouble/materials
While it’s true that this could still occur with a property management company, you’ll usually be left out of the mix unless it’s a major problem. Instead, they’ll take care of everything for you so you don’t have to worry about it.
Now, if you love tinkering and don’t mind working on houses yourself, it makes perfect sense to ignore all of this. You may like it when something breaks, and you can go fix it! But considering most landlords are trying to build passive income streams, you’re probably the kind of person that would rather have someone else take care of it for you. In that case, a great property manager will be worth their weight in gold.
3) Screening Tenants and Collecting Rent Aren’t Very Fun
Having a tenant that pays regularly every month can make DIY property management exciting. When you see that check come in, it will make you feel good. But what about those tenants that tend to drag their feet each and every month? Or even the upfront process of interviewing tenants to find someone who is responsible and won’t destroy your property?
Unfortunately, there’s only so much you can do upfront. If you get into a situation with a bad tenant, having a property management company fight for you will help take a load off your shoulders. Instead of having to make constant calls and trips to the house yourself, your property manager will do it for you.
Of course, if the property is close by and you have plenty of free time to take care of these issues- having someone else do it for you may be an expense you just don’t want to pay.
4) What’s Your Goal for DIY Property Management?
The last thing to consider is simple- what’s your end goal?
If you’re trying to build a huge portfolio of properties, DIY property management will be very difficult. Even if you have a few dedicated contractors or handymen, they may become overwhelmed at times and then have very slow times later, which can be frustrating if they’re expecting regular work from you.
But if you just plan on having a few properties at a time and you like doing everything yourself, it probably makes sense to skip the PM. After all, that 10% you’ll save will add up over time, making your nest egg grow much faster or allowing you to easily update/maintain your properties.