As a landlord or property owner, having total control of the management of your property seems ideal. And in many cases, managing your own property is worth the time and extra effort. After all, it can provide you with additional monthly income, can integrate easily into your scheduled responsibilities if you stay organized, and keeps you in control of your property. Those are all advantages, sure, but there are real potential disadvantages as well that are legitimate cause for you to consider hiring a property manager rather than becoming one. In this article, we’ll talk about some reasons why you might not want to manage your own property, and what considerations to keep in mind when hiring a property manager.
Tackling Task Manager
Managing your own property comes at some personal cost to you. But how can you decide if that cost is worth the consequent reward? One thing to consider is the volume of your business and your goals for growth. For example, if you own many properties or large properties (apartment complex owners, college student housing owners, etc.), hiring a property manager to assist you is likely necessary, and can improve the efficiency with which your property is run, therein leading to a higher return on your investment. The same can be said if you own properties in other states or regions, especially if they have high desirable traffic, as these factors encumber your ability to manage effectively.
If a large portfolio is your goal and part of the way you want to engage in your business, hiring a property manager grants you more time to devote to expanding your portfolio and directing your experience where you want it to go. Besides an expanding portfolio, some property owners intend for their property to be a more passive form of income accumulation than actively managing that property will allow. If you desire for your property ownership to be more passive, especially if you supplement your investments, debt improvement, and credit building with a day job, then hiring a property manager may be ideal for your situation.
It takes a special kind of person to manage property. And while that person might be you, it’s important to have full understanding of the responsibilities you’re agreeing to shoulder by managing your own property.
Real estate laws can differ across states, counties, and cities, and as such you need to be sure that you are completely up to date on local ordinances. Though some concepts are shared from one entity to another, you should still be thoroughly aware of the laws where your residents reside. A good property manager can help assist you in keeping up to date on these laws and act as a resource to you and your residents. A good property manager is also likely to have other contacts in the industry, and can help steer you away from legal issues before they happen. Never fear, however, as you can also hire a real estate lawyer to help in this arena of business.
But being a property manager involves more than legal awareness. Are you prepared to drop what you are doing to handle inconvenient emergencies for your residents? While the broken toilet at 3 am is a bit of a myth among landlords, the insinuation remains that managing your property means that you are willing to anticipate and act upon the needs of your residents whenever they need you. It is also true that these same inconveniences can crop up even if you hire a property manager, but only in the case of a major issue. A good property manager will be worth their weight in gold for taking care of these kinds of inconveniences, saving you time, and keeping property ownership a more passive means of income. That, unless you love tinkering about when something needs fixing, of course!
A final major responsibility of a property manager that we’ll talk about here is screening tenants and collecting rent. If you are lucky enough to have residents that pay their monthly rent without prompting and are responsible tenants, property management is easy and can even be exciting! But in reality, the process of interviewing tenants, screening potential residents, collecting rent payments, and handling constant calls are made easier by finding a good property manager to handle these tasks for you. Especially, if you live further from your property or have limited time, it simply may not be feasible for you to expect yourself to be on call and to be able to handle bad tenant situations without some assistance.
Face Your Finances
Up to this point, the elements discussed have revolved around your time and commitment. But we can’t neglect the necessary importance of your financial situation. The main consideration to have is, first and foremost, can you afford the luxury of hiring a property manager? It is an investment and requires careful calculation and intentionality. Managing yourself costs you time and limits your options to expand your portfolio, but can earn you extra income every month and can allow you a more personal relationship with clients. Is hiring a property manager worth losing that side money? If you already successfully manage a few small properties on your own, then now is not the time to invest in a manager unless your finances allow for it and your goals shift you away from being so actively involved. If you’re losing money because of an inability to manage your property efficiently, then it’s time to restructure your management. How you operate your business is ultimately up to you, but outsourcing your management needs to be a well-informed decision that is only worth the expense if it is serving your business model.
Here are some red flags that indicate it’s time to restructure your management:
- A large number of vacancies in your properties
- Frequent or high turnover
- Low rates of lease renewal
- Low customer satisfaction ratings
All of these indicate poor performance and that your business is missing out on major potential growth, and hiring someone new can offer an outside or even more informed perspective to help you and your business flourish.