The Cons of Self-Managing Your Rental Property
Managing a property is not an easy task. It calls for a good amount of commitment on the part of the owner due to the need to carry out constant management tasks like chasing late payments, ensuring the welfare of the tenants, performing regular inspections, and so on.
Many people purchase real estate property as an investment. They intend to earn passive income as their properties increase in value. Real estate investors will probably confess that they were not seeking a full-time job when they purchased their rental property. However, if they try to manage their real estate properties on their own, a full-time job is what they have created. Property management companies perform many services for their clients to help them avoid the disadvantages of self-managed real estate properties.
If you do not hire a property management company, here are some of the disadvantages:
1.This job is often very demanding.
Unless you are a retiree or unemployed with lots of time to spare, you may find it difficult to properly manage your investment property. There are so many tasks that will require your attention, from maintenance requests to dealing with bad tenants, it can be overwhelming and you’ll have to respond promptly to your tenant’s complaint and maintenance issues. Even when they call you at three in the morning because of a plumbing issue.
2.You have to find tenants for your rental property.
To have the income to pay the mortgage or cover other expenses associated with owning a rental property, you need tenants. Unless you are already a property manager, you may not know where to advertise to find a tenant for your property.
Property management companies know how to advertise your property to attract the best-qualified tenants. Many companies have standard ads in various forms of print media and marketing sites on the internet.
When renting through a property management company, the tenant will have to complete a rental application. The property manager will use the information the prospective tenant provides on the rental application for screening and interviewing tenants. They will also use the information to conduct credit checks, verify employment, and conduct other requirements of a background investigation.
Unlike hiring a property manager, self-managing means that you’ll have to screen all your prospective tenants. Unfortunately, without proper experience, knowledge, and resources, you may end up with bad tenants.
A bad tenant is someone who:
Won’t pay their rent on time
Won’t take care of your property
Is a nuisance to other renters
Won’t be easy to reason with when there’s a problem on the property
The best form of advertisement is word-of-mouth. A good property management company will have established relationships with both current and past tenants. Those tenants will mention your property to their family members and friends who are looking for a place to rent.
3.You Have to Collect the Rent
If you manage your property, you will be the one setting the rental rate and collecting rent from tenants. Because Property management companies are aware of the current market-value rent rates, they can price your unit appropriately.
If your rental unit is overpriced, you will have difficulty renting it. You will lose money in the months the property sits vacant. If the property is underpriced, it could give the impression that there is something wrong with it.
If the tenants do not pay on time, you may have to chase them down to collect any late rent payments. Tenants may try to appeal to your emotions. Knowing that you are the final approving authority, they may give you excuses for emergencies to convince you to allow their rent payment to be late.
Depending upon how far away you live from your rental property, traveling to the property to collect the rent could take a lot of your time. You could save time and effort by letting someone else handle your property management duties. The property management office may have a rent drop box, or the tenants may have the ability to pay their rent online on the company’s website.
If a tenant does not pay on time, the property management company will be able to charge a late fee. If the non-payment of rent becomes a violation of the lease agreement, the property management company will serve the tenant with an eviction notice.
4.You Must Deal with Legal Issues
Dealing with tenants involves managing contracts, lease agreements, collecting rent, fees, and security deposits. The rental laws in your state have specific requirements regarding how you handle these matters. It is your responsibility to make sure you are following the law. When you work with a property management company, you know that they will follow the landlord-tenant laws.
The property management company will deal with complaints, issue permits, and cite violations. They will also act quickly to resolve complaints and disputes by tenants and neighbors. If allowed, the property manager will give the tenant a warning for the first violation of their lease. When necessary, the property management company will handle more severe violations by evicting the problem tenant.
Having a company to handle compliance issues reduces your risk of having legal issues in the future. As an investor, you may not be aware of all the legal implications of managing legal processes, such as evictions. Also, the landlord-tenant laws and other legal actions affecting rental properties could change.
An example of a recent change in the law is the eviction moratorium due to the coronavirus pandemic. In this case, a property management company may handle these situations better than the property owner, especially if you own several properties.
5.You Have to Respond to Maintenance Issues
If you do not want tenants to call you in the middle of the night to fix a broken pipe or clogged toilet, you should hire a property manager. Property management companies have maintenance personnel on staff who are accessible 24 hours a day.
Most maintenance issues are routine, and the maintenance staff can handle them. They will only need to call a professional plumber or other outside contractors if the problem is significant.
Maintenance personnel on staff can perform preventative maintenance so that problems do not occur in the future. Tenants will be happy knowing that the property owner cares enough to hire someone to take care of the property.
6.Easily Managed Tax Records
Each month you should expect to receive a statement showing the amount of rent collected and any expenses. Every three months, the property management company will provide a quarterly statement. At the end of the year, you will receive an annual profit and loss statement and other tax information.
If you can afford to pay for the cost of a property manager, it is worth the investment. As the property owner, you will not have to be involved in the daily activity of managing the rental property. The property management company will handle all aspects of the rental process. They will ensure that the tenant is adhering to the conditions of the lease agreement. Leaving the property management chores to others will free up time for you to focus on investing and other personal pursuits.
We understand managing a rental can be complex, especially in terms of legal obligations and requirements and we believe a great property manager is worth their weight in gold. So while self-managing might be the preferred option for those who can cope with the workload and understand the legal liability risk that is involved with DIY, engaging an agent can be a wise move to ensure a good return on an investment.