Let me start by saying: I do truly believe in the use of property management from the investor standpoint. But I know plenty of poorly run property management companies exist that make the really good ones look bad. You could also provide many examples where you don’t need a property manager to be successful. I would agree with many of them. In fact, in this article I list five reasons why you don’t need a property manager.
I’ve stood in front of large rooms of investors at events and local REIAs and said as much. I’ve said: “When possible, if you have the time and an easy commute to the property, self-manage your investments.” I stand by this statement, especially for your first couple of properties.
I’ve flirted with writing this article for quite some time because, yes, I co-founded a property management company. And yes, my business partners hate when I say this, but I firmly believe not everyone needs a property manager. However, if you own investment property or think you may in the future, you should know your options. All of them. You should know what it takes to be a landlord before you know what to expect from a property manager. Below are a few reasons you can totally do things yourself.
1. You have the time
Even more than money or other resources, time is our most valuable commodity. We all have limited amounts of time in the day and must make conscientious decisions on how to spend it. How we spend our time says a lot about what we value most. I know a lot of investors who started off self-managing their properties when they were in their 20s and single. Years later, they’re married with kids or focusing on building their careers and portfolios. They decided to outsource lower-level activities like property management to make the best use of their time. As I write this, I am 39 years old with the monumental 40-year mark just about six months away. Time is on my mind more than ever.
How do you determine what qualifies as a lower-level activity? You have to decide how much your time is worth versus the cost of paying someone else to do a task. For example, I calculate mine at above $150 per hour. When I need to delegate something, I figure out what tasks I can pay someone to do for less. Then I can use my time to complete higher-level activities. Leveraging time this way sounds like an easy enough concept, right? But many find it tough to offload something they know they can do themselves. Even I get tempted to just do simple tasks myself. For inspiration, I look at how the most successful people leverage their time in all aspects of their life.
2. You live close to your investment properties
I know of many successful real estate investors that manage their properties from a distance. To me that just adds an unnecessary level of stress to overcome. How do you know if your property is being taken of? Who will handle the ongoing maintenance projects? What if there’s an emergency and you cannot get there quickly to address it?
They say you can’t plan for all home emergencies. But you can nearly guarantee they will happen during the most inopportune times. Things just seem to break on the coldest nights of the year, most likely when you’re out of town.
As a landlord, you have a legal and moral obligation to address these situations and have back-upplans when you’re not around. Some people do really well in emergency situations: their back-up plans have back-up plans. But a lot of people can’t handle that stress. And even the most organized folks need a hand now and again.
I see many owners who can manage an occupied property from many states away. Once the tenant starts to talk about moving out, then they end up calling someone like us. Plus, in many cities, like here in the Chicago suburbs, local rental license ordinances require owners or managers to be located within 30 miles of the property. Of course, loopholes or grey areas exist to handle this. They also come with increased risk of fines when caught using these side steps.
3. You want to get to know your tenants well
To clarify, landlords shouldn’t strive to make close friends with their tenants, but they should properly vet them. Landlords need to know that their tenants will pay rent on time and keep the place in good shape. They should also consider what might happen if they run into each other at the grocery store.
I’ve found that the more interactions landlords have with their tenants, the more emotional entanglements can cloud their business decisions. Having a middleman removes that complication. Property managers have a unique negotiating platform where they can make the tenant feel like they are on their side. They build a bond that can be tough to establish as an owner talking directly to a resident.
Also, as the ability to find people becomes easier, more landlords have begun appreciating a certain level of anonymity. As an investor, I want my leases to have the property manager’s name listed as my manager. Also, my LLC has a mailing address that goes to my property manager. This means when tenants try to go around my property manager’s decisions, they still cannot find me. All roads point back to the property manager. I don’t consider this hiding; I consider it the best use of my time (see point 1).
4. You know all the building codes and landlord-tenant laws
With your own house, you can get away with holding off on maintenance or repairs for a while. Maintenance that should be done isn’t necessarily a legal situation for your home. Most DIYers can sort out how to address health and safety codes for home projects.
The rules differ for rentals, and landlords are obligated to ensure timely maintenance and repairs that stay within these codes. The challenging part is local ordinances can vary drastically from neighborhood to neighborhood and can change frequently. For example the Residential Landlord and Tenant Ordinance for the City of Chicago has guidance that differs from the Landlord-Tenant Laws for the State of Illinois.
These were put in place to protect renters from legal issues or unsafe living situations from predatory slum lords. I know no one here could be accused of being a slum lord trying to cut corners with their rental properties. We all want our tenants to feel happy, healthy and safe in the rental units we provide. Understanding and adhering to these rules can accomplish that, and keep owners out their own legal hot water.
5. You already have happy tenants
Good for you! Renters who pay on time, take care of your investment, and notify you of issues promptly are hard to find. As many long-term investors know, for reasons unrelated to your efforts, they can still leave. These diamond tenants might have life changes (like marriage, job changes or children on the way) or are on their way to their own home ownership. Finding another diamond can prove challenging, especially if it’s been a minute since you’ve conducted a vetting process.
Appropriate rent rates change frequently and knowing where to set rates takes research and diligence. Then, figuring out where and how to advertise your rental takes time and energy, too. Every entrepreneur knows to always look out for their next business venture. Every employee should prepare for their next job opportunity. Even with a happy tenant currently in place, landlords have to be ready to find new tenants unexpectedly. Someone’s new job opportunity just may require your happy tenants to move out.
There are hidden values to having a quality property management company to take care of your investment. The caveat being an owner has to have a quality property management company maintaining their investment property professionally. The day-to-day activities of a property manager should provide value to owners. Annually, a property manager may end up costing $100 a month per unit to handle all property management activities. By not needing to address these activities, owners get an average of 18-22 hours of their lives back each year.
Having a property manager doesn’t make sense for every investor, especially if they have the time, resources and knowledge to self-manage their properties. As I said, our business – or any business – will not fit everyone’s needs. You might not need a property management company today. But if at some point you want to consider how having a good property manager could help you, know your options.
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