Pros and Pitfalls of DIY Property Management
When purchasing your first rental property, or even adding another one to your list of assets in the real estate space, you may often be tempted to assume that your journey as a landlord is going to be rather trouble free. After all, how hard can dealing with tenants truly be?
If that is the case, you may very well be in for a rude shock!
Managing your own rental property is very different from simply owning one. While ownership may come across as easy when you have a secure source of income, managing a rental property is a lot more work than just collecting rent month after month.
In case you are pondering “Should I self-manage my rentals or hire a property manager?,” there's no direct answer to this. However, in this piece, we plan to cover a few pros and cons of self-management and how it compares to professional property management.
Advantages of DIY Property Management
1. Complete Autonomy
When you self-manage your rental property, you get to retain complete control over it.
From assigning payment deadlines and deciding how often maintenance should be done, to keeping aside advertising budgets and even negotiating with service providers, the buck firmly stops at your desk.
2. Cost Savings
When you self-manage your property, you can save approximately 10% of your gross rental income that would have been spent as property management fees had you outsourced it. Over the course of one year, that equates to around a month’s worth of rent.
3. Learning On-the-Go
When doing DIY property management, you’ll also learn a lot as you gain further experience. Sure, you’ll make mistakes as you start off - some expensive ones as well. However, you’ll eventually learn to be a better landlord and property manager.
While there are no two opinions when it comes to stating the fact that you’ll be highly incentivized to manage your property well, you must be aware of its disadvantages too.
Disadvantages of DIY Property Management
1. Time Consuming
When you opt for self-management of your own property, your time is never really your own. Maintenance requests and other related queries from your tenants require you to not only be available, but also spend time arranging for a maintenance technician to look into the task.
Furthermore, you will also have to chase rents by yourself if your tenant is late paying, and this demands both enough time as well as energy.
2. Lack of Predefined Processes
When it comes to looking up and evaluating prospective tenants, investment property managers usually have an added benefit. Since they do this on a regular basis, they already have an existing list of applicants for a potential property and will have agents available to show those right away. They will also vet applicants in a more comprehensive manner, checking details such as the applicant’s employment history, backgrounds, credit scores, past history, etc.
To do the same, you’ll need to religiously set some time aside from your busy schedule.
3. Greater Responsibility
When managing your own rental, you will need to ensure that your tenancy agreement is precise, up to date, and formulated in accordance with the latest regulatory law. If you fail to do this, you wouldn’t be able to hold anybody but yourself accountable if an unpleasant event were to occur.
Advantages of Opting for Professional Property Management
1. Pre-Existing Expertise
A property management firm most likely has years of expertise in managing homes. This gives it an upper edge when it comes to comprehending customer demands and market trends, deciding how to price homes based on different factors, conducting competitor analysis, etc.
They’ve probably seen and dealt with everything right from roommate changes, tenant disputes, evictions, lease breaks, and more. These are instances that can often get overwhelming for an ordinary landlord, especially if you’re someone who has never managed a rental property before.
2. Time Efficiency
Hiring a property management company frees up a lot of your time.
As far as maintenance issues are concerned, property managers not only respond to those quickly, but they typically have a lot of vendor options at hand that can tackle the job. This saves you the hassle of having to locate different vendors and contemplate which one is the best fit.
3. Better Management
Property management firms are generally used to seeing tenants leave (sometimes even at a moment’s notice). Therefore, they will be prepared to start marketing the home and getting it ready for rent as soon as the old tenant vacates. That way, you wouldn’t have to experience long vacancy periods and profits will never decrease.
4. Less Burdensome
When you manage your own property, it’s necessary to be close to your home so you can swiftly perform walkthroughs and respond to maintenance requests. Hiring a property management company means you can freely move elsewhere since they will be taking on these duties.
Disadvantages of Opting for Professional Property Management
1. High Costs
The greatest problem people see with hiring a property management company is the cost associated with availing their service. Those initial quotes can oftentimes leave even the well-off feeling overwhelmed.
Most property management companies charge a fee on a monthly basis, which is usually a fixed percentage of the month’s rent. Additionally, there might be a leasing fee involved. This fee goes toward marketing your home, i.e. photos, listings, video, etc.
There might be miscellaneous fees as well, depending on the company. Some charge extra maintenance fees, cancellation fee, renewals fees, etc.
2. Professional, Hands-Off Approach
Another immediate disadvantage that comes alongside hiring a property management company is that you likely aren’t going to be involved in every little decision concerning your property. This is especially true because their system works best with a hands-off approach.
If you are someone who prefers to be hands-on at all times, perhaps this isn’t going to be a good option for you.
A Balanced Alternative
Now that we’ve comprehensively looked at the positives and negatives of both DIY and professional property management, it is important that you know about a third option if neither pleases you.
A more balanced approach would be to leverage a property management software solution - a seamless, integrated platform that can take care of all your landlord duties in an affordable manner.
Whether you’re planning on renting out a single property or more than one, a dedicated property management platform will help you streamline your day-to-day rental operations while giving you the opportunity to build better client relationships.
Some of the benefits that come alongside leveraging a property management platform include:
- Maintenance Management and Tracking: Building maintenance is one of the most important components of property management that ultimately results in greater customer satisfaction. The better care you take of buy-to-lets; the higher will be their tenant retention rates.
Most property management platforms available in the market today have tie-ups with service providers and can make them readily available as and when your property needs maintenance.
- Tenant Screening: A lot of property management apps help you filter out less-qualified leads with tools that assess background checks, reference verification, renter histories, etc. These actions let you know if the individual is a dependable candidate to rent out to.
Screening capabilities are usually included or made available through third-party integrations, and can raise red flags if there is any data relevant to fraudulent behavior.
- Online Payment Integration: The easier you make it for your tenants to pay their rents in a timely manner, the less time you’ll spend following up on late payments.
The majority of property management platforms today embed an online payment option. These systems also include rent tracking capabilities so you instantly know who has fallen behind and who is paid up. All these features make it less troublesome for you to collect rent on a timely basis.
- Contact Management: It is a known fact that it takes quite a many people to successfully manage a rental property, and that lengthy contact lists can quickly become unorganized as well as exhaustive.
The contact management capabilities that come alongside a property management app can help you to reduce the amount of time you spend searching for phone numbers and emails by better organizing your contacts.
- Financial Management: The best property management apps will help you minimize the amount of money you need to spend while maximizing returns.
A well-designed property management app can put you in a position to make the most out of your operating budget by providing you with a comprehensive overview of your financial health. Tax management features can help you to remain compliant with local tax laws while bank integrations streamline the reconciliation process.
The features mentioned above only scratch the surface of what property management apps truly have in store for landlords.
To know more, get in touch with us at Tirios - the one-step solution for streamlining property management for single family rentals. We will be happy to guide you with the smallest of queries and help you become a better landlord!