Should you be self managing your property or should you be paying a management company to deal with your property? It’s a question that comes up quite often around here and there really is no one answer that fits everyone.
Personally, I manage all my properties, I save a ton of money by doing it myself and it works well for me. Of course I’ve been doing this for a while, and because of that I have some secrets I’ll share a bit later on in this article. Also, I don’t like sharing the money with a property manager when I know I can do as good, if not a better job at it than 99% of the property managers out there.
Others I know have one or two properties, they pay property managers to deal with collecting rent, placing tenants and they simply sit back collecting the left overs. It takes the stress of management out of their hands and it works for them.
Some landlords I know have dozens and dozens of properties and are continuing to expand their holdings, so rather than burden themselves with property management, they understand they need to focus entirely on buying and only use property management. They don’t really make money managing properties, they make money buying and owning so they have different priorities.
Yet thousands (probably closer to millions actually) of landlords self-manage their properties. So the question comes up, should they really manage their properties? Or should they hand it over to professionals?
The Challenges of Management
The more properties you have, the more tenants you have. The more properties you have the more appliances that can break, the more tenant turnovers and the more items you have to track. And the issues don’t grow in a straight line, they seem to grow exponentially.
For many people, a single property can be overwhelming. Imagine multiplying it by a second suite, a second property or more!! It could lead to complete failure and eventually push them out of the landlord business. For those folks, the challenge is too much and it simply makes sense to hand the reins over to a property manager. But property managers don’t work for free.
The main challenge of having someone else manage the property often ends up being the cost. Property managers are typically going to cost 8-12% of the monthly rent. For a property that generates $2,000 of gross income per month that works out to be $200 per month or $2,400 per year. That’s a good chunk of change!
Throw in extra costs for signing in new tenants, possible showing fees, extra charges for coordinating repairmen and it doesn’t take too long for a low cash flowing property to suddenly start losing money.
Now I’m not saying it can’t work, or that all property managers will overwhelm you with additional costs. I am saying that you need to be aware of all the costs involved, you need to make sure they balance out appropriately and it should fit your goals or plans with your portfolio.
As I’ve talked about in previous articles, your goals affect your strategies. If you don’t need cash flow now, a property manager may be perfect for you. If you drastically need cash flow, a property manager could be draining that cash.
The Secret of Successful Self Management
Since I’m a pretty big proponent of self management, maybe you’d be interested in learning some of the secrets of successful self managing your property? Still here, good!!
Surprisingly, to really find out how to be successful at managing your property or properties you really should start by looking at what property managers do. Or at least what successful ones do!
Not so surprisingly, the biggest “secret” is another topic that I try to bring up repeatedly and it involves systems.
No matter what property management company you look at, if they’re successful they have specific systems and processes in place that they have refined over time and they then replicate and use over and over on all their properties.
Sure you need some time management and some customer service skills, but if you have true systems in place that walk you through steps like advertising properties, screening tenants, even clean up and maintenance, it can make the job of managing your property so much easier and perhaps just as important, much more consistent.
You can expand on these systems to include processes for your accounting (if you haven’t read my article about a simple paperwork accounting system for rentals you might want to read the article, Accounting For Your Rental Property), processes for buying a new property and just about every recurring process involved with your investment.
Another Secret About Self-Managing Your Property
So what else can make your job self managing your property easier? Well how about an accounting system or a software system set up specifically for your rental business?
Many new investors often start out trying to track everything on spreadsheets or in notebooks and while it’s a great way to potentially store or analyze some information, you really do need to set yourself up properly to manage your properties and your tenants.
With the large number of transactions we go through on a monthly basis we ended up going with Quick Books Pro as the accounting package to track all of our income, expenses and even tenants.
While it’s not specifically designed to work with rental properties, we made the wise decision to bring in a bookkeeper to set it up properly for us right near the beginning.
To be fair, we didn’t bring her in early enough, we thought we were smart enough to set it up how we needed it and it ended up costing several hours worth of re-entering data and adjustments once it was properly set up, but it was worth it. Lesson learned. Fortunately, it was still fairly early in our business endeavor as it would take dozens of hours to convert now!
We also had the bookkeeper come in once a week and usually spend three or four hours a week doing data entry. This left us with reports and information at our fingertips and readily accessed if needed while taking some of the burden off us.
Since we first started there have been dozens of programs and applications that have been developed for both small and large portfolio property owners. They track everything from rents to maintenance and all the particulars in between. Again, I’m already neck deep in the systems we already have so it’s too late for an old dog like myself to pivot and start over, but if you’re looking for options why reinvent the wheel when there are new shiny ones available?
Property Management Software
The priorities you need to stay on top of are obviously going to be incomes and expenses, so at the very least any property management system requires the ability to track those.
Some of the software you can currently find out there goes far beyond that though. From the ability to store leases under tenant files via mobile camera apps to creating maintenance lists and even some marketing information. Some are entirely mobile allowing you to run your business while you’re on the move while others are designed for desk top use. Some of them even allow you to accept online payments!
Caveat About Self Management
I’ve shared some important information here, but I’d be remiss if I didn’t talk about one other important piece of the puzzle when it comes to self managing your property. It’s actually the biggest benefit of having a property manager and the biggest negative about self-management.
It’s having back up for when you need a break!
If you like to spend a couple weeks in the Caribbean during the winter months or perhaps you spend the summer at the cottage you still have tenants in place and a property to worry about if you self manage. With property managers in place it’s one less item to worry about, but on your own you need some backup.
I understand I’m starting to sound like a broken record, but having systems in place and someone who can look after your property when you’re away (like another like minded landlord!) can relieve a ton of stress and guilt about zipping away for a well-deserved getaway.
If you can find someone you can trust to help you out and in turn you can reciprocate; if you can set yourself up with systems to keep your business consistent and if you have something in place you can use to track your portfolio you are well on the way towards being able to self-manage your property!
Bill Biko has become “the Educated Landlord” through both training and the school of life. With almost a decades experience of land lording Bill’s been mentoring and assisting landlords for the last five years and you can find more of his tips and articles to make your life as a landlord easier, more profitable and less stressful at www.TheEducatedLandlord.com.