When you own rental property, one of the first decisions to be made is whether you want to self-manage the property, or use a professional property management company; certainly both have their draws. For a lot of owners, choosing to self-manage a property is the less expensive route, and they believe that they will see a higher profit due to not having to pay a professional property manager.
In a recent Forbes article, author Nathan Miller writes that at the most basic level, investors use the formula of: rental income – (mortgage + expenses) = profit. But what many self-managing investors don’t take into consideration is their time. What kinds of things require this time and energy? Miller lists the following examples:
Maintenance - Owning a rental property involves managing routine and emergency maintenance. Renters are notorious for harder wear and tear on a house than owners, so rental homes require more energy from the owner or manager to upkeep.
You need to schedule seasonal maintenance to keep appliances functioning, gutters from overflowing and to check in with your tenants. And you need to respond to emergency maintenance from your tenants. Good maintenance management will significantly improve your bottom line.
Addressing Vacancies - When a rental property is vacant or vacancy is looming, you need to get the next tenant lined up quickly. Finding your next tenant involves more than just putting an ad up on Craigslist. Don’t forget about property visits, talking to prospective tenants and meeting them for showings. You will need to collect rental applications, complete tenant screenings and approve your future tenants.
Additionally, you will need to prioritize tenant screening. A profitable investment relies on good tenant screening. As part of this process, you should look at a rental applicant’s credit report, criminal history and eviction history, verify income and call references and past landlords. This time investment will give you the best chance of an eviction-free rental situation.
Tenant Relations - A good manager will check in with their tenants at least once a quarter. This check-in can be regarding seasonal maintenance reminders or asking if everything at the property is working well. If the tenant does have any issues, you will be the one to rectify the situation.
Sometimes a tenant will call you with a legitimate complaint. Other times, you will get tenant calls for things like “the dog across the street is barking again,” a problem that should be the tenant’s to handle. Regardless, you will be your renter’s point of contact for anything related to your property, good or bad.
Rent Collection - Rent collection should be easy enough: "Mail me a check by the first of the month and I’ll deposit it."
But what if the check doesn’t show up? That’s time you have to spend calling your tenant, listening to their excuse and waiting extra time to get your money. What if the tenant lies about the check being in the mail? What if the mail carrier misdelivers the check but your tenant is on vacation and can’t send a new one?
All the "what ifs" that go into rent collection can typically be managed with an online rent payment software, but if a tenant misses a payment, you will still have to figure out what happened.
Lease Enforcement - You will be responsible for making sure your renters follow the lease terms. If you find out a tenant is breaking the lease, you need to follow your state’s rental law regarding a Cure or Quit Notice, which gives a renter to option to fix a lease violation or you will move forward with an eviction.
Other Landlord Duties - The duties listed above are just some of the duties you will face when you own rental property. Others include:
- Rental law enforcement and compliance
- Tenant turnover
- Raising rent
Owning and managing rental property is work and, in addition to normal expenses, requires time. The primary question for an investor who wants to self manage is: How much is your time worth? If investors would rather be doing other things with their time, then maybe professional property management is the answer.
To read the full Forbes article, click here.