Managing Rentals: Alone or With Help
How to Choose Between Self-Management and Professional Management
Apr 25, 2009
There are many duties involved in managing a rental property. These include:
- Arranging for repairs, painting, cleaning, snow removal and other maintenance
- Scheduling inspections required by government agencies
- Paying real property taxes, insurance, sewer, and other recurring expenses
The management duties increase with each rental property that is added to a real estate investment portfolio. Before finding themselves in overwhelming circumstances, investors must determine whether they themselves want to handle all of the management duties or whether they should hire someone else to perform all or just some of those duties.
Self-Management of Property
Some experts in real estate investing believe that those new to the role of landlord should manage their own first few small rental properties as a form of on-the-job training. In his book The Beginner’s Guide to Real Estate Investing, Gary W. Eldred states that the benefits reaped by new landlords from self-managing include learning the day-to-day operations involved, becoming familiar with the local rental market, and vetting potential tenants more quickly than if a professional property manager were involved.
Nonetheless, not all individuals have the time and temperament needed to learn on their own how to manage rental properties. Moreover, investors who have full-time careers in a non-real estate field or who are self-employed or running a business not related to property management will have to think carefully about the additional time demands involved in dealing with the upkeep and tenants of rental properties.
Property Caretakers, Property Management Companies
Investors who cannot or will not manage property on their own will need to pass on some or all of the management duties to someone else. Investors are free to keep some of the management duties for themselves, such as collecting the rents or handling the upkeep or upgrade of some or all of their properties.
If the cash flow of a multi-unit building is sufficient, a landlord may want to have a caretaker live on-site in one of the units for free or reduced rent. The caretaker, also known as the superintendent, is responsible for routine duties such as basic repairs, putting out trash receptacles on collection day, showing vacant units to prospective tenants, and dealing with the repairmen and contractors who work at the property. The caretaker arrangement is particularly useful when an owner lives far away from a property.
For a very large apartment building or multiple apartment buildings, an owner may prefer to hire a property management company. Property management companies can handle all of the management duties, and they often have effective policies and procedures for matters such as screening tenants, evicting deadbeats, hiring repair people, and letting the owner know when the property needs major capital improvements.
There are different ways to pay a property management company. A company may charge a flat monthly fee, or it may take a percentage of the monthly rents that it collects. Some experts suggest that a fee based on a percentage of the monthly rents collected motivates a management company to collect the rents and to prevent them from falling below the market rates. Investors also must be aware that some management companies charge additional fees for finding tenants for vacant units, evictions, or handling repairs.
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