Owning investment properties can be a fantastic way to earn more money and diversify your investment portfolio. However, with rental properties comes some added work.
The home needs to have someone who can take care of the tenants’ various needs, who can collect rent, handle repairs, maintenance, etc. Landlords should also know the local markets including state, federal, and local laws, demographics, typical rents for the area, how to market the property, and more.
You have a couple of options. You could choose to manage the property yourself, or you could opt to hire a property manager to handle it for you. There are pros and cons to both of these options. Let’s get a closer look.
What Is Self-Management?
This simply means that you will be responsible for everything that happens with the property, not just owning the home. You will be required to market the home and screen potential tenants, set the rent and collect it, and handle repairs, maintenance, and other issues that come up with the property. Essentially, this option means that you will handle everything relating to the property.
Doing it on your own will save you from the cost of working with a property management team. It will also provide you with more experience in how this aspect of the business works. Some investors prefer to have this hands-on approach. However, it doesn’t mean that it’s the right solution for everyone.
When to Consider Self-Management
If you are working as a real estate investor full-time, and you can dedicate yourself to all of the various tasks associated with being a landlord, then it could work for you. However, you will also want to make sure that you are close to the home or homes that you manage.
Ideally, you will be an hour or less away from the properties. This will make it easier for you to handle tours when looking for new clients and to handle any emergencies that crop up. If you have properties across the state or the country, it will be impossible to handle all of the management duties on your own.
Those who have only a small number of properties will find that it’s possible to take care of local rentals on their own. However, if you plan to increase the number of homes you own and rent out, management will soon become a job that you have to be ready for around the clock. The more properties you have, the greater the time and financial commitments.
Some investors might opt to self-manage one or two units for a while to get a better understanding of everything that it entails. However, they may eventually want to hand off the properties to a third party if they find that it’s too much work for them.
If you are going to manage the property on your own, you must look up and understand all of the laws in your area that apply to landlords and tenants. Failure to know and follow the law could end up landing you in legal trouble.
What Is Third-Party Management?
Third-party management simply means that you hire a professional property management team to handle your properties for you. If you have no interest in working as a landlord and instead simply want to be an investor, you can find a quality property management company that can handle the work for you. There are plenty of good reasons to take this route.
One of the first reasons is cost-efficiency. Working with a property management team is more affordable than many people realize. Consider all of the work they put into the properties that you no longer have to do. You’ll find that even though there’s the cost of hiring them, it could end up helping you save time and money while eliminating the frustration you would feel if you were doing it on your own.
When you choose a great company, they bring a wealth of experience with them. They have seen and handled just about anything you can imagine. Whether it’s certain types of repairs, problem tenants, etc., they have policies and procedures in place on how to deal with them. They will also have preexisting relationships with contractors, repair companies, and more. They can handle the issues that come up faster and more efficiently than you could on your own.
The experience of the property management company also includes knowledge of the landlord and tenant laws in your area. They can advise you on laws and potential liability. Property management companies also carry legal liability insurance if there are issues that occur during things like showings, maintenance, etc.
When you have a great property management company, you’ll also find that it’s easier to scale your investment business. You can invest in more properties without worrying about how you will manage all of them. As long as you have a quality property manager, they will be able to handle new properties.
However, you’ll want to keep in mind that there may be times when you need to have more than one property management company. For example, if you are buying properties that are outside of your city or your state, the company you are currently using might not have agents in those locations that can provide service. In those cases, you might need to have relationships with several different property management teams.
When to Consider Third-Party Property Management
If you have a large number of properties, it’s going to be hard to manage them on your own. If you have another job, or you simply want to relax and focus more on the investment side of things, it’s in your best interest to work with a property management company.
What’s Right for You?
As you can see, there are benefits to both of these options. The one you choose will ultimately be based on how much time and work you want to put into being a landlord and the number of properties you own.