Why I don’t manage my rental properties …

Managing your own rental properties sounds like a good idea; you get to save some money – and, you hand choose / hand manage your tenants.

The World Of Wealth (blog) puts it nicely:

Manage your properties yourself!

Reason Number One – It’s Valuable Experience
Managing my rentals has taught me numerous life skills from how to negotiate with a contractor to the best way to (attempt to) collect rent from a deadbeat tenant.

Reason Number Two – You WILL Do A Better Job Yourself

First of all, your property manager may not actually be very experienced. Secondly, your problem may be worse if the manager IS highly experienced and recommended. In that case, you will probably find yourself be at the very bottom of their priority list.

Reason Number Three – You’ll Save LOTS of Money

Property managers and leasing companies don’t come cheap. You’ll pay 6% – 10% of gross rental income directly to the manager. A rental property with 6-10% of cash flow is rare and precious indeed, so hiring a property manager is all but ensuring your cash flow will be negative.

Reason Number Four – You Won’t Save Yourself Any Stress
One of the main reasons I hired a leasing company this summer was because I didn’t think I could effectively handle 3 vacancies while I was traveling in and out of town. But I was more stressed out than ever before! I still worried about when I’d get a new tenant in each unit, how I was going to make the cash flow work in the meantime and how much the repairs were costing.

I can’t comment on how much less or more stressful it would be to manage my own rentals …

… because I have used a property manager since the get-go.

But, my case might be different to yours: my properties were investments, not my source of business income. So, for me, time was more precious than money.

Even so, Dave Lindahl – well-known property ‘guru’ – makes the case for NOT managing your own properties, at least not after the first 3 or 4 that you own: burnout.

Handling all of those “Reason 4” issues that The World of Wealth blog mentions (dealing with tenants, vacancies, defaults, etc.) will stress you out more than you can imagine, then burn you out pretty quickly.

Also, the argument that properties return 6% and property management costs 6%, therefore all your profits go to the property manager, don’t hold water … because, commercial properties (for example) return 6% after the costs of property management are factored in (or, so they should) …

… and, even residential property may return the same – if you purchase cheap and add value (e.g. paint, add a bedroom, etc.) before you rent expensive.

By all means, manage your own rentals, if that’s the way you want to roll.

But, have the expectation (and, build the cost into your calculations from the start) that you will employ a property manager sooner rather than later, because managing your own rental properties simply isn’t any fun 😉

Be Sociable, Share!

5 thoughts on “Why I don’t manage my rental properties …

  1. This summer I have experienced a blown AC unit, a contested eviction, a roof leak (associated with the AC unit), a 3am plumbing call, a bust garage door, and a mouse in the house incident. All the lessons that needed to be learned occurred in one summer, we are ready to release to a manager asap.

  2. The problem for ME has been finding a competent and ethical property management firm. I recently signed on with a particularly bad one [link removed], and they were completely negligent, had horrible communication, and did no work whatsoever in the weeks I had a vacant property under their management. And they continued charging my credit card weeks after I cancelled. It was a costly nightmare that I would not care to repeat.

    I DID finally find good managers in some general contractors that are family friends, but it cost me thousands of dollars to get to this point.

    So I agree that property management is the way to go, but it’s extremely difficult to find one that won’t add stress and actually COST you time and money.

  3. Property managers want a ton of cash to manage properties. IMHO it’s not worth it. They want too much money for what I can do with little effort. If you screen tenants well and build a good support team it will greatly reduce stress levels.

    Train your tenants from the beginning and it will pay off in the end!

  4. @ Tyler – Like all professionals, a bad/negligent/criminal one can really screw you over … but, don’t let a bad experience put you off: you wouldn’t start doing your own accounting, just because your first accountant failed you.

    @ Michael – I prefer to be in the business of investing, than in the business of being a property manager. On the other hand, DIY does save money and you do learn a lot. But, listen to what Luis has to say about burnout.

  5. Since I can’t invest locally and have a busy “day job”, I will always use a property manager.

    They are probably the most important piece of your real estate team. You only buy the property once, but you deal with property management as long as you own the property.

    I have spent a lot of time comparing and interview property managers, and I can see how careful you need to be.

Leave a Reply