As a property owner, one of the most critical decisions you’ll face is whether to manage your property independently or enlist the services of a property management company.
This choice can significantly impact your finances, the level of involvement required, and your overall experience as a landlord. Self-management offers direct control and the potential to save on management fees, but it also demands significant time and effort. On the other hand, a property management company brings expertise, efficiency, and convenience, though at a cost.
In this article, we’ll explore the advantages and disadvantages of both approaches, providing you with the information necessary to make an informed decision based on your specific needs and circumstances.
What is Self-Management?
Self-management is exactly what it sounds like: you, the property owner, are responsible for every aspect of managing your rental. From collecting rent, finding tenants, handling repairs, and dealing with legal requirements – it all falls on your shoulders.
For many property owners, self-management seems like a no-brainer. After all, who knows the property better than you? And no one is going to care about your investment as much as you do. Plus, there’s no property management fee to pay, which is typically around 8–12% of your monthly rental income.
In fact, a 2019 study by Buildium, a property management software company, found that 63% of landlords self-manage their properties. This number is somewhat surprising given the complexity of managing multiple tenants and the time investment involved. But, for many owners, the potential savings and personal control are simply too appealing to pass up.
What is a Property Management Company?
A property management company acts as the go-between for landlords and tenants. They handle everything, from tenant screening and rent collection to maintenance and legal issues. These companies are equipped with knowledge of landlord-tenant laws, insurance, and emergency protocols, and they can often secure better deals with contractors for repairs or cleaning.
Property managers charge a fee for their services, typically between 8% and 12% of the monthly rental income. If you’re managing a high-value property or multiple units, the fee can quickly add up. However, many property owners find the cost of hiring a professional to be well worth the time and stress saved.
Property Management Company vs Self Management: Pros and Cons
Deciding whether to manage your rental property yourself or hire a property management company can be a tough choice. Each option offers distinct advantages, but also comes with its own set of challenges. Let’s see them…
The Pros of Self-Management: Are You Ready for It?
Here are some benefits of self management:
- Direct Control and Personal Touch
Self-managing allows you to have full control over your property. You get to choose tenants, set your rent, and handle every issue as you see fit. If you’re the hands-on type and love solving problems, self-management may feel like a rewarding challenge. - Financial Savings
By cutting out the middleman (the property manager), you save a percentage of your rental income each month. This can add up, especially if you only have one or two properties. In fact, you might save hundreds of dollars a year – or even more if you’re managing a large portfolio.
A quick example: If you’re renting out a property for $1,500 per month, a 10% management fee would cost you $150 each month. Over a year, that’s a $1,800 saving for you if you self-manage.
- Flexibility
You’re not tied to a schedule dictated by a property management company. Need to do a quick maintenance fix? You can do it when you want. Want to rent to a specific type of tenant? You have the power to make that decision, too.
Relatable story: Alex, decided to self-manage his two rental units. At first, he was overwhelmed, but soon enough, he got into a routine. He enjoyed the extra income without the middleman fees. But eventually, when his tenants started calling at 3 a.m. for a broken boiler, he realized it wasn’t sustainable. We’ll touch more on that later!
The Pros of Hiring a Property Management Company: Less Hassle, More Time
Let’s see some advantages of hiring a property management company:
- Professional Expertise
Property management companies have experience in all areas of property management. They know how to screen tenants effectively, avoid legal issues, and navigate maintenance problems. According to the National Association of Residential Property Managers (NARPM), 92% of property managers report a significant increase in tenant retention, thanks to their professional approach.
They also stay up to date with evolving landlord-tenant laws, ensuring you stay compliant. For example, the Fair Housing Act requires specific guidelines for tenant selection, and a property manager ensures you’re following the rules correctly.
- Time Savings
Managing a property, especially if you have multiple units, is time-consuming. A property management company handles everything from advertising the property to performing routine maintenance. They even deal with tenant complaints, saving you time and stress.
In fact, a 2021 survey from the National Association of Realtors found that property owners who hired property management companies reported spending an average of 50% less time dealing with tenant issues and maintenance.
- Better Tenant Screening
A property management company can help you screen tenants more effectively. They have the tools and knowledge to run thorough background checks, including credit history, rental history, and criminal records. This reduces the risk of renting to tenants who may cause trouble later on. - Maintenance and Repairs
Property managers have a network of trusted contractors. If something breaks, they can send someone out quickly, often at a discounted rate. On average, a property management company can save you 15-25% on repair costs due to these relationships.
The Cons of Self-Management: Is It Really Worth the Effort
Now, here are some cons of managing your property by yourself.
- Time-Consuming
Self-management can take a significant chunk out of your free time. Whether it’s dealing with late-night tenant emergencies or coordinating repairs, being on-call 24/7 can quickly become overwhelming. 60% of landlords report that the most stressful part of managing a rental property is handling maintenance issues and tenant concerns, according to a survey by Zillow. - Stressful
Managing tenants, ensuring compliance with rental laws, and handling unexpected repairs can be stressful. Plus, you may have to navigate tenant disputes or even eviction processes, which can become emotionally draining. - Lack of Legal Knowledge
Landlord-tenant laws are complex, and failing to follow them correctly can result in costly mistakes. For example, evicting a tenant improperly can lead to legal fees or even fines. A property management company helps mitigate this risk by staying up-to-date on the laws.
The Cons of Hiring a Property Management Company: What’s the Catch?
Here are some disadvantages of hiring a management company:
- Fees
While the time savings can be substantial, the cost of hiring a property management company can add up. As mentioned, fees typically range from 8-12% of your monthly rental income. If you’re renting out several properties, that could mean significant monthly costs. For example, for a property rented at $2,000 per month, the property management fee could be $160 to $240 per month. - Less Control
While hiring a property manager means fewer responsibilities, it also means less control. For some owners, having someone else decide on tenants, repairs, or rental terms might feel uncomfortable. You’ll also be entrusting them with sensitive decisions about your property. - Choosing the Wrong Company
Not all property management companies are created equal. Some might not be as responsive or may not manage tenants in the same way you would. Doing your homework to find a reputable company is crucial.
Key Factors to Consider Before Deciding
Before making a final decision, consider these factors:
- Your Availability and Expertise: Are you willing and able to take on the responsibility of managing a property?
- The Number of Properties: Self-management might work for a single property but becomes difficult if you have a portfolio.
- Location: If you live far away from your property, self-management might be a headache.
- The Type of Tenants: If you’re renting to high-risk tenants, a professional manager can handle the extra stress.
How to Know When It’s Time to Make the Switch?
- When tenant complaints become overwhelming.
- When the time spent on property management cuts into your personal life.
- When property management fees are outweighed by the time and stress saved.
Conclusion: What’s Best for You?
Choosing between self-management and hiring a property management company depends on your personal situation. If you’re comfortable with the responsibilities and ready for the time investment, self-management can save you money. But if you value your time and need professional help, a property management company can ease the burden significantly.
No matter which route you take, the key is to make an informed decision based on your goals, available time, and the level of involvement you want in managing your property.
