Property Management Company Vs. Landlording: The Pros & Cons
By JD Esajian on July 7, 2017
Most new landlords self-manage the properties. While there is nothing wrong with this if you don’t know what you are doing you can quickly run into trouble. As great as rental property ownership can be all it takes is one bad tenant or one oversight to quickly change everything. You are better off taking your time to make sure you know exactly what you are getting into prior to getting involved in a rental property. There is much more to managing a rental property than simply collecting rent checks every month. If you plan on managing the property on your own there are a few key items you need to consider.
- Everything Revolves Around Your Tenants. The quality of your tenants dictates everything with your rental property. If your tenants are poor and you have to chase the rent every month it impacts other areas of your business. On the flip side, if your tenants pay on time and take care of your property things will run smoothly. It is easy for a new landlord to go with the first tenant that shows interest. They seem nice so might as well rent to them. This is the worst thinking you can have. You need to treat your rental the same way a bank does with a credit applicant. They may be the nicest applicant in the world but without an ability to repay you need to move on. You must have a system in place to screen your tenants to ensure you know who you are renting to. You are well within your rights asking for a paystub or following up with any references listed. If you have a good property in a good location you do not have to worry about finding other tenants. It is better to wait for the right tenant than to go with the first tenant that shows interest.
- Expect The Unexpected. Quite frankly, too much is made about the calls from your tenant in the middle of the night. This may happen once every five leases. It is the call in the middle of the morning you need to worry about. Regardless of how strong your tenants are things in your property will eventually need to be repaired or replaced. It is important that you have a team in place and assets in reserves to deal with them. Things can be going along great than out of the blue the washing machine will stop working. This may seem like a minor item to you but it is important to your tenant. If you don’t act quickly to get it fixed your tenant will lose confidence and faith in you. Instead of going out of their way to pay their rent on time or take care of the property they will become less than enthusiastic. This will lead to other minor issues popping up and your tenant not renewing the lease at the end of the term.
- Know All Rules And Restrictions. All it takes is one slip up or oversight to ruin years of hard work. If you manage the property on your own there is no property manager to help understand local laws and rules. If you drop the ball with one tenant they can sue you and cause severe financial damage. In addition to a federal set of guidelines there are a handful of local laws that can vary based on the specific location. Something you thought was fact in one town may not be the case where your property is located. You need to make it a point to hop on the local planning and zoning website of the town once a week just to stay current. If you don’t live in the town you may not hear about the changes. Ignorance of the law is no excuse for not following it.
- Understand Eviction Laws. If you own rental property long enough at some point your tenant will be late on their rent. In most cases they are just a week or two late but the check eventually comes. In extreme situations, your tenant stops paying and you are forced to move forward with an eviction. It is important that you know the rules and guidelines before you get too far in the process. An eviction can be very costly, time consuming and frustrating. Your tenant has many rights and privileges that you probably wouldn’t assume they would. Even if you don’t agree with the law by following it you keep the process moving and get someone in the property as quickly as possible. Ideally you will never have to evict a tenant but the odds are at some point you will.
- Start Close To Home. If all things are equal you should focus on properties that are in close proximity to where you live. Self-managing means you will probably cut the grass, rake the leaves and shovel the snow. If you are thirty minutes away from the property you may not give it the care and attention it deserves. Furthermore, every time you get a call from a tenant you will be annoyed that you have to drive to the property and may take it out on them. By sticking close to where you live you will be more tuned into the market and can stay on top of any changes.
Self-property management can work if you understand the numbers and know what you are in for. Always consider these five items if you plan on managing the property on your own