I thought it would be easy. Invest in a property and improve my return by managing it myself. Simple, right? Well… not exactly. It didn’t take long to realize the breadth and depth of knowledge required to manage my own property well. Overnight, I became a compliance manager, legal expert, leasing agent, relationship manager, call center, vendor manager, maintenance coordinator, and contractor. There are many hats worn as a property manager and it takes significant time and effort to learn the nuts and bolts.
So Many Laws, So Little Time
The legal framework is changing constantly. Adherence to evolving local, state, and federal laws and regulations keeps you on the right side of the law. This means staying abreast of Fair Housing regulations, Tenant Protection Acts, landlord-tenant laws and regulations, lease agreement components, lead and mold compliance, and more. The requirements are extensive and specific to your location – what the lease must and must not include, right-to-enter requirements, lead based paint mitigation, tenant protections, notifications, what to do with items left behind, what you can and can’t charge for damage, what type of font you must use on notices, when you can and can’t evict tenants, and how much relocation assistance is required to name a few. Owning properties in more than one location is double the fun. For example, a property in the City of San Diego is subject to the City of San Diego Tenant Protections Ordinance as well as the California Tenant Protection act of 2019. The requirements are similar, but not the same. Different cities, counties, and states may have entirely unique requirements.
Too Busy for Inspections
Inspections are time consuming and not my area of expertise. Scheduling, entry, and coordination with renters can be a challenge. My life was so busy working full time with two kids, it was easy to procrastinate. Big mistake. I had invested $50,000 renovating a lovely home in a great neighborhood. I rented it to a cute family of four, who turned out to be a party of 10 and two dogs. Caught by surprise, this was heartbreaking. The value of my investment was reduced and more money poured in to fix it. My pride of ownership took a beating.
Dreaded Turnover
Turnover is exhausting. I’m cruising along thinking managing my own properties is easy and then.. bam… tenant is moving out. The clock is ticking because every day that passes is income lost. Repair, paint, clean, new flooring, fix the toilet, replace appliances, yard clean-up, take photos, figure out market rent, advertise, market, respond to hundreds of inquiries, perform credit checks, update my lease with new legal requirements, show units, say no to desperate prospects, choose the best tenant, set up signing, get deposits, set up rent payments, and more. Whew! I’m sure my boss at my “real job” was thrilled with me.
The Rent Increase Trap
I found myself doing anything to keep current tenants at all costs, even if that meant keeping my rents below market. My excuses – it’s altruistic, it’s my way of giving back, I don’t want to be “That Greedy Landlord.” Setting and raising rents was uncomfortable, even when the market definitely called for it. In reality, I was avoiding investing my time. Keeping a tenant at a lower rent meant I invested less time in managing my rental. A costly miscalculation. My income fell further and further behind market rent. Year over year, my rents lagged behind those set by a property management company by 5%, then 10%, then 15%. This alone would have covered the cost of hiring a property manager. It seems easier to keep your rents low and retain tenants, but it’s not a financially sound decision.
Emergency Calls
Who doesn’t love calls at 2:00am in the dead of winter during an ice storm to report the heat is not working? Need I say more?
Fix What’s Broken
Have you recently tried to find vendors to fix plumbing, windows, appliances, HVAC? Some are two, four or even six weeks out. Don’t get me wrong, I enjoy shopping. But not for water heaters, dishwashers, affordable window coverings, sinks, faucets, and toilets. Go out and measure… three trips to the big box store… arrange installation timing with the big box store and tenant. Oops, that one doesn’t fit… repeat.
Out of State Management
If I thought managing my own properties was hard living in the same city, managing them from out of town was almost impossible. All of the time consuming tasks became harder, if not impossible.
Managing my own properties took more time and effort than I anticipated. While it does get easier as you learn, it takes time to figure out what is needed and how to handle new challenges that present themselves routinely. Being out of state made self-management impossible, so I hired a property manager.
THE VALUE OF A PROFESSIONAL PROPERTY MANAGER
Things changed for the better after hiring a professional property management company. Rents up. Cash flow up. Emergencies and maintenance handled. Best of all, time saved and stress gone. The management fee was well worth it.
Improved Cash Flow
Rents stayed on pace with the market, late fees were collected rather than negotiated or ignored, maintenance was completed quickly at the right price, turnover was 3 days instead of 3+ weeks. I sat back and received my monthly net income into my bank, reviewed the accounting, and routinely reviewed my assets with my property manager for a reasonable fee.
All the Details are Handled
Professional property managers handle the details at a fee less than the cost of my time. Legal requirements were just handled. My role during leasing? None. My role during turnover? None. My role fielding emergency calls? None. My time commitment? About an hour each quarter for a phone call.
Hassle Free Inspections, Maintenance, Repairs, and Renovations
Inspections made a difference upholding lease requirements and keeping my properties in good condition. One inspection, for example, discovered a hoarder living in one of my units. The garage was full of items up to the roof. My property manager handled the delicate conversations with the tenant, arranged to help her with the process to remove the garbage, and brought their cleaners and a trailer to help reduce the cost. On routine maintenance, I set a dollar limit for approvals, agreed to expectations, and only became as involved as I wanted to be in bigger projects. Preferred vendors and in-house maintenance teams provide quicker response and a pricing advantage that can’t be matched by an individual.
They Saved My Sale
Last year, I was closing on the sale of a triplex. Two days before closing, a tree fell, collapsing part of the roof. It was a big storm. So many other buildings had been damaged, vendors were weeks out to even look at the damage. I called my property management company. They jumped into action with their preferred vendors and internal resources. They were able to prioritize removing the tree and repairing the roof as soon as possible. They coordinated accessing the units for insurance inspectors, framers, and roofing companies. They coordinated with the insurance company. My investment – only a couple of phone calls to my agent and property management company. The sale closed with only a two week delay, rescuing a substantial capital gain.
FINDING BALANCE
Did I save money managing my own property? Not at all. A professional property manager at a 7%-10% fee is well worth the investment. My income increased and the cost to operate decreased. When you consider the opportunity cost of my personal time, it’s a clear win to hire a professional property manager. With a property manager on my side, I can sit back and watch my asset grow without all the hassle of managing it myself.
