The pitfalls of being your own property manager
When you’re just starting out as a property investor, and purchasing your first or second investment property, you’ll most probably be on the tightest of budgets in order to ensure a positive cash flow on your investment. However, when you act as your own property manager, and you’ve never done it before, you’ll most probably be in for a startling awakening. Yes, you’ll save the ten or fifteen percent of gross rents a property management company would traditionally receive. But you will definitely earn that money in your time, expense and frustration levels. Traditional property investing advice would dictate that you should consider it a learning experience of incredible magnitude. Take a deep breath, and don’t let what’s to come get you down. Instead, prepare for the worst – the worst tenants, that is, by doing two things. One, choose only good tenants. Two, never let a tenant control you. You must set proper boundaries – otherwise, they will eat you alive.
Choosing the right tenants
Properly vetting your tenants before you sign them to a lease is crucial. It’s not simply that you’ll want to run a credit check on them (you must), or check their work references (ditto), but most importantly, you’ll want to check with their past landlords to see if they have any history of causing problems. If all their references check out, you’ve met them and feel comfortable with them (don’t underestimate your own good instincts and judgment), and , naturally, their income is sufficient to support the rent you’re asking, then by all means install them as your new tenants. Some of the best property investing advice I can share, is that choosing good tenants is the most important way you can control how big a headache being your own property manager will end up being.
Controlling your tenants
The key to controlling any tenant is setting proper boundaries. Without these boundaries, a tenant will run roughshod over you as the property manager. Do you think a tenant will ask for “favors,” or ask to show them how an appliance works, or both, at any hour of the day if they are dealing with a property management company? Not ‘gonna happen. That’s because professional property managers do several things you’ll need to do. They have set hours during the daytime that a tenant can call with problems. They have supplied the tenants on their first day with loads of written information about how things work in their unit and/or building…where and when the trash gets put out, what emergency exits are to be used, and their location…you know, basic information about the running of the building.
And so should you if you’re going to act as your own property manager. Make sure you have a boilerplate document that details everything a tenant should need to know, including who to call – and acceptable hours to call – in case of emergencies. And of course, you need to specifically spell out what constitutes an emergency. No heat? Yup. Broken pipe? Sure. An explanation of how to work the microwave? Nope. Boundaries…it’s all about setting proper boundaries. Once set, your life as a property manager, while still difficult, will be made much, much more palatable. And you can take this property investing advice to the bank.
photos courtesy of drkimfoster.com, realtybiznews.com, iresvegas.com, funagain.com