I’ve got a confession. I always disliked managing my own rental properties. Actually, hated it would be a more accurate way to put it. But, that’s OK. I eventually learned to become honest with myself. And then I went out and hired a nice property manager to handle all my rental units….dealing with the tenant complaints, collecting rents, selecting tenants when old ones left, keeping my vacancy rate down, maintaining my properties, and inspecting them on a regular basis. Oh – and supplying me with monthly accounting statements as well. Let’s face it – if you don’t have the right temperament for the job, fire yourself! And hire a property management company. While you’ll be paying a management company fifteen percent of your gross rent roll, it may well be worth it in your time – and more importantly – your sanity – saved.
The temperament of….a pitbull?
It takes a certain temperament, a certain je ne sais quoi, to be a good property investor and rental manager. Basic personality qualities include being entrepreneurial, being decisive, and having a proper aptitude (though not genius-level) with math, as well as being meticulous, grounded, and having stick-to-itiveness. These are some of the basic qualities a good property investor will display. Notice I did not include: being good with people, or being a “wheeler-dealer” type. These two traits are not something you need…and they can be learned, as well as delegated to others. That’s what property managers , as well as real estate agents come in and can do for you.
What makes a good property manager?
So be cognizant of what makes you tick – and what your passions are – when deciding if you should manage your own rental property. Active investors in real estate (those that prefer to control their own properties, as opposed to investing in Real Estate Investment Trusts, REITS, for example) don’t get in for monetary rewards alone. There are too many pitfalls to running a successful property investment business to take on the added risks. Rather, hands-on property investors enjoy wearing many different hats: being the site locator, searching for properties, then being good numbers crunchers to see which are the most attractive properties available at any given time.
They then switch hats to become buyers, making offers, negotiating, then finding financing for the properties. However, the very active investor in real estate is the one who needs to wear the hat of property manager – acquiring tenants, refurbishing units, and keeping them continually maintained properly. This requires great diligence and attention to detail. You are running an active business, not simply parking your investment dollars in a fund that will (hopefully) offer you positive returns.
How to manage your own rental property
In deciding on whether you should ultimately take on the task of being your own property manager and manage your own rental property, understand that this is no simple task. Here are the most basic responsibilities of property managers: Maintaining your rental property – As your own manager, you’ll be responsible for regular on-site checks on your building(s) to ensure proper safety and regular upkeep/maintenance. Also, you’ll be responsible for all emergencies (ie. – emergency calls from tenants), and making sure the right tradesperson is called to fix the problem, as well as follow-up to ensure the problem was fixed properly, quickly, and resolved to the satisfaction of your tenant – all at the most affordable cost to you. Ask yourself if you’re okay with these emergency calls from tenants – whether in the daytime, or in the middle of the night and on weekends. If you’re a calm person who’s good at “putting out fires” without it taking an emotional toll on you, then by all means you’ll be a good property manager for your own real estate holdings. If not, look towards hiring a professional property management company.
Did someone say…emergency?
Regarding hiring emergency service folks, you’ll certainly be dealing with a list of trades people when it comes to basic maintenance on your property (landscaping, lawn cutting, snow plowing), as well as repairs (mostly plumbing and electrical). Sometimes, hiring a handyman you’re comfortable with can suffice, as he can perform many of these tasks as a general all-in-one repair/maintenance service person who‘s “on call” for you. In addition, you’ll need to advertise, locate, screen and approve all tenants. Show your rental units that are vacant. Prepare all leases, and have them signed. Collect rent from all tenants. Make all collection calls on delinquent tenants. Represent yourself in any tenant eviction process, if necessary. Work with your attorney to aid in a smooth eviction. And keep all accounting for each property – you’ll need to deliver to your accountant each tax season a proper set of books ( or files) for each building you own.
I’ve mentioned in past articles about property managing that you will also be responsible for collecting rents. If you’ve chosen tenants well, no problem. If you haven’t – big problem. After all, this is a business you’re running, and it needs to be humming along, or else you’ll have cash flow problems paying your expenses. As part of your job as your own property manager, you’ll also want to stay in regular (at least once a month) contact with your tenants. Many times, tenants will not tell you about “small” problems they’ve been having with your property – until it’s a big problem. By being pro-active, you can scope out these problems when they are indeed small. So, for example, you can ask each tenant each month if there are any issues you should be aware of – for example, any small leaks going on in the unit, any bug problems they’re seeing, any safety-related issues (say, a constant flickering light that would indicate a potential electrical wiring fire hazard). By asking you’ll stay way ahead of the curve – and be able to jump on any potentially big problems when they’re still small – and easily (and cheaply) corrected!
Do you have the right stuff?
Rental property management is an acquired set of skills. And I would dissuade any novice investor from hiring a property management firm right after the purchase of their first investment property. It really is best for you to better understand the rigors that come with managing your own properties. And in the process, you will develop a finer appreciation for the sheer amount of work and expertise required of the job. Even with property management software readily available online, it’s still going to be a learning experience for you. And this experience will only help serve you in good stead as you move forward, and purchase your next investment property. You’ll know from limited experience how demanding property management can be – and time consuming as well. You may find that it will be much smarter for you to hire a property manager as you grow your investment property empire. By doing so, the extra cost for their services should be outweighed by your time costs, as a property management company will aid in providing you more time to search for new property acquisitions.
photos courtesy of houstonmortgagetexas.com, trexglobal.com, landerassociates.wordpress.com, m8property.com, lawofficewalterjennings.com, newhomessection.com, tenantscreeningblog.com