Your first decision was easy: Yes, you will invest in residential real estate.
Now you face the harder choice: Do you manage the property yourself or hire a professional?
Start with three basic questions:
• Do I have the time and energy to do this?
• Do I have the skills and abilities to do this?
• Do I really want to do this?
Just as there is an “investor’s temperament,” you need to have the right disposition to manage the property you invest in. It takes an honest assessment of your abilities and goals to make your own best decision.
Which option works for you?
Just because you run your own household, that does not automatically mean you are the perfect property manager. Hiring a trained professional might be better decision – on both a financial and personal level.
However, if you hire a property manager, it will cost you between 8% and 12% of your gross monthly rental income. So you need to weigh that against the costs in time and effort you will need to do the job yourself.
Are you ready and able to collect rent every month? Can you handle all the complaints from tenants? Do you have the skills to complete all the minor repairs your renters need?
Let’s compare the whys and why nots of becoming a property manager as well as an investor:
|
WHY OURSOURCE |
WHY DO IT YOURSELF |
|
Free up your time to focus on your portfolio |
Why pay others to do something you can do yourself? |
|
One manager for multiple properties reduces your stress |
You enjoy the interaction with your many tenants |
|
One expert will handle all your problems easily |
You love the challenge of learning new solutions |
|
Invest in different locations with better economic up-sides |
Pay yourself to increase your own income |
|
Scale your holdings, up or down, quickly and easily |
Increase profitability due to personal initiative |
|
You live far from your properties |
You have availability and live close to your properties |
|
You prefer freedom and flexibility, not wanting to be on call 24/7 |
You are willing and able to be on call 24/7 |
Where do you land? Are you a “hands-off” investor or a “roll-up-the-sleeves” property owner?
Seven insider tips for every property investor
No matter which camp you fall into, there are some proven tips and tactics that will make your life easier (and more profitable) – and that really is your primary goal, right?
So, whether you own one unit a few blocks from where you live now, or multiple addresses in a variety of locations, here is some advice that is sure to pay off:
1) Account for property management fees and expenses. Remember, it does not matter if you pay someone else or pay yourself, make sure you budget for this expense. Whether you are the property manager or you outsource the role, there is value in the time and effort contributed.
2) For the do-it-yourself investor/managers, divert the fee you would have paid a professional into a savings account. Once a year, use the money to treat yourself to a dinner, pay off some bills, or leverage that money into further investment opportunities.
3) Learning how to do it yourself first is invaluable training for those who are investing in real estate for the first time. The more you know about property and tenant management, the better.
4) Property management might become a new income stream for you. Many investors enjoy managing their properties so much that other investors hire them to manage their units. If you’re good at it for yourself, you can be good at it for others!
5) Which skills do you have: managing the manager or dealing with tenants directly? Play to your personal strengths.
6) Property managers are on call 24/7. Are you ready for that? Is your family ready? When your tenant calls with an emergency, someone needs to be there. Is that you or your property manager?
7) Do your due diligence. If you decide to go the outsourcing route, do the interviews, check the references and ask questions. Your property manager is your representative. Treat them as you would any vendor: professionally. They are part of your team, so make sure you share your vision.
Property management is as much a business as your property investing. Both require personal decisions and personal commitment.
