With home prices nearly 50% higher than in 2020, according to a report from Harvard’s Joint Center for Housing Studies, consumers continue to flock to the rental market–along with savvy investors and entrepreneurs. While long-term rental properties provide vast opportunities, managing an investment property requires additional time and resources.
Many first-time rental investors don’t know how to manage rental properties and wonder whether it’s better to self-manage or hire a rental property management company. Luckily, Finance of America Commercial (FACo) is here to help simplify your decision! In this article, we’ll discuss the pros and cons of self-managing an investment property vs. hiring a property manager and which approach is best for you.
Many first-time rental investors don’t know how to manage rental properties and wonder whether it’s better to self-manage or hire a rental property management company. Luckily, Finance of America Commercial (FACo) is here to help simplify your decision! In this article, we’ll discuss the pros and cons of self-managing an investment property vs. hiring a property manager and which approach is best for you.
Self-Managing a Rental Property
While learning how to manage your own rental property comes with growing pains, there are several benefits to learning how to become a successful landlord. Let’s look at the biggest pros and cons of self-managing rental properties:
The Pros
Cost Savings
The biggest reason investors self-manage rental properties is the cost-saving benefits. By managing an investment property, investors can avoid a property management team’s monthly fees–typically between 7-10% of the tenant’s monthly rent–and any additional costs for marketing, leasing renewals, and other miscellaneous fees.
First-Hand Experience
While evolving regulatory challenges within residential real estate can be difficult to navigate, gaining first-hand experience with property management while learning legal aspects and local rental market trends will undoubtedly make you a better landlord and investor.
Full Autonomy
By self-managing an investment property, you gain complete control over decision-making, including:
- Tenant screening and selection processes
- Maintenance scheduling
- Financial decisions
With full autonomy, you can customize lease agreements and property policies (within tenant/landlord legality) and have the final say during tenant selection. Additionally, you can hand-pick the vendors and servicing times for your property and its appliances.
The Cons
Time-Consuming
The time and energy it takes to play landlord is perhaps the most significant deterrent for investors. Landlords must be jacks-of-all-trades and available 24/7 to handle various property and tenant concerns, including:
- Maintenance requests
- Emergency maintenance
- Tenant issues and disputes
- Evictions and late payment events
- Tenant screening, approval, and paperwork
- Marketing the property for rent
Rental property management requires substantial presence and paperwork. The time and resources necessary for self-managing a rental property can negatively impact an investor’s work-life balance and ability to grow their business.
Legal & Compliance Risks
As mentioned, landlords must constantly stay updated on the latest tenant rights, fair housing laws, and eviction procedures. When self-managing a rental property, you’ll be accountable for associated legal and financial responsibilities.
Hiring a Rental Property Management Company
For budget-conscious investors, a rental property management team may seem like a needless expense. However, the experience, resources, and peace of mind provided by property managers can pay dividends later down the line. Let’s look at the most significant pros and cons of hiring a rental property management company:
The Pros
Industry Experience
When you do the research and find a credible rental property management team with a proven track record, you get the experience, knowledge, and systems needed to succeed. An experienced property management organization brings a defined, uniform, and proven process for the entire property management lifecycle, including:
- Preparation
- Marketing
- Tenant screening and application processes
- Maintenance scheduling and response times
- Rent collection and tenant communications
Shorter Vacancy Times & Higher Tenant Approvals
With a proven system for managing an investment property, rental property management organizations’ processes typically equate to shorter vacancy times. Whether it’s their due diligence to find stellar tenants, unit preparation and marketing techniques, or satisfactory maintenance and tenant communication processes, professionally managed investment properties tend to have shorter vacancy times and higher tenant approval.
Time & Peace of Mind
Dealing with unruly tenants, maintenance issues, or any other landlord-specific tasks can quickly become inconvenient and eat away at your business or personal time. Hiring a property manager erases nearly all the headaches of being a landlord and minimizes you and your business’s exposure and liability regarding rental rules and regulations.
The Cons
Costs
As mentioned, property management teams are a continuous debt to your overall rental income, with the average property manager costing between 7-10%. With the average rental price in the US at $2,078, according to Zillow, that’s between $145-$208 a month in expenses. And, that doesn’t include additional costs for marketing and other miscellaneous fees like preparation, cancellations, extra maintenance, and more.
Lack of Involvement
Rental property management teams come with uniformity. This means investors may have little to no say in the screening processes, marketing, and maintenance vendors. While property owners tend to have the final say in tenant approvals and maintenance work, certain time-sensitive repairs or appointments may be relayed after the fact. If you’re a more hands-on investor, the lack of involvement may be enough to drive you away from professional property management teams.
To Self-Manage or Not to Self-Manage
The decision to self-manage a rental property or not depends on your personal situation and business goals. While both self-management and property management teams have their pros and cons, the choice ultimately boils down to three things:
- Your desire to be involved and learn the ropes of property management
- Your profit margins
- Whether or not you have extra time and resources
Regardless of how you choose to manage an investment property, adequate and accessible capital is essential to rental investment success. Whether you’re looking for a Single Rental Loan or Rental Portfolio Loan, FACo has you covered with some of the most comprehensive and flexible long-term rental loan programs in the country.
Our residential rental loans include:
Our residential rental loans include:
- Competitive 30-year term loan options
- Maximum rental flexibility
- SFR, warrantable condos, townhomes, PUD, and 2-4 units eligibility
- DSCR blanket loans with no W2s, paystubs, or tax returns required
FACo’s rental loan programs are designed specifically for rental investors with streamlined loan application processes and more avenues for our associates to say “yes” to financing your dream.
Whether self-managing an investment property or hiring a professional property management team, ensure you have the funding and resources to make the most of your investment property. CLICK HERE to schedule a FREE consultation with a FACo expert today.
Whether self-managing an investment property or hiring a professional property management team, ensure you have the funding and resources to make the most of your investment property. CLICK HERE to schedule a FREE consultation with a FACo expert today.
