Do Your Own Rental Management?
By Steve Gillman - 2006
Typical rental management fees vary according to property
type and area of the country. From as low as 4% of the gross
rents for large properties, they can go as high as 12% for single
family homes. Obviously, managing your rental properties yourself
can theoretically save you a lot of money, especially if you
have a collection of single family rental homes.
Should you manage those apartments yourself, then? It depends
on the property, and on your own goals. Some of the advantages
and disadvantages are outlined here.
Do It Yourself Rental Management
The obvious advantage? You save the property management fees.
For a fourplex renting at $700 per unit, the fee might be as
much as 10%, or $280 per month. That could be all of your cash
flow. In this case, you could save $3360 per year by doing it
That $3360 makes it a safer investment, doesn't it? If the
furnace needs repairing, or some other surprise comes up, you
will be more prepared. Obviously, there is a safety factor in
doing it yourself and saving the money.
Personal involvement also means you can find cheaper ways
to do things. A rental management company will call a plumber,
for example, for a clogged toilet. You could choose to save $80
for a minute of plunging.
If you just want that one property as a retirement investment,
and you don't mind the work, doing it yourself can make sense.
You may also have to do your own management just to have cash
Hire Rental Management
Good property management companies have prospective tenants
coming to them weekly, so they can fill a vacant apartment quickly.
Suppose an apartment is vacant for an extra two weeks, because
you are too inexperienced and busy to get it rented quickly.
That can cost you hundreds of dollars. In other words, the fee
may not cost you as much as it seems.
Doing your own rental management may be financially safer,
and you can control costs more. Of course, a job is safer
too, and that's what you end up with. The time spent showing
vacant units, collecting rents, and plunging toilets takes away
time from finding other good investments. Saving a few hundred
dollars can cost you thousands in lost opportunities.
Management companies have experience dealing with collecting
late rent, making tenants pay for clogged drains they caused,
getting apartments ready to rent, and every aspect of the process
of running a rental property. Do you? Maybe you do, but you still
have to ask yourself whether you want to invest in properties
or work in them.
A good income property should have sufficient income to cover
all expenses. When you analyze a property, include a manager
as one of those expenses. Then, when you make your investment,
you can pay for rental management, and get back to investing.
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