Managing your rental properties can be tough, which is why deciding whether you will self-manage or hire a property management company is one of the first decisions you should make. Hiring a management company may seem like the easiest option, but you should understand both options in order to make the wisest decision. Here is a look at the pros and cons of each option.
Self-Managing Your Property
Managing your rental property on your own means making all the decisions about your property. This gives you freedom to run your property the way you want to and removes any middleman on the income every month.
Pros of Self-Managing:
- Full income: None of the monthly rent paid will be going to management companies; everything is paid straight to you.
- Direct oversight: It is good to have direct control over your properties so that you can get done what needs to get done as well as have personal contact with your tenants.
- Tax benefits: Managing rental properties allows you to write off many expenses as business expenses while still not having to list yourself as self-employed.
Cons of Self-Managing:
- Time expectations: Managing your own property requires you to invest a lot of time finding tenants, providing maintenance, collecting rent, and all of the other tasks involved in running a small business.
- Tenant complaints: Some tenants will send you many complaints, sometimes for minor issues. Self-managing means dealing with each of these individually and personally.
- Financial management: Self-managing means needing to have money to cover taxes on your properties while looking for tenants and negotiating prices with those tenants. The bottom line can sometimes be tough to deal with when self-managing a rental property.
Hiring a Property Management Company
Management companies will actively take care of your properties for you, removing the need for you to be active in the managing of any properties you own. They do this for the price of a percentage of the monthly rent coming in from the property.
Pros of Property Management Companies:
- Less hassle: Having a management company handle everything about your rental property means you won’t have to do as much work yourself.
- Tenant options: Management companies often take over the process of finding new tenants, so you will not have to oversee that process yourself.
- Long distance: Having a management company means that you are not restricted by geographical distance. If you have a rental property and decide to move 5 hours away from it, the management company will continue to take care of that property for you.
Cons of Property Management Companies:
- Payments: Usually around 10% of your monthly rent payments will go to paying your property management company.
- Repair money: Some management companies will require a certain amount of money, usually around $300, to be placed in a separate bank account each month. This money is used by the management companies for emergency repair money or any other expenses incurred.
- Lack of choices: When making repairs or performing other work on the rental property, the management company will make all the decisions about what repairmen to use and how much to pay. You as the owner will not have a say in decisions like this once you have signed on with a property management company.