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 yourself.

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 flow.

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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