Property investment is a lot like living life on a seesaw, on one end sits income and on the other resides cost — with property management the cost is not only the financial cost but also the time and stress costs as well. The constant balancing act is ensuring you get the most value from your investment with the least amount of money spent and stress experienced.
When it comes to saving money and raising the ‘income’ side of the seesaw, do-it-yourself property management may seem like the best place to start, but in reality, it may not be all it's cracked up to be (we'll explain more on this shortly). On the other end of the scale, you can reduce time pressures, stress, and other costs by engaging a property manager who will share a portion of the income.
It’s because there isn't a straightforward answer to how to get this balancing act right that we’ve written this article. In it, we explore the various definitions of ‘cost’ and ‘income’ to look at whether self or professional property management yields better ‘returns’.
When you take into account the amount of time managing a property can take, including juggling the demands of tenants as well as the amount of potential stress involved, the responsibilities of a property manager can be extensive — regardless of whether that’s a third-party property manager or an owner/manager.
Don't forget to combine that with the recent changes to the Healthy Homes standards as well as the amendments to the Residential Tenancies Act, which is affecting all landlords. With information on these changes accessible online, tenants are well aware of their rights, and (rightly so) making landlords more accountable for their properties. As the Government adds more regulations to landlord responsibilities it can be difficult to navigate these changing requirements and to know which facts are facts, and which are misinterpretations of the rules.
Managing a rental property requires many skills and can be extremely time-consuming — especially when issues arise. So let’s explore a few of the pros and cons of managing a property yourself, versus using a property manager.
Cons of property self-management
Property management can take up a lot of your time
Managing a property can be demanding. From finding reliable tenants, vetting references, collecting rent, being on call 24 hours a day for emergencies and repairs, to holding property inspections — the hours can stack up. In some instances, a week or a month can pass without hearing from a tenant, and then other times contact may be weekly or even daily, especially if there is an issue that the tenant needs to be resolved quickly.
Having to manage tenant/property issues at all hours
Unfortunately, we don’t have control over when something decides to break. Issues can arise at any time and often occur in the evening, at weekends, or even late at night, as these are the times when people are at home noticing or using things that suddenly cease to work. Sometimes these can turn into bigger problems than you are prepared to deal with. If you don't mind dropping whatever you're doing to respond to a callout, then this won't be an issue. But if you're hoping to have a steady stream of income with minimal effort, the reality might be quite the opposite.
Staying on top of property management paperwork and records
It might seem like unnecessary admin but keeping on top of inspection reports, bookkeeping, legal documents, legislation, maintenance logs, and communication with tenants is essential! It pays to be on top of these things and have everything in writing, especially if something was to go wrong. Sadly when self-managing a property all of this administration falls to you. Keeping accurate records and storing them offers peace of mind and a paper trail should anything go wrong.
Pros of self-management
You have 100% control over your investment
Self-managing your rental property means that you are responsible for everything. There is no third party person between you and your rental revenue. From marketing, tenant screening, management of the tenant, maintenance, repairs, and inspections, you are responsible and have full control over every aspect.
There are no property management fees
The main reason why people choose to self-manage their property is to avoid property management fees. Property management is a paid service that typically sees a percentage of the month’s rent go to the property manager or property management company. The initial dollar signs can be the leading reason why many landlords choose to do it themselves.
You'll have a direct relationship with the tenant
As the main point of contact with your tenant, you can foster a relationship with them that simply isn’t possible with a property manager involved. They will be able to contact you directly at any time, and you'll be able to build up a rapport with them — just keep in mind you’ll have to respect their legal boundaries and not just drop in on them!
Cons of using professional property management
The additional expense of property management fees
As we mentioned above, a percentage of your weekly rent will go to management fees. This can be frustrating especially if your rental property basically runs itself — that is until it doesn’t (to see what we mean take a look at these real-life examples of things not going right). As well as these, some property management firms (including us) recommend a small voluntary amount of the weekly income goes into a holding account for unexpected bills and maintenance. This is completely optional but is very helpful when a problem arises so that you’re not diving into the holiday fund to fix it.
A lack of involvement in some property management matters
Property managers likely won’t involve you for minor tenant issues, maintenance issues, or other trivial matters. This is because they are equipped to handle these issues and have learned the best way to do so. If you are someone that needs to be hands-on at all times, self-managing might be a better fit for you.
Property managers are managing multiple properties simultaneously
A property manager will be managing more than one property at a time. This means that, unlike a self-managed property, your property will be one of many being looked after. Whereas when you're self-managing you'll be able to give the property your full, undivided attention.
Pros of using professional property management
Property managers have experience in the industry
Professional property managers have years of experience under their belts. They are trained to understand the rights of each party and identify when breaches have occurred. They can advise you on best practices so you can avoid any trouble and potentially hefty fines. Over the years property management companies have handled many situations and learnt the best ways to combat them, from tenant disputes, and evictions, to late payments, their knowledge and experience can be invaluable.
Hiring a property manager frees up your time
A property manager takes care of all issues, they are the main point of contact for tenants, in fact, a tenant shouldn’t even know you’re the owner of the property unless you want them to. As a result, you can live in peace, knowing that your property manager will handle everything.
Having a property manager gives you the freedom to live out of town or abroad
Owning your own property requires you to stay close to it so you can respond quickly to maintenance requests and conduct walkthroughs. You will need to conduct physical inspections within the legal timeframes and parameters set out in your insurance policy. When you hire a property manager, you can move elsewhere or even go on an extended holiday because the duties will be taken care of by them.
Your property manager will deal with maintenance issues
Property managers are not only quick to respond to maintenance issues, but they typically have a wide range of trusted trades that can get the job done, and quickly. It saves you time and effort researching different providers and choosing the one that is right for you. Plus your small job might not be a top priority for a busy tradesperson, but with a property management firm providing a consistent level of work for a tradesperson it's likely they'll want to stay valuable to the property management firm and prioritise their work.
Your property manager will find reliable tenants for you
Finding the right tenant is crucial for the success of your investment. Reference checks are important, but not everyone has the time, money, or correct resources to do thorough assessments. Being lumped with a bad tenant can be stressful, costly, and hard to remedy. Using a property manager means they can do extensive checks to ensure you're getting good tenants into your property.
Having a property manager can reduce vacancies
Long vacancy periods can quickly cut into your profits! Once your property is vacant you'll want to get a new, qualified tenant in as soon as possible. Thankfully, property managers not only have an extensive list of tenants looking to rent properties, but they also have insider information on tenancies coming to an end with good quality tenants who will be in need of a new property.
A property manager deals with relationships professionally
One of the most common reasons why a property is moved from being privately managed to professionally managed is because the owner has become too close to a tenant and problems can become harder to deal with. The tenant-landlord relationship needs to remain professional so that all parties know what's expected. Dealing with late payments, eviction notices, and damages to a property can be a daunting task for many people to deal with, especially if a friendship has been formed. Property managers are not only trained to deal with these situations, but they also know the boundaries.
Some landlords start out managing their own properties and then change to a property manager as their lifestyle or needs change. Take this property investor’s experience for example:
"We were undecided as to go with a rental agency or try to do it ourselves, I am so glad we opted and gave Rachel a chance. She is always very organized in regards to repairs and inspections. Goes that extra mile to find us the best deal for any maintenance requirements.
To be honest, we have a busy family life, and I couldn't do it without her. I completely trust Rachel and I know she will always do her best for the tenants and the landlord."
A good manager is meant to take the day-to-day hassle out of being a landlord. They also make renting easier for tenants by being on call to fix problems and making sure routine maintenance gets done. The result is happy tenants who stay longer and happy owners who get regular rental income and shorter periods of vacancy between tenants.
If you are currently self-managing your property or properties and would like to make sure you’re well protected if anything were to go wrong, don’t hesitate to contact our team of property managers to discuss your situation. You might be curious as to whether you’re getting the best income from your investment? Then talk to our team to see if you’re meeting the market demand or selling yourself short. Perhaps you have challenging tenants and need some tips on how to manage them? Our team are also here to offer impartial advice and guidance, simply get in touch today.
Good property management rebalances the seesaw. Enabling you to get a consistent, regular income without the stress and cost impacting your profits and even your health.
The property management team here at McDonald Real Estate is always willing to help share their experience and knowledge so why not request a free appraisal today.