If you have recently purchased an investment property in the Auburn, Grass Valley or Nevada City, California areas with the intent of renting it out, you may be thinking, “How hard can it be to find tenants and manage it myself?!”
For anyone who has prior experience in this area, it may be easier than for those who are completely new to it, but it’s no walk in the park. There is a lot involved that should be considered and you should investigate all aspects of managing a rental yourself before coming to that decision.
Navigating this process can be difficult, so below are some of the pros and cons of self-managing to help you decide what’s right for you.
Pros of Managing Your Own Rental Property
1. You don’t have to pay anyone!
When you are the one managing your property, that means you are saving money monthly and every time you place a new tenant that you would otherwise be paying a property manager. The money that would have been spent on a property management company can now be saved for any maintenance or repair issues that may arise with your rental in the future.
2. You have complete control over all aspects of the rental property.
Whether it’s tenant screening and selection, lease agreements/enforcements, rent collection, repairs, updates, etc., you will be in complete control of everything associated with the property. You will be the first point of contact for the tenant and able to decide how to move forward with maintenance, repairs, and lease renewals according to your preference.
3. You will personally know the tenants and see how they are taking care of the home.
As the landlord, you will have met the tenants during the viewing/screening process. By performing inspections at the property, you will be able to see how well the home is being cared for and if they are living up to the terms of the lease agreement.
Cons of Managing Your Own Rental Property
1. Poor screening requirements can lead to bad tenants.
Property management companies have specific criteria when it comes to screening applicants to avoid approving someone who is not qualified to rent a home. Although some owners prefer to meet applicants face-to-face and screen them personally, it could end up costing them in the long run if the tenants have to be evicted. Lack of experience with regard to screening could result in approving a tenant who does not pay rent on time (or at all), does not properly care for the property, is a nuisance to neighbors, is difficult to work with regarding maintenance, inspections, lease violations and more.
2. If the tenant has to be served notices or evicted, you’re on your own.
First, there’s a late rent payment, but it’s only late by one day so you let it slide. The next month, it’s 4 days late, but they promise it won’t happen again. The following month, rent isn’t paid at all and now they are complaining about a maintenance issue that needs to be handled before they will pay rent. What do you do?! You will need to know what form(s) should be served and when and how to respond to circumstances such as these. Staying calm under pressure and handling issues the correct (and legal) way is always your best bet.
3. You might end up paying more in the long run to self manage your own rental property.
When you don’t hire a professional to manage your rental property, you run the risk of having to deal with various issues that may arise as a result of your lack of knowledge. While it could seem like you’re initially saving money by placing your own tenant and not paying a monthly fee, you could end up in court having to evict someone for non-payment of rent or worse, property damage and non-payment of rent. Between repairs, lawyer fees and court fees, it could cost you a pretty penny if you don’t know what you’re doing.
Investment properties are just that, an investment; and they should be treated as such! If you feel confident that you have the knowledge to take on being a landlord, more power to you! However, if you start the process without a plan or any knowledge about how to manage a rental, you may want to reconsider.
If you’re considering managing your own rental, but you’re not sure if you can handle it, talk to a property manager to find out what is involved. Do some research, look up the state, city and county laws to find out what you need to be aware of. You could even pay to gain access to rental agreements, forms and industry specific information from a company such as American Apartment Owners Association (AAOA). Whatever you do, make sure that you make an informed decision before moving forward. If you need help making the decision or just need someone to bounce some ideas off of, feel free to give us a call!
