Property Management: DIY or Outsource?
By Patrick Francey
If you ask REIN Members about how they approach property management of their single family properties, you’ll get a mixed response with some preferring to do it themselves while others are adamant that it should be outsourced. For some investors it’s a friendly tug-of-war debate that is as common in the larger real estate investing world as it is among REIN Members.
So which is the better option for you? Should you get property management services or do it yourself? Ultimately there are a number of things that you’ll have to consider. For example, do you currently have the necessary skills and experience, and if not, are you willing to learn? How does self-managing your portfolio align with your lifestyle and goals and how do you value your time? The average expenses for a property manager to look after your properties, deal with calls, and collect rent, generally ranges from 8% to 12% of gross rents. Does the expense cost you more than you want to pay each month or does it save you the value of extra time?
Some arguments in favour of outsourcing your property management:
- You might see the property management expense as a small cost toward achieving the freedom of time and lifestyle that attracted you to real estate investing in the first place.
- If you have multiple properties, you’ll appreciate having a single point of contact for all of your properties instead of dealing with multiple tenants and personalities.
- A well-chosen property manager should be an expert resource who identifies and mitigates tenant and property problems that are unfamiliar to you.
- You can own properties in cities that are economically stronger and aren’t necessarily in the same city, province, or even country as you. Property managers are your boots on the ground when you live somewhere else.
- You gain scalability that isn’t limited to how much time YOU have, how much bandwidth you have, or the geographic location of the property.
Arguments in favour of managing your own properties:
- You might see the property management expense as an unnecessary depletion of money that could be going into your pocket for a small amount of effort.
- You’re willing and able to maintain a good working relationship with tenants, as well as develop the time and knowledge to deal with finding a tenant, collecting money, and (sometimes) evicting a tenant.
- You love to learn: learning about marketing to fill vacancies, repairs and maintenance of properties, managing contractors, trouble-shooting issues and more.
- You pay yourself well to manage your properties and it makes sense as a way to supplement and increase your income.
- You have a very hands-on approach to managing costs and believe you can increase profitability by doing it yourself.
- You understand how to manage properties and therefore you treat it like a business.
- You know your properties better than anyone else, so you know when you need to hire a firm like Titan Roofing Company when the roof needs repairing or a decorator when the walls need a fresh lick of paint.
Which describes you best? If you love the idea of being a hands-off investor who can leave town on an impulsive vacation at a moment s notice then your property management expense is a small price to pay. If you’re an investor who loves being hands-on and sees property management as a vehicle to earn income then choosing to do your own may clearly be the answer.
The question of a self-managed portfolio or not is ultimately determined by your own investing goals. If you want to own one or two properties near where you live, as a way to help pay the bills each month, then you might not want to hire the services of a property manager. But if you want to own multiple doors, perhaps in multiple locations across your city or province, and spending time finding deals has more value to you than collecting rent, a property manager is a good addition to your team and can help you achieve your goals.
Whatever you decide, here are some property management tips for both types of investors:
- When preparing to purchase a property, be certain to account for property management fees whether you are outsourcing your property management or not. Budget for the expense, even if you’re managing your own properties. Paying yourself will honor the value of the time you’re spending and if you choose to have the properties managed in the future, you’ll be prepared because your budget allows for a property manager.
- There can be an upside to doing your own property management if you always pay yourself the going rate for property management. For example, you could put that money away and once a year have a dinner celebration, pay some bills, leverage it more and put it against the mortgage. Don’t forget to always pay yourself!
- If you have one or two properties and they re not far from your own home, doing your own property management can at first give you an invaluable education into the workings of owning property and dealing with tenants. That way, if you’re ever without a property manager for a while, you won’t suddenly struggle.
- If you choose to hire a property manager, interview several and do your due diligence including speaking with references, (remember: they’re vendors who provide you a service). Once you’ve hired them, create a relationship with your property manager by making certain that expectations are communicated and that you both align.
Property management. Should you do it yourself or hire someone else? To find the right answer, look within yourself and decide how you value your time, what you like to do, and how you see your investing business grow in the future.
Whether you choose to manage your own properties or outsource the job, be certain you always treat your real estate investing like the business it is.
Patrick Francey is the CEO of REIN. As a serial entrepreneur he owns many businesses and has been a real estate investor for nearly 20 years. The majority of his holdings are located in Edmonton and Grande Prairie.