The Pros and Cons of Managing Your Own Rental Property (From Two Experienced Investors)
Does this situation sound familiar?
“I vividly remember the conversation I had with my boyfriend shortly after submitting an offer on my first rental property. We were sitting at his son’s Little League baseball game, and my mind was wandering (if you’ve ever watched a Little League baseball game, you understand). I turned to my boyfriend and said, ‘What if they really accept my request at that place?’
The truth of the matter was, I was 28 years old with absolutely no rental property or real estate experience. All I knew was that I was done working a 9-to-5 W-2 job and thought real estate investing could be my way out. Being a black and white person, straight to the point, my boyfriend replied, ‘You’ll understand.’ I didn’t know how true this statement would be.”
That’s Amelia McGee, author of Self-Managing Home Owner and Grace Gudenkauf, explaining her concerns and fears as a soon-to-be DIY homeowner.
Self-Control or No Self-Control—That is the Question
Like many first-time real estate investors, Amelia found herself entering the world of property management with little knowledge and a lot of uncertainty. Managing a rental property yourself can be difficult, but it also offers significant benefits—greater control, potential cost savings, and continuous learning. However, it comes with its own set of challenges, from managing tenants to handling maintenance issues.
Based on real-life experiences and insights from Amelia and Grace, we’ll explore the benefits and challenges of being a self-managed landlord.
The Benefits of Managing Your Own Rental Property
Managing your rental property yourself offers unique benefits that can greatly improve your investment experience and increase your profits. Here are four key benefits of self-management that can have a positive impact on your bottom line.
1. Cost savings
One of the most important benefits of managing your own rental property is the ability to save a lot of money. Property management companies typically charge 8% to 12% of the monthly rent for their services, as well as additional costs for the rental, maintenance, and renovation of the property. By managing it yourself, you can avoid these fees and save more rent for yourself, thus increasing the return on your investment.
Let’s look at an example from Self-Managing Home Owner that shows how much you would need to pay the property manager. In this case, we assume that the property is rented for $1,700 per month and purchased for $170,000—following the 1% rule.
| Service | Costs |
| Account setup fee | $300, once |
| Administrative fee | $170 per month (10% of monthly rent) |
| New employer income tax | $850, plus (50% of monthly rent) |
| Maintenance fee | $100 per application (take three times a year) |
| Total for the year | $3,490 ($290 per month) |
If you look at the breakdown here, you can see that after setup, management, storage, and maintenance costs, you can expect to pay about $3,500 a year in property management fees. That’s more than two months’ rent!
Granted, those costs will decrease in the second year, assuming the tenant renews their lease. However, these costs will still eat into your cash flow.
2. Quality control
When you manage yourself, you have direct control over maintenance, choosing a tenant, and the overall condition of your property. This is very important in ensuring that your investment is well taken care of and your tenants are satisfied. Property management companies often manage multiple properties, so your rental may not get the attention it deserves.
Self-Managing Home Owner explains why some mom-and-pop homeowners may be dissatisfied with the quality of service they receive from property management companies:
A common issue I hear from investors who use a property management company is that they don’t feel like their property is getting enough attention, or that the property management company doesn’t care about them after their contract is signed.
Let’s think about this from the big perspective of the property management industry. Most property management companies only make $100 to $200 in recurring revenue per month for every property they manage. These are small edges in the grand scheme of things. In order to run a profitable business, pay their employees, and cover other business expenses, these property management companies need to onboard hundreds of clients, making their efforts very small.
This problem is even worse if you only have a few locations in the management company. Their main priority will be their big clients, so the smaller you are, the further down the ‘return’ list you will be.
3. Better employer relations
This level of control allows you to build relationships with your tenants, resulting in long-term retention and reduced costly turnover. Direct communication fosters trust and respect. Tenants appreciate landlords who respond quickly to maintenance requests and are approachable when problems arise.
Also, by being more involved in the tenant screening process, you can ensure that you choose responsible tenants who are likely to stay for a long time and take care of the property.
4. Build important skills
Managing a property on your own teaches a variety of important skills, from managing repairs and maintenance to negotiating leases and managing finances. These skills can be beneficial, not only in your rental properties, but also in future areas of business.
In fact, in the book, Amelia shares information about how she partnered with other investors to buy a $500,000 property. They brought cash for the down payment, and she brought her skills as a successful DIY landlord. It was a win-win for everyone.
Challenges of Managing Your Own Rental Property
Self-regulating rental properties can be rewarding, but doing so comes with several challenges that a landlord must consider. Self-Managing Home Owner it talks about these five important areas where self-control can bring difficulties.
1. Managing tenants
Managing tenant relationships is one of the most important aspects of being a landlord. Even if you are trying to build an employer relationship, mismanagement can lead to disputes, vacancies, or even legal issues.
Educating yourself about tenant laws and best practices is important to avoid problems. Proper tenant screening, dealing with tenant issues, and ensuring that rent is paid on time are important. Although most employers are reasonable, there will always be a few who challenge your patience, which requires tact and expertise to manage successfully.
2. Managing contractors
Grounds maintenance is another important responsibility, and requires finding, hiring, and coordinating contractors for maintenance and upkeep. Poor contractor management can lead to increased costs, poor quality work, and reduced property value.
Knowing how to negotiate contracts and oversee projects is essential to maintaining tenant satisfaction and the quality of your entire property.
3. Handling emergencies
Emergencies, such as plumbing leaks or electrical problems, can happen at any time. As a self-managed landlord, you may not always be available to respond quickly, which can lead to property damage or unhappy tenants.
A reliable emergency response plan is essential to ensure that emergencies are dealt with quickly and efficiently.
4. Solving problems
Managing a rental property can be emotionally taxing, especially when tenant relationships arise or property issues arise. Allowing personal emotions to cloud your judgment can negatively impact your decision-making process.
In accordance with Home Owner:
“One of the most important skills you must have as a property owner is the ability to solve problems. Leasing may not be suitable for someone who quits when the going gets tough or doesn’t react well to stress or pressure…You need to decide if it’s really worth it to continue leasing or if renting is a better option. ”
Successful landlords must maintain professionalism, set clear boundaries, and remain objective when communicating with tenants and property matters. Creating systems and processes to reduce emotional decisions can help ensure consistency in your management approach.
5. Legal risks
Self-managed landlords must be well-versed in local, state, and federal landlord-tenant laws. Failure to comply with legal requirements can result in costly disputes, fines, or dismissal. Keeping up-to-date with legal developments and seeking legal counsel when needed is essential to effective risk management.
Final thoughts
Although these challenges are real, you should still be able to manage your properties yourself. At the same time, they remind you that the right knowledge and preparation can help you face potential difficulties.
By thinking about worst-case scenarios and being proactive, you can make informed decisions and prevent many problems from occurring. Remember, even without previous experience, many successful landlords have learned as they go—proving that you can effectively manage your rental properties and see great results with the right tools and mindset.
Save time and money with this refreshing guide to managing your properties.
In Self-Managing Home OwnerAmelia McGee and Grace Gudenkauf share the secrets to managing real estate, tenant screening and onboarding, and growing your business—all to help you break out of the 9-to-5 grind and create lasting real estate wealth.
A Note About BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BiggerPockets.
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