You know what they say, buying and holding real estate investments is the way to go. But hold on, it’s not all sunshine and rainbows in SF East Bay rental market. Without proper management, even the best and most profitable rental properties can go sour. Effective property management is the lifeblood of any successful real estate portfolio whether you do it yourself or hire a management company.
So should you manage your San Francisco Bay Area rental property yourself? Well that’s a question ultimately only you can answer. Consider if you have the time and patience to deal with tenants and are you willing to take on the complicated laws and regulations that protect your tenants. Read on to see if self management is for you or if you should hire a professional property manager.
Let’s take a look at the advantages of each approach:
Advantages of Doing it Yourself:
- Chance to save money: Management companies generally charge 6% of collected income and the first month’s rent for each new tenant. Managing the property yourself can save you this expense.
- Increased control: It’s a lot easier to make decisions and implement them yourself or through your employees than it is through a third party, even if they’re really interested in following through with your plan.
- Avoidance of fraud: Unfortunately, not every property management company is run ethically. Some receive kickbacks from contractors, pocket rent from “vacant units” or engage in other such unsavory activity. Managing yourself can make it easier to avoid being a victim of these types of things.
- Gained experience: It’s extremely important to know the ins and outs of property management, even if you’re not the one doing it. It’s much easier to evaluate how well others are managing your properties if you know how to do it yourself and have experience in that area. It’s easier to see which excuses are legitimate – and which are not – if you’ve done it before.
- You care more than anyone else: Consider it a universal truism that no one will ever care as much about your properties as you do. And caring translates into effort. That extra effort can potentially be the difference between a performing property and one that bleeds money every month.
Advantages of using a Management Company:
- Infrastructure already in place: Early on, you won’t have an office or policies or a staff – or anything else that property management companies generally have. But management companies will have all the leases, applications, notices of entry, and other such documents, as well as screening procedures and knowledge of the landlord/tenant laws in your state (at least they should). If you go it yourself, you will have to put these things together. Management companies will also have an extensive list of vendors and contractors to use that you will have to find if you do it yourself.
- Ability to save time: The more time you spend managing, the less time you have to look for other potential properties to buy or other business opportunities – and you lose out on time to simply enjoy life. If you can find a quality management company, that can undoubtedly save a lot of time.
- Opportunity to outsource headaches: Unfortunately, property management has a not-altogether undeserved reputation for producing a large number of headaches. It will require a thick skin to deal with angry tenants and severe maintenance problems. Most tenants are great people, but those won’t be the ones you hear from very often. Instead, the bad apples and discontents will eat up a substantial amount of your time and energy (and sanity).
Good property management, whether you do it yourself or hire a management company, can make or break your investment. We have listed the pro and cons to both approaches, and ultimately the decision will depend on your unique circumstances. Generally, if you have the time, patience, and expertise, managing the property yourself can save you a substantial amount of money. However, if you’re short on time or lack experience, a management company may be the better option.
If you go the Management Company Route:
Before you choose a management company, it’s crucial to do some research beyond the usual first page search results. Don’t just pick the first company you find on Google or Yelp. Instead, ask for referrals from other successful investors and interview several companies to find the one that’s the right fit for you.
When you’re vetting a management company, here are some questions to ask:
- What are their management fees?
- How long have they been property managers and how many properties do they manage?
- How many evictions do they have each month?
- How long do properties usually stay vacant before being leased?
- How do they screen tenants, and do they accept people who’ve had evictions?
- How do they handle maintenance requests?
- What is the minimum charge for a maintenance visit?
- What do they do when a tenant doesn’t pay rent?
- How do they intend to market your property?
These questions will give you a better idea of the management company’s experience, expertise, and overall approach to managing your property.
Some tips on Self Management:
If you choose to manage the property yourself, make sure you have a solid understanding of landlord-tenant law and fair housing regulations. These laws can be complex, so it’s important to consult with an attorney to ensure you’re in compliance.
You’ll also need to create or gather the necessary documents, such as leases, applications, and notices of entry. Standard forms are available at most office supply stores and online, but it’s a good idea to have an attorney review any documents you create yourself.
And most importantly, don’t skimp on tenant screening. This is one area where you can’t afford to cut corners. A bad tenant can cause all sorts of headaches, from missed rent payments to property damage and legal trouble. Be careful.
In conclusion, buying and holding real estate can be an excellent long term investment strategy, but it’s not without its challenges. Property management is a tough gig, but with the right approach, it can also be a rewarding and profitable endeavor. Whether you choose to manage the property yourself or hire a management company, make sure to take a careful approach to tenant screening and compliance with local laws and regulations. With a little hard work and a lot of patience, you can turn your real estate investments into generational wealth.