Should I manage my own home owner occupied duplex?

Question

Hi,

I have taken my first step towards real estate investment by buying a duplex - I plan on home-owner occupying one side (2 bedroom, 1 bath) and renting out the other side (3 bedroom, 1 bath).  I am trying to figure out if I should hire a property manager or since it is just one property, I should manage it myself.

I would prefer that the tenant not know that I am the property owner.  Here are a couple of things I am worried about as a new landlord: 1) screening tenants, 2) figuring out what to do if a tenant is delinquent on rent, 3) getting maintenance requests/calls early in the am.  I will be honest that I know I can learn how to screen tenants well and set in place a system so that the tenant will not be delinquent in rent (I'm planning on using the Cozy app).  My realtor has a handyman and contractor that she has recommended but I worry about crazy maintenance related things happening at 2am that I may not know how to handle since I am NOT handy at all.

My biggest worry is that there is something that I am negligent about as a landlord simply because I am a new landlord.  Laws/regulations that I did not know about specific to my state/county/city (I live in Hickory, NC).  I think maybe a property management company, may already have systems in place and have more up-to-date info related to rentals that I may not be privy to.

Also, I work a 8-5pm job that is hard to take a break and take phone calls.  I am really on the fence about either managing the property myself or asking a property management company.  Any advice?

Thanks!

Landon Clipp · Answer

As everyone has stated, it's purely a matter of personal preference. If you are someone who is extremely averse to dealing with difficult situations, then getting a PM is a good idea. If you are someone who is willing to deal with difficult situations once in a blue moon, I personally feel it isn't worth it to get a PM.

@Michele Fischer mentioned getting a PM for finding new tenants, but you don't need a PM for this. You can either hire a real estate agent to market, show, and screen tenants for you (usually for 50% of the first month's rent), or just use something like RentPrep to do all credit and background checks and host an open house or two during the weekends. You can pay them an extra $12 for them to follow up on any tenant references.

I view PMs as a way that I can scale my business. Right now I have enough time where I can spare 1-2 hours a month with maintenance issues, calling contractors, and doing my accounting. When I start lacking free time, I'll start delegating to PMs. Once your property is up and running, it really should only be taking 1-2 hours of your time per month on average.

I highly encourage you to simply manage yourself because it gives you lots of excellent experience you'll need if/when you scale your investing larger. It'll save you tons of money too. If you find something taking too much of your time, delegate it, hire it out.

This doesn't happen very often. As long as you know some basics: where is the water main shut off, where is the main circuit breaker, where is the fire extinguisher, you should be okay. Get the number of a handyman willing to field emergency 24/7 calls just in case. If your house is on fire or any serious water related thing is happening, call the fire department. Anything that is not life threatening or property destroying can wait until the morning.

You can hire a real estate attorney to draft all contracts that you have that are specific to your jurisdiction. The leases should be specific and comprehensive enough that if you ever have a question on what you can and cannot do, you just read the lease and it will tell you. If not, call the attorney and ask. Don't need a PM for this. The big thing that screws landlords in my area is not paying the tenant interest on security deposits. Attorneys can tell you all of this. You can also hire attorneys to do the entire eviction process for you, including posting all notices in the correct timeframe and showing up to court to plead your case.

So overall, you should view PMs as people who give you back free time, not necessarily someone who will expertly handle your property (because in many cases, they won't). If 1-2 hours a month of your time is worth 10% of your rent plus all additional related fees, you should do it. Otherwise, don't.

David K. · Answer

The self managed versus PM debate is really one of personal preference. I can give you all the pro-PM anti-Self Managed stuff you want, just like plenty of people can do the opposite.

It really comes down to the type of investor you want to be. Being next door will be hard to conceal, and at the same time easier to manage. You can always hire a good PM to place the tenant for you, and then you manage. That will help you with your screening tenants issue.

The most hands off answer is the PM, the question becomes how much you care to be interrupted. The wrong tenant will stop you in the driveway, come outside when you're playing with your kids or sitting by the firepit, and will call you day or night.

The right tenant, you'll never know is there.

The most absolute answer is the PM, and you learning to say "I understand, but you need to call 'David'". You may not advertise that you're the owner, but that's public information, and if your PM will lie if asked about you, how long until he/she lies TO you.

The best advice is to pick what at the end of the day you're the most comfortable with. Give it a timeline, like a year, and then re-evaluate. It sounds like you're PM heavy now, so hire one to place a tenant and manage. If after a year, it doesn't seem worth it, move to a placement only contract. The vice is also possible, start with placement only, and you can always hire to full time if needed.

Good luck!

Anthony Bogan · Answer

your situation is similar to yours so what did you decide?

Drew Sygit · Answer

Some thoughts:1) If you live in a 1-4 property and rent the other units out, you don't have to follow most Fair Housing Act requirements.

2) In our experience, Realtors are TERRIBLE at screening applicants! Logically, this is because they only do the bare minimum because they DON'T HAVE TO DEAL WITH THE TENANTS IN THE FUTURE. You can hire a PMC just to do the tenant placement, we do it all the time for owners.

3) It will be difficult for you to hide your ownership. You will start getting all sorts of junk mail targeted to you as a new homeowner. Some of this junkmail will inevitably be mistakenly placed in the tenants mailbox.

4) As this is your first property, and you're VERY local to it, there are probably more pros than cons for you to self-manage it. What you learn hands-on will only benefit you going forward, especially when you do decide to hire a PMC to take over.

Jennie Ballard · Answer

I was the tenant with the 10pm phone call, LOL. The hot water heater was replaced at move-in and 3 days later the ceiling started leaking in the 1st floor. Afterhours maintenance confirmed I had shut off water and thanked me for using shower curtain to direct leak into buckets. He called me back 20min later with name off plumber that would be there first thing in morning to diagnose and repair.

These are the kinds of problems that a question checklist and the phone numbers of correct contractor make easy to handoff. The selfmanaging headaches I foresee are the day to day stuff.

Evina Nonato · Answer

Thank you so much!

Theresa Harris · Answer

Have you ever owned a home before?  Stuff will happen from time to time, but if you get a solid house, there shouldn't be a lot of things.  You can always tell the tenants that you are managing it for the owner.  Look up your local tenancy rules and see if you are comfortable doing it.  You can always hirer someone to place the tenant and then you do the rest.

Michele Fischer · Answer

You will probably get advice all across the board, but I would suggest you use a PM if the finances work out.

It is easy to learn how to screen, but it takes time to do it and it will be a lot of hours all at once when you have a vacancy.  You have a lot of decisions to make about your criteria (either way) and processes to verify and gather application data.  One advantage of self-screening is that when you are living in the unit you normally have more latitude to look for culture fit rather than the way a PM has to approach it.

If a tenant is delinquent on rent it will be a stress either way, but the PM probably has more tools to deal with it.  A PM is a great buffer, especially if you are conflict adverse.  But, if you are self managing the law lays out what you are allowed and what steps to follow to escalate to eventual eviction.  It’s all learnable, it depends on how hands on you want to be.

In my mind the handyman and maintenance issues are the toughest.  If you can get reliable help and can give them enough work that you aren’t on the bottom of their priority list, it is a blessing.  We self managed for 10 years and we got calls and issues we had to deal with, but rarely after hours and rarely things that were truly urgent.  The main thing is being disciplined enough to do regular maintenance inspections so you can identify and anticipate upcoming issues.

We can’t make the decision, but hopefully this is helpful input.

Should I manage my own home owner occupied duplex?

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