To Self-Manage or Hire a Property Management Company...

What do you envision when you consider owning real estate? Do you see yourself jetting off to scout new locations, reviewing market data, negotiating the best price, and closing on deals left and right?

That’s the dream, isn’t it? But you probably don’t envision yourself pouring over background checks, contracting plumbers and landscapers, and doing all the behind-the-scenes tasks that keep a property running like clockwork.

When it comes to owning and investing in real estate, you have two options for managing your investment properties: you can either self-manage them or hire a property management company/ professional for support.

More often than not, this decision comes down to time and money. Both options have their pros and cons, and it’s also going to depend on your other obligations, risk appetite, and desired level of control. As such, we’ve put together a few thoughts to consider when contemplating this next move.

How much industry experience do you have?

Some career paths may lend themselves more naturally to working as your own property manager. For example, if you’ve worked in real estate in the past, say as an agent or contractor, you might have built up some industry knowledge and professional skills to take the reins here.

In addition, other fields might lend themselves to the kind of multi-tasking and job management required to handle a property management role. If you’ve been a high-level project manager or worked in the legal or human resources field, you might have some of the know-how to:

• Manage the multiple subcontractors required to keep your properties in good shape.
• Handle the people-related aspects of the process, like background check processing and tenant relationships.
• Negotiate contracts and lease terms

How much time do you have?

Property management is a full-time job. While you may have the skills and capabilities to handle it, it may not be how you want to spend your time. Is the goal of your real estate investment to replace your current working income, or is it to provide additional revenue for your retirement years?

If you’re planning to use your real estate as a stepping stone to a new career, you may eventually consider managing your own properties. But those who want to stay active in their current careers will quickly discover that managing properties majorly detracts from their 9-to-5. And when your career is your main source of income, that’s a lose-lose. For example, if you’re a doctor, attorney, or software engineer, expanding your practice or project scope to earn more investable dollars would be much more lucrative than splitting your focus for the sole purpose of saving money on a third-party company.

If you’re headed into retirement, are you willing to commit to another full-time job? Most people in this demographic want to actually enjoy this life chapter and leave the minutiae of daily property management to someone else.

Do you have the skills and resources needed to analyze data?

A big part of a property manager’s job is to analyze information and make deals that are to their client’s (i.e., the property owner’s) benefit. This includes developing and negotiating lease terms with incoming tenants, a task that can require substantial back-and-forth between parties.

They also have the resources and tools needed to screen tenants and ensure the people renting your property are trustworthy and creditworthy.

And, because property managers work with multiple real estate investors, they can also share their industry insights knowledge and give you valuable data to use during decision-making processes. You can lean on their knowledge and experience without getting in the weeds of your local property trends, tenant-landlord legalities, and more.

Do you have the money?

For upcoming-and-coming real estate investors, it can be difficult to determine what your cash flow might look like and if hiring a third-party management company is feasible. Even if you don’t want to take on another full-time job, it’s reasonable that you might consider self-managing your property if the budget feels extremely tight.

 Final Thoughts

If you own a small portfolio of properties and are just starting out, you may want to go the self-management route. For most real estate investors, the ultimate goal is to scale well beyond that and own a wide range of assets, making it so that outsourcing property management companies is not a want—but an actual need.