Hi Mica,
Here are some thoughts to consider about Self-Management.... This content is from a article I am just about to release to the digital community....
A property management company provides valuable advantages for the self-managing landlord
- Time and Effort – It takes a lot of work to prepare and rent out a property for residential use. There are the post-closing cleanup, maintenance, and repair issues, as well as on-going problems after the tenant moves in and you receive a “punch list” of whatever else is needed. Then as often is the case, the self-managing landlord becomes the “de facto handyman” because it seems easier [and cheaper] to fix things yourself. Essentially, the self-managing landlord now has a second job in taking care of the property. A property management company can take this burden entirely from your shoulders and perform the management functions in a more systematized and automated manner, saving the landlord countless hours of time and effort.
- Personal and Professional Liability - Florida’s premises liability law requires landlords to maintain their rental property and protect their tenants and their guests from harm. This law imposes duties on the landlord including: Abiding by any applicable housing codes (including state, city and/or county codes), and maintaining the property in a safe and reliable manner.
A tenant can sue a landlord for a slip and fall as long the tenant can prove the landlord was negligent and the negligence was the cause of the tenant’s personal injury (broken or fractured bone, scarring, or another serious bodily injury). See case examples below.
Hiring a property management company helps to reduce the landlord’s personal and professional liabilities because there is now a 3rd party involved who has been hired to perform the work that is required. The landlord has reduced liability by hiring the the property management company, who in turn, takes on the day-to-day functions of the landlord.
- Passive vs. Active Income - Passive income, from rental real estate, is not subject to high effective tax rates. Income from rental real estate is sheltered by depreciation and amortization and results in a much lower effective tax rate. However, the IRS defines Passive income—or unearned income as the Internal Revenue Service (IRS) calls it—is income that requires minimal effort to obtain. It is the opposite of active income, which is income received from a job or business venture that requires active participation. According to IRS Rule That means at least one of the following is true:
- The taxpayer works 500 or more hours in the business during the year.
- · The taxpayer does the majority of the work in the business.
- · The taxpayer works more than 100 hours in the business during the year, and no other staff works more hours than the taxpayer.
Hiring a property management company, therefore, effectively off-loads the primary work from the landlord, allowing for the income generated by the investment to remain passive and lower tax rates than active income.
Hope this is helpful
Perry
