Self Managed vs Property Manager
We will break down the costs and value of self managing your property compared to choosing a property manager to do it for you
By Faraaz Hashmi
When you own a commercial property, you can be tempted to manage it yourself in order to save money. It is possible. Self-management can also help you save money. However, in some situations, the expense of hiring a specialist management firm may pay for itself by preventing costly errors. Now, why is learning this important? Learning how self-management and property management by a property manager works is very much important so that you can learn which one is the best for you. This can help you decide whether you can manage your properties yourself or if you need a property manager to do it for you.
As a customer-focused property management firm in Los Angeles, we meet over 25 homeowners every month and one important talking point during our meetings is the difference between having properties that are self-managed vs homes managed by a property management firm.
Before we get our hands dirty with the pros and the cons, let’s work out some numbers.
The Time Factor
The first and foremost thing to be done is to put a $ value for an hour spent by you.
If you are a full-time employee, divide your monthly income by the number of hours you work per month. If you are a freelancer or a solopreneur, the calculation is even easier as you will know your hourly rates.
In Los Angeles, the average household income is $51538.
This is a gross number and it does not include taxes. For the purpose of calculation, let’s assume you are a single earner in your house, and you make $51538 per year and you work 40 hours per week.
Yearly Income – $51538
Approximate Monthly Income = $4294
Approximate number of working hours per month – 160
Hourly Income – $26
If you would like to calculate your approximate hourly income, you can use the calculator below.
Now that we know the $ value for your hours, we can dive into the value and costs of self-management vs property management.
Your Profit Margin
For a homeowner, the basic profit calculation every month boils down to the following simple equation.
Monthly Profit = Rental Income – (Mortgage + Expenses)
The expenses entered in this equation is mostly the costs incurred for maintenance or repairs.
What is often overlooked in this equation is factoring the expenses in terms of your time and energy spent as a landlord in managing the property on your own.
Energy spent cannot be measured but the time spent can be easily measured.
Let’s say you spend an average of 8 hours every month to manage your property including trips to your property to collect rent, regular inspections etc.
Assuming your hourly income as $26, you are spending $208 every month for self-managing your property. If you have a couple of properties or more, this cost would go even higher.
If you still think it’s right up your alley, here are the top four landlord duties you will be taking on when you self-manage your property.
Importance: Let’s say you absolutely love your tenants. For you to retain the tenants, they have to be happy with the property. If they feel there is a delay in attending to their maintenance issues, they will start looking for a new place. This might affect your profits and mortgage payments even if the house remains vacant for just a month.
Who does it better: Property managers have a significant(unfair) advantage when it comes to maintenance and repairs as they can get great discounts from service providers as they provide the service providers with job orders every month. You can save a lot on the maintenance costs when you work with a property manager.
2. Rent collection
On the outset, the collection of rent at the start of every month sounds like a trivial issue. The major cause of any rifts between the homeowner and the tenant is a delayed rent payment.
Instead of wondering why the rent cheque has not reached your mailbox or frantically calling your tenant who is on vacation, you can automate the rent collection using new-age applications.
Importance: Importance of rental income does not require an explanation.
Who does it better: If the homeowner does not mind following up with the tenants every month on delayed rent payments, the odds are just the same for both self-managed homeowners and property managers.
3. Managing the Vacancies
4. Tenant Screening
Final questions to ponder
1. How far is my rental property?
2. What is the level of support you may receive from your family?
3. How much is your time worth?
4. What is your ultimate financial goal?
“It is better to work on your business than work in your business”
5. Are you a process person?
5.6% of your Rental Income or $98 per month (whichever is lower)