Landlording vs. Property Manager : Which to Choose?
Well, it’s 2019 and many real estate markets in the United States are at full tilt or making adjustments to account for a bubble that is beginning to form. The Federal Reserve has recently reduced the funds rate by 25 basis points and nearly every sponsored ad I receive on social media is from a “real estate coach” that can teach me how to make money in our current market.
As many real estate flippers have entered the market and wanna-be landlords have purchased 1-5 properties or entered the real estate syndication game, no one really seems to take into account an exit game or at least a strategy for maintaining the month to month management of their rental property portfolio.
Thus, hot real estate markets are for landlords that haven’t developed the day to day strategy and exit gameplan to make their real estate rental portfolio sustainable.
Having said this, what makes it worthwhile to hire a professional property management company and at what point does it make sense to continue to manage your own rental property as a landlord? Here are my thoughts on what to consider when making that decision :
Do You Know How to Evict a Tenant?
If you don’t know how to evict a tenant in your US State, you shouldn’t be landlording. While not complicated, contacting a local real estate attorney can be a good start. Understanding the details behind evicting a tenant is not a prerequisite, but, understanding the documents your state requires and the timeline in which you must follow is entirely necessary.
So, the first place to start is to understand the eviction process for your state. Here’s a good place to start :
I also recommend you choose three local real estate attorney (by county) to assist you in managing an eviction for your rental portfolio. This could be as easy as a Google search, but, you may want to contact your local REIA (Real Estate Investors Association) and ask for a few good referrals.
If you don’t want to take the time for figure this out, or if your rental portfolio is 10+ properties, I think considering a property management company to manage this for you is a wise choice.
How Do You Manage Your Rental Property Bookkeeping?
We all know Quickbooks and this can be a good place to start if you have outgrown an Excel spreadsheet for bookkeeping purposes.
However, Quickbooks is fairly expensive and can take some customization. So, here are a few affordable landlording property management softwares I endorse if you have not reached an unmanageable scale :
Cozy.co : Very affordable but takes too long to get rent electronically transferred to your checking account.
Tenant Cloud : I like it more than Cozy.co for managing repairs, but, rents take a long time to transfer to your account.
Rentec Direct : I have not used this software, but, I’ve heard good things!
I consider these options to be effective for landlords under a dozen properties, but after that, diligence in bookkeeping becomes even more necessary. This is where utilizing a property manager becomes critical.
Furthermore, the more rental properties a landlord adds to their portfolio, the cheaper is becomes per property to provide to a property manager. Meaning…landlords receive bigger discounts the more properties are transferred to a property manager’s rental portfolio.
Repair Reporting Systems : Is a 24 Hour Service Necessary?
When making the decision to delegate your property management to a professional, another critical decision is to decide whether your repair reporting and management systems have scaled to a point of being unmanageable.
While it is critical to notify your tenant the means in which you will accept repairs (text, email, phone and the contact information for each), it is even more important to have a system in place to document the repairs in place. This is not only necessary for bookkeeping purposes, but, as a means of refreshing your memory when tenants request an update on the work order at hand.
In my opinion, if you can’t pick up the phone at all hours of the day, it is best to pay a property management company to handle this for you.
However, if you think it is manageable for you, then you may wish to consider payment of the following service call centers to handle this on your behalf :
Latchel.com : Affordable but will not document your work orders…
EZ Repair Hotline : More of a tool for property managers, but, if your size is right…they will consider you.
At the end of the day, landlording provides plenty of wealth building activities. However, it is not a passive activity and for each landlord a decision will eventually have to be made to consider whether their time is better spent “landlording” or delegating that activity to a professional property manager to assist in the growth of a rental portfolio.
When to make that decision is typically better as “sooner” rather than later. Should you have questions regarding when you should make that decision with your rental portfolio, we are here to help you make that decision. Feel free to leave your question in the comment box below.