Self-Management vs. Professional Management

Monday, July 25 2005 @ 11:26 PM CDT

Self-Management vs. Professional Management

To take full responsibility in the operation of your rentals it is mandatory that you check your: State Rental Laws, County Rental Laws, and City Rental Laws. You must make your adjustments to how you chose to operate your rental business accordingly. Check any Landlord-Tenant Acts so you know what the rules are for your area. The rules are not the same in every State, County and City.

Rental property management is business and not personal. Renters will act how they act. Some renters are fantastic and some are average and some are poor actors. It is not personal so don’t fall into the personalized thinking of “How could they do this to me?” It is just business so treat it that way and you will have a great, easy time being a landlord. Hold your renters responsible for their agreements and stay “in-trust” with your agreements.

Whether an investor (landlord) decides to personally manage a property or have it managed by a professional firm, sound property management is essential to keeping a real estate investment profitable.

No person or company will care for your money or your investment as much as you will. Always check and double check that all management items are being done and on time.

1. Advantages and Disadvantages of Self-Management:
1. The Pros of Self-Management
1. Investor maintains direct control of the investment.
2. Investor utilizes personal skills and achieves satisfaction.
3. Investor may be more meticulous about personally owned property than would a non-owner.
4. Investor may realize substantial savings.
2. The Cons of Self-Management
1. Investor cannot devote as much time to other interests.
2. Investor may lack the skills to properly manage a property.
3. Investors may spend time managing and forfeit opportunities to earn more money per hour elsewhere.

2. Advantages and Disadvantages of Professional Management

1. The Pros of Professional Managemen
1. Professional is a highly skilled expert.
2. Professional has established contacts with other professionals (attorneys, accountants, tradesmen, etc.)
3. Professional can provide the owner with periodic operating statements.
4. Professional may utilize economies of scale.
2. The Cons of Professional Management

1. Investor loses control of day-to-day operations.
2. Professional management may dramatically impact cash flows.

Depending on the area and the company, prices range from about 10% of rent collected in a metro area to 40% in a second home, recreation, ski or beach area. Some charge advertising, cleaning, and ½ the first months rent on top of their fee.

• It can be very difficult to find an excellent property management company. Many are good at computer book work and poor at renting or checking on the property. It is best to select only on the bases of referral from someone who is using that firm and/or person.
• Under the Tax Reform Act of 1989, employing a professional property management company for a rental property would still qualify the owner as an “active participant” and allow passive losses, if any, to be applied against other income.

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