On a surface level, owning a rental property seems like an easy way of making a profit. Rental profits are generally looked at as passive income. Even the IRS views rental activities as “passive activities.” So as a landlord, it can seem appealing to handle managing property on your own. Since it's just a source of passive income, the act of managing the property and dealing with tenants should be easy, right?
In fact, the task of managing a property no matter the size can be far beyond passive. From securing tenants and screening them to handling move-outs and everything in between, managing a property is a full-time investment. Along the way, there are also a multitude of pitfalls and risks to property management that can cost you time and money.
Self-management on a property can be a much bigger task than you might think, and those risks are critical in the decision of who will be managing your property. Let’s dive into those risks and go over why they would cause you to reconsider managing your own rental property.
The Pitfalls of Self-Management
Every step involved in managing property comes with a cost and risk associated with it. These affect your income, present potential legal challenges, and cost you unneeded time when handled incorrectly. Having knowledge, experience, and the means to handle each step is challenging for one owner or even a few people to accomplish on their own from top to bottom.
Acquiring Tenants
The cycle of managing a rental always starts with finding the right tenant. And that process is not always a quick one, even with just a singular property. It can take a landlord multiple showings to get a yes from an applicant, and that’s time taken away from your other business ventures and personal needs. If it does become a time-consuming process to find someone willing to rent (or even if you get an early agreement), it can be tempting to quickly say yes to start making money on your investment
This is where the tenant screening process comes in. Tenant screening isn’t as simple as verifying the applicant has enough income to pay rent either. Background checks in particular are able to uncover much more when handled by a property management company with reliable, proven methods. Rental history, including prior evictions, can also be complicated to uncover and is never something you want to rely on the tenant’s word for. Even employment status itself is easier to properly verify with a property manager. All of these necessary checks together can almost guarantee that at some point, something will be missed by an owner working on their own.
Laws & Lease Agreements
Once a suitable tenant is secured, now the particulars of a lease agreement must be made. The legalities of what can and can’t be included in the agreement, and what laws apply to particular tenants are something any owner needs to follow strictly to avoid the headaches of legal trouble. Even if you get everything figured out, laws for any given city, county, or state can change at any given time without your awareness.
Once an agreement is signed and a tenant moves in, every property owner's favorite part comes next: collecting rent. It's the whole reason you started renting a property in the first place, so you can earn profit on your property investment. However, even this step can become draining tackling it on your own. Dealing with payment reminders, late fees, and collecting the rent all cost time and can be mentally taxing. A property management company working full-time on your properties takes that off your plate. You can learn more about how we handle lease agreements in our FAQs.
The Cost of Running a Rental
There are too many maintenance problems that can arise when owning a property to count. When it's an investment property being occupied by a stranger, this only heightens the stress of this. It's a cost that heavily cuts into your profits. If you complete repairs or you choose the wrong contractor to work with, that can quickly turn into a money sink.
One way you can combat potential maintenance issues is by performing regular inspections. These work to discover problems the tenant does not report before they get worse, or ensure the tenant is taking care of your property. Inspections are a responsibility every property owner has to themselves, but they do come with more time cost and their own legalities to follow when completing them yourself.
When a Tenant Moves Out
What every landlord wants from any rental is for their tenants to complete their lease and either resign or move out on time. We all know there are multiple ways this expectation can be defied though, and handling these unexpected situations comes with its own problems and legalities. If a tenant does not pay rent, evictions can be emotionally and financially draining.
Abandonment of a unit for any reason can call into question your legal responsibilities with a tenant's deposit. If a tenant gives you the opposite problem of not moving out on time, how can you safely and legally get them out of a unit? These are all problems that are better solved by seasoned professionals rather than yourself.
It is also important to note that when move-outs do occur, there have to be detailed records of the condition of the property before move-in and after move-out. This is necessary to determine if abuse or neglect of the property has occurred and if the tenant will face a charge to their security deposit.
Starting Again with Your Property
Perhaps the hardest part of running a rental property is what comes after the move out: starting again and marketing your property. To accomplish this successfully and keep your occupancy rate on par, this takes marketing know-how and a mindset to always be looking for the next tenant. Failing to do so or properly market the property can cut into your profits. Reliable property management companies will always be actively marketing your property the right way so you never see a dip in your income.
Finding the Right Property Manager for You
Knowing all of these dangers, it's clear that having a reliable and proven property management company is the right way to go for running your rental property. It gives you peace of mind, secures your profits, and takes the bulk of time spent off of your plate.
Chambers Theory has a proven track record of providing solutions to all of these problems. We employ a wide-reaching team that can address every step of managing a property and maximize the income you can receive from your investment.
Pick the right property management company for your rentals and optimize your investment. You can always get in touch with us to start working together on your property today.
