By Muriel Black
First time buy-to-let owners enter the business in the hopes of an easy, passive income to live off, but then make the mistake of attempting to manage their property on their own. They quickly find out that self-management is anything but passive. Yet, many tend to pull back from outsourcing to a property management company. If you’re considering doing your own property managing, which way should you head?
What property managers do with their own properties?
If you need to know how good a deal a paid property manager is, it’s a good test to look at what such managers do to manage their own rental units. As managers, they would have all the skills and resources that they needed to manage their own. As some surveys have found, though, professional managers rarely do their own work.
Property management agents focus on work in specific neighborhoods. Unless they own homes in the neighborhoods that they work, they usually find it a waste of time to devote resources to them. They farm out the work involved to professional, third-party property management agents.
The benefits of professional property management
New buy-to-let investors often hesitate to pay for professional management for the simple reason that they underestimate the level of responsibility involved. They look at the work as nothing more than a set of housekeeping responsibilities. While these duties can certainly be a burden, there is more to the business. Landlords require protection from the legal implications of making the wrong choices.
The legal implications start the moment you decide to take on tenant. It’s important to make out a legal lease document that takes account of tenant responsibilities, and includes detailed information on the ways in which the deposit will be dealt with. This isn’t as simple a matter as it may seem.
Rent agreements cannot standard, boilerplate affairs. The laws change on a regular basis, and tend to be different in small but significant ways in different jurisdictions. Some forms of forfeiture are illegal in some areas. Other serious legal responsibilities exist, as well. Many DIY landlords break the law without realizing it, and get themselves into serious hot water. It’s illegal to do the following:
• Security deposits can only legally be used to cover damage beyond wear and tear. Using it for cosmetic upgrades and appliance repair is illegal.
• Security deposits need to be returned within days in many jurisdictions, and delaying is not legal.
• When a tenant breaks a lease, it is not legal to forfeit the entire security deposit. It’s only legal to take as much as may be needed to cover the time taken to find a new tenant.
• It is illegal for the landlord to show up unannounced for checks, repairs or to bring in prospective tenants. In many jurisdictions, the law requires a day’s notice.
• It is illegal to set policies that discriminate against families or anyone else, or to ask discriminatory questions while screening.
• It is illegal break local tenant safety ordinances.
According to Gascoigne-Pees, landlords end up in court so often over violations of this nature that it simply doesn’t make sense them to attempt to do things themselves.
It can also be a hassle
It may seem easy enough to take care of a few things around a property that you let out. Most first-time landlords find, though, that it turns out to be a huge problem. Not only can it take weeks of searching and interviewing to find a tenant, attending to complaints, finding workers for repairs and making sure that they do a good job, can be a huge time sink. It can be especially difficult for landlords who have full-time jobs. With a property agent, the process of finding tenants and managing maintenance needs goes on autopilot.
It doesn’t cost much
With the stiff competition that the property management field is thrown up, full-service management now cause more than 10%. Some services offer protection only from the legal and financial mistakes possible, while allowing the landlord to arrange for their own maintenance. They tend to be cheaper. Nevertheless, it makes sense to go with a full-service package. The expenses are tax-deductible in many cases.
Muriel Black has worked in real estate all her working life. Now semi-retired she enjoys spending some of her spare time sharing her expertise through her articles which appear on property and personal finance sites mostly.