Are you thinking you might want to manage your Grand Rapids investment property on your own to avoid paying property management fees?
That’s one approach. But, it may cost you more than you think.
DIY landlords often realize, too late, that self-management comes with its own costs. You’re often losing money with longer vacancies and higher turnover rates. You’re spending more on maintenance. You’re missing opportunities that professional Grand Rapids property managers would be able to identify immediately.
There are some good reasons to manage on your own. Maybe you have experience in property management, real estate, or contracting. If you’re looking to build your own property management or maintenance business, working as a hands-on landlord for your own properties is a great way to start.
Saving money, however, is not a great reason to tackle DIY landlords.
Let’s take a look at what you spend on professional management companies like Short South and what you spend (or lose) as a DIY manager. You might be surprised at this cost-benefit analysis.
Costs and Benefits of Property Management in Grand Rapids
When you partner with Short South Realty Group, or professional property managers in Grand Rapids, you can expect to pay fees such as:
- Leasing Fees
These cover the cost of finding and placing a qualified tenant in your rental property. Your leasing fee pays for marketing and advertising, showings, tenant screening, communication with all interested parties, lease negotiation and execution, and the collection of move-in funds such as the security deposit, first month’s rent, and any pet fees. Every management company is different, but typically leasing fees are a percentage of or the equivalent to the first month’s rent. Some leasing fees will be a flat fee.
- Monthly Management Fees
You’ll pay a monthly management fee to your property manager that covers the day-to-day business of managing and maintaining your property. Think about the time and effort that goes into rent collection, lease enforcement, tenant communication, correspondence, inspections, scheduling and following up with repair work, responding to emergencies, and handling lease renewals as well as accounting and financial reports. Your management fee covers the technology we provide and the customer service.
Most property managers in Grand Rapids will charge a percentage of the rent they bring in for you as the management fee. It’s deducted from the tenant’s rental payment before that money is deposited into your account.
What are you getting in exchange for these fees? Well, there are some tangibles and intangibles. The tangibles are all those services we’ve mentioned. You’re paying for the placement of a good tenant. You’re paying to have rent collected on time and deposited into your account. You’re paying to have someone else respond to maintenance requests and schedule work.
But, there’s also the experience. This is a value that’s hard to put a monetary figure on. You’re paying for the elimination of risk and liability because your management team knows the local and federal laws that apply to rental properties. You’re paying for professional advice so you don’t lose money by pricing your property wrong or neglecting upgrades and updates.
Here’s something else to consider: property management fees are tax-deductible.
Costs and Benefits of DIY Management
The benefit is pretty obvious. When you manage your own rental property, you don’t have to pay a management fee or a leasing fee. The rent you collect from tenants is all yours.
Let’s take a look at what the costs really are, though. We’ll break this down into financial costs and non-monetary costs.
- Financial Costs of DIY Management
One of the most significant expenses in property management is maintenance and repairs. Without a Grand Rapids property management company like Short South to handle these tasks, landlords need to find reliable contractors and negotiate prices themselves. This can often lead to higher costs, especially if you’re not familiar with industry-standard pricing.
There’s also vacancy risk. Managing vacancies is a critical aspect of property management. Without access to professional marketing tools and platforms, filling a vacant property can take longer, increasing your vacancy rate and resulting in lost rental income.
What do you know about fair housing and security deposit law? Landlords must stay updated with local, state, and federal housing laws to avoid legal issues. This can include anything from fair housing regulations to health and safety codes. Failing to comply with these laws can result in costly fines and legal battles.
High tenant turnover rates can also be costly, and turnover rates tend to be higher in properties that are not professionally managed. Every time a tenant moves out, landlords must invest in cleaning, repairs, and marketing to prepare the property for the next tenant. DIY landlords may struggle with tenant retention due to a lack of experience in managing tenant relationships.
- Non-Financial Costs of DIY Property Management
Let’s talk about some things that are even more important than money.
Like time. Time is one of your most valuable resources, and managing properties can be incredibly time-consuming. From responding to tenant inquiries to scheduling showings and handling emergencies, the responsibilities of a landlord can quickly pile up, leaving little time for your career, family, other pursuits, or other investments.
Being a DIY landlord can be stressful, particularly when dealing with difficult tenants or unexpected repairs. Over time, this stress can lead to burnout, affecting your overall quality of life and potentially impacting your ability to manage the properties effectively.
Expertise is also extremely valuable when you’re working with a management partner, and you miss out on that when you do it yourself. Professional property managers have the expertise and experience to handle various situations efficiently. DIY landlords might lack the knowledge needed to deal with complex issues, which can result in costly mistakes.
While DIY property management can seem like it’s saving you money upfront, it’s essential to consider the long-term costs and challenges. For most landlords, hiring a professional Grand Rapids property management company is a more cost-effective solution. We have established relationships with contractors, access to marketing tools, and a deep understanding of the local market and the housing laws, which can lead to higher tenant satisfaction and improved profitability.
Let’s talk about how to save money with professional Grand Rapids property management. Contact us at Short South Realty Group.