When it comes to investing my favorite saying is “experience is the best teacher.” It is something that holds true in much of life, but I love how experience has a positive financial impact on my future real estate investments.
Why You Should Self Manage Your First Rental Property
This is one of the reasons I believe everyone should self-manage their first rental property. This is assuming you can of course. If you are investing out of state to start then it may not be an option, but for anyone with a place less than 2 hours away the experience is valuable.
What does good management look like?
Here’s the thing about hiring property management. How do you know if they are any good if you have no idea what managing a property entails.
Now, of course there is the tag line “no one will look after your own investment as well as yourself” but that does not mean property management is a bad idea.
You just need to know what you are looking for.
Here are a couple examples of experiences I’m glad I had before turning to property management:
1.) Tenant Screening Process
I can tell you first hand – screening tenants is a bit of a pain. However, once you do this process yourself you will know exactly what you are looking for in a tenant.
Granted much of the criteria is dictated by fair housing laws, but there are plenty of variables that you are allowed to decide for yourself. Things such as credit and pets, for example.
More important though is the actions of the applicant. I once had a lovely couple with a young child apply for a property. I was very happy with what I saw from them, but when it came to getting me pay tubs and such, something that should take a day, they struggled to supply them.
It wasn’t like they were lying about employment as I knew where the guy worked and the type of money made in his position. He was just that much of a disorganized mess. Doesn’t bode well for getting my rent on time and the property being taken care of.
After a few days passed by I told them I had to go with someone else.
The tenant I went with was awesome, she supplied me everything right away. Was always punctual and stayed in the unit for two years before moving out of the area.
In fact, when she moved out the place was in such good shape I didn’t have any turnover. No repainting, no wall patching, nothing. Not every tenant will be like that, but what a dream.
You value stuff like that when you have a tenant much the opposite, which I have had. When it came time to turnover the property, it felt more like a rehab. Deposit money only gets you so far. Quality of tenant still counts.
I guess it’s the nuances that make a difference within all the standard criteria.
2.) How is that lease looking?
When you research leases and acquire even a standard one for your state it gives you a much better idea of what you can and can’t do.
I always advise having a lawyer look at your lease to ensure you are on the right side of the law, but remember there are many options you can decide on in your lease.
Along with the aforementioned pets policy, how about things like broken glass, unlicensed vehicles and minor plumbing issues?
These are just examples and are items that may not be in the lease the property management company uses.
Plus, how do you know where you stand on these items until you have had to decide and experience what works.
Final Thoughts…
Self-managing my first three properties was an invaluable experience. It is very easy for me to tell when a property manager is doing a solid job or doesn’t have there stuff together.
Yes, there were times I hated self-managing, like that one month when all three properties had issues. That happened one time though over that three year span.
If you are able to self manage at first, why not get the experience? Good Luck!
You can learn the ins and outs of investing in rental properties through the scaredycatguide to investing in rental properties video series.
Meh, I disagree.
The experience can be valuable, but I'd rather treat it as a business from the start. And that means doing your market research and implementing policies and procedures. Knowing applicable laws; how to budget for maintenance, repairs, vacancies, etc; understanding cash flows; screening; and all the rest of it can be learned much faster through study and research.
If you've never managed anything before, then I can see your point. But if you have business experience, it's just another business. Albeit a great one.
We had this exact conversation at the real estate meetup today and my buddy Jon had the same point as yours above. I get it and it makes sense, but managing my first one was worth it for me for the knowledge add particular to rental properties. It helped improve my policies and procedures.
We have 23 properties. I am an experienced business owner. I didn't get rentals right until my 4th property. Now I have it down and make great money at it. You must have persistence.
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I think it is a great idea if serious about doing this for the long term and broadening out the exposure. I have unwillingly been doing it which is probably why I cannot visualize myself doing it for more properties in the future! I really don't think it is for me...
I think you are right. I just have some cottages on my house that I rent out and I have learned the hard way what to look for and what to tolerate in tenants. It helps that I live there too, to keep an eye on them and intimidate them into leaving when I say so ;)
That is great, sound, advice.
I am following your blog now and look forward to reading your other posts.