Managing rental properties can be a lucrative venture, but it also comes with its own set of challenges. Whether you choose to manage your property yourself or hire a professional, it’s crucial to understand the pros and cons of each approach. In the post below, we’ll explore effective property management tips and delve into the differences between DIY property management and hiring a professional.
Quick Tip: Social Housing investments are managed by the housing association in place and are often fully repairing and insuring meaning no management and no maintenance costs for the Landlord. Scroll to the bottom of the article to download our FREE guide to navigating the Social Housing property investment market!
DIY Property Management
Managing your property yourself can be rewarding, both financially and personally. Here are some tips to help you succeed.
- Screen Tenants Thoroughly: Ensure you perform background checks, verify employment, and check references. Good tenants can significantly reduce your management workload and reduce your risk.
In the UK it is a legal requirement to check a prospective tenant right to rent, failure to do so will result in a penalty fine of £10,000 per illegal tenant for your first offense, increasing to £20,000 per illegal tenant thereafter.
- Stay Organised: Keep meticulous records of all transactions, maintenance, and communications. Use property management software to streamline the process.
- Understand Legal Obligations: Familiarise yourself with local laws regarding tenant rights, property standards, and eviction processes. Keeping up to date with legislation and your legal obligations will prevent you from unintentionally breaching your part of the tenancy agreement and risk legal action being taken against you. Joining the NRLA is well worth the yearly fee if you self-manage.
- Maintain the Property Regularly: Regular maintenance can prevent small issues from becoming costly repairs. Also, a well-maintained property will help maintain or improve the property value. Schedule routine inspections and respond promptly to repair requests.
- Set Clear Policies and Expectations: Draft a comprehensive lease agreement outlining rules and responsibilities for both landlord and tenant to prevent misunderstandings.
- Effective Communication: Be accessible and responsive to tenant inquiries and issues. Good communication can enhance tenant satisfaction and retention.
- Budget for Contingencies: Set aside funds for unexpected repairs and vacancies to ensure financial stability. The standard amount is usually 10% of the monthly rental income.
Pros of DIY property management
- Cost Savings: You can avoid management fees which typically range between 8-15% plus VAT of your rental income. Some letting agents may also add a small surcharge onto any maintenance work they organise on your behalf.
- Control: Managing the property yourself means you’re keeping an eye on it, choose which contractors will carry out maintenance and have greater control over the big investments you may need to make. No-one cares more about your property than yourself, so organising and checking the work yourself means you will have better awareness and avoid someone else’s poor judgement or mistakes.
- Personal Touch: You can build direct relationships with your tenants, which can lead to better tenant satisfaction. You can also “learn the ropes” which you would benefit from if you chose to expand your portfolio. Doing so means that when you’re ready to instruct a managing agent you know what qualities to look for.
Cons of DIY Property Management
- Time-Consuming: Managing a property requires significant time and effort, from tenant screening to maintenance, to administrative tasks. Often managing your own property requires you to be able to make yourself available 24/7 in case of emergencies. It also requires organisation to ensure statutory safety checks are carried out so you are not breaching any laws.
- Legal Risks: Without professional knowledge, you may inadvertently violate landlord-tenant laws which can come at a high price if legal action is taken against you. The industry is an ever-changing landscape, with new or amended laws coming into practise periodically, so you will have to continually keep your eye on the news and learning the new regulations.
- Stress: Handling tenant issues, repairs, and emergencies can be stressful and overwhelming. Chasing unpaid or late rent must be conducted appropriately to be effective whilst preventing conflict between yourself and the tenant which could lead to legal action if you inadvertently overstep.
Hiring a Professional Property Manager
Professional property managers can take a significant amount of the burden off your shoulders, but this comes at a cost. Here’s what to consider:
- Expertise and Experience: Property managers have extensive knowledge of the rental market and legal requirements, ensuring your property complies with all regulations.
- Tenant Screening: They have established processes for vetting tenants, which can reduce the risk of problematic renters.
- Maintenance and Repairs: Property managers have a network of reliable contractors and can handle maintenance efficiently, often at a lower cost due to their established relationships.
- Rent Collection and Financial Management: They ensure timely rent collection and provide detailed financial reports, making it easier to track your investment’s performance.
- Handling Tenant Issues: From disputes to evictions, property managers are skilled in managing tenant relations and can address issues professionally.
- Marketing and Vacancy Management: They can effectively market your property and manage vacancies, reducing the time your property is unoccupied for.
- Legal Protection: Property managers stay updated on landlord-tenant laws, minimising legal risks and ensuring compliance.
Pros of Hiring a Professional Property Manager
- Time-Saving: A professional property manager should carry out property viewings, review applications from prospective tenants, conduct tenant referencing/vetting, draw up the tenancy agreement, carry out a property inventory/ schedule of condition prior to move in, carry out a checkout/ schedule of condition upon the tenant leaving, negotiate any damage or cleaning costs after a tenant leaves, carry out routine property visits/inspections, take calls/ emails from your tenants, deal with maintenance reports, arrange contractors and follow up on repairs, arrange for invoices to be paid, arrange routine statutory safety checks, keep financial records and statements to assist with tax returns, plus other potential tasks. All of this frees up your time for other investments or personal activities.
- Expertise: Professional knowledge and experience can lead to better property management which can save you money in the long run, and ensure you meet legal obligations and protect you from inadvertently breaching your tenancy agreement or end up having legal action taken against you.
- Reduced Stress: Property managers handle all aspects of management, reducing your stress and can provide a hands-off passive income.
Cons of Hiring a Professional Property Manager
- Cost: Management fees can eat into your rental income. Property managers typically charge a monthly percentage of your rental income; however, they can also charge you for the marketing fee for finding a tenant, admin fees, renewal fees, additional management fees on top of maintenance or repair quotes.
- Less Control: You have less direct control over your property. Property managers often won’t involve you issues that they feel are minor or trivial, as that is their job, however this is open to individual perception. Equally, whilst property managers understand that your property is important to you and needs to be taken care of, hovering or regularly checking up on them only makes their jobs harder, so if you like to be hands on and involved in everything, perhaps self-managing if a better fit for you.
- Potential for Mismanagement: Not all property managers are equally competent. Hiring a poor property manager can be costly as a poorly managed property or ignored tenant complaints are detrimental to the tenant and can expose you to legal and financial consequences because you cannot delegate your legal responsibilities.
DIY vs. Hiring a Professional: What’s Right for You?
Choosing between DIY property management and hiring a professional depends on several factors:
- Time Commitment: Managing a property requires a significant time investment. If you have a full-time job or multiple properties, a property manager might be more feasible. If you want a hands-off investment which generates passive income, you will likely find a property manager is a worthwhile cost.
- Location: If you live far from your rental property, managing it yourself can be challenging. A local property manager can provide on-the-ground support. Property managers often have relationships with local contractors who they can rely on to carry out maintenance works. In addition, if you are an overseas landlord you must appoint a property manager by law.
- Experience and Knowledge: If you are new to property management, the expertise of a professional can be invaluable. However, if you are confident in your abilities, DIY can save money.
- Cost: Property managers typically charge a percentage of the rental income. Consider whether the convenience and expertise they offer justify this expense. Also ensure to check all the fees, what is included and what would be charged extra. Some property managers will offer a low monthly percentage to entice you to use them, but then charge additional fees for services other companies would include as standard, and this can mean your costs creep up significantly.
- Control: DIY management gives you full control over your property. If you prefer to make all decisions yourself, this might be the better option
Managing Rental Property from Afar
If you decide to manage your rental property from a distance, here are some additional tips:
- Leverage Technology: Use property management software to handle everything from rent collection to maintenance requests remotely. Also use technology, websites, or apps to market the property, reference tenants and even source contractors with good reputations and customer reviews.
- Local Contacts: Establish relationships with local contractors, maintenance people, and a reliable point of contact who can assist with on-site issues.
- Regular Visits: Plan periodic visits to inspect the property and ensure it is being well-maintained. If you are unable to visit personally, find a trusted representative who can visit on your behalf, and ensure they take photos, videos or even video call from the property.
- Effective Communication: Maintain open lines of communication with your tenants. Use video calls to address any concerns or issues.
- Emergency Plan: Have a plan in place for handling emergencies. This could include a list of local emergency services and a trusted contact who can act on your behalf.
Scroll down a little bit further to download our FREE Social Housing Guide – a property investment strategy that is complete hands off and has no management costs.
Next Steps
Hopefully this article has made you fully informed on whether you should self manage or appoint a property manager for your investments. If you are looking to purchase a buy to let property, speak with one of our investment consultants at E.R.E Property today on +44 (0) 113 380 8930
