The answer depends on the location of your real estate and how many properties you have in your real estate portfolio. I would advise real estate investors just starting out and investing in your local area (within a 30-minute drive from your home) to self-manage. If you are long-distance or have a large number of units, then hiring a property manager may make more sense.
The most important benefit for self-managing is that it allows you to create your own playbook for how you would like to make decisions for your real estate business. Each time you make a business decision, you have created the criteria and guidelines that future decisions should pass through.
Some of the business decisions in your playbook revolve around attracting, screening and placing tenants in your rental properties. What is your application process? Will it include a background check? How do you screen tenants and what are your criteria for a successful tenant? You might consider income to monthly rent ratio, credit score threshold, rental references, pets (dogs, cats, other animals), number of tenants per unit, preferred length of lease term.
Other items that you will likely include in your playbook are how you will collect rent. You could do it through an online web platform, by check, or ACH. How will you handle repairs or maintenance requests? What will you do if your tenant is late paying rent? What are the laws in the state regarding tenant or landlord rights? What is required to start the eviction process in the state the rental property is located? It is better to educate yourself and make these decisions in advance than be caught unaware.
After you create your playbook to manage your own rental properties, it will be much easier to hire a property manager and then manage that manager in the long run. Only when you have a playbook can you assess whether they are following your it. Nobody will manage your rental property or be more vested in the success of your rental properties than you will.
If you are a long-distance landlord, it will be difficult to self-manage without having already created a team in the local area. This team should at least consist of a maintenance person, trades-people (such as a plumber, electrician, carpenter, and HVAC for more serious repairs), real estate agent, banker and attorney. All real estate is local and this is particularly the case if you are trying to manage long-distance. What is reality in Nashville, TN may not be at all applicable in Brunswick, ME. So, if you have not been able to create a team, it makes more sense to hire a property manager when you are long-distance.
As the number of units in your real estate portfolio grows, there are greater economies of scale and lower cost per unit to have a property management company manage your real estate.
Also, as investors age, it may be that they are looking for a truly passive investment, which a well-managed property management company may provide.
Besides a preference for how active you want to be in managing your rental properties, the choice between self-management and hiring a property management company relates to taxation. If you need to establish material participation hours to change the nature of the taxation for your rental portfolio, it will be difficult to establish material participation if you have a property management company.
Please understand that I cannot give you specific investment or legal advice, just guidance in these areas, and you should consult a professional licensed in these areas for specific advice before making any final decisions.
