Low interest, numerous properties to buy, and a busy rental market make this one of the best times to invest in rental real estate. But along with making that property purchase (or purchases, if you’ve been following Jason Hartman’s investing strategies) come some decisions. Properties need to be managed, repairs need to be made and rents collected. All that takes time and effort. Should you manage the property yourself or hire a property manager?
Taking on the business of owning rental real estate can seem overwhelming. Some properties, especially those bought in foreclosure, may need a lot of renovation and repair before they can even be rented. And the business of finding and screening tenants can be time consuming and a frustrating. Ongoing maintenance and handling tenant issues will require regular attention. Hiring someone to take care of all these things can relieve you of some of the pressures of dealing with your investment.
But unless you’ve purchased property well out of your local area, or you have numerous ones to manage, managing your own property as part of your rental investment business can offer a number of benefits in terms of saving money, getting tax breaks, and keeping control of your holdings.
Hiring a property manager costs money. You can generally negotiate with the manager or management company about the level of service you need, ranging from simply handling maintenance issues to never contacting you except to send rent money. But those services don’t come free – and they siphon away a percentage of your rental profits each month.
Hands on management can earn you some tax breaks. Just about every aspect of your investment enterprise has some tax benefit associated with it. From your home office to the mileage spent in travel to your property, your expenses related to property management can be deducted. And, some deductions, such as Passive Activity Losses, or PALs, only apply if you play an active role in managing your property, measured in hours per year.
You can hire experts in just about any field. Choosing to go solo doesn’t mean you have to do everything yourself. Consulting experts in areas such as heating or cooling repair, plumbing, or other maintenance issues can make repairs go smoothly and fees paid to these experts are tax-deductible if they are directed toward keeping the property up.
You have better relationships with tenants. One advantage of using a property manager might be that you’re one level removed from tenants, so that difficulties such as evictions are handled by that third party. But being a hands-on owner that tenants can call directly if problems arise also creates loyalty and trust, and allows you to have a first-hand look at what issues really are. This increases tenant loyalty and may help limit problems with vacancy.
No one solution is right for everyone, and as Jason Hartman says, diverse investments in varied markets may require some outside management assistance, especially in more distant areas. But for many rental property entrepreneurs, the path to independence means taking on the job yourself.
The Jason Hartman Team