DIY can be a great way to be independent, learn new skills, and often times it saves you money. There are a lot of people taking the DIY approach as a landlord. If a person has the time and resources to follow best practices, it can be a rewarding experience. However, the majority of owners don’t have the time or resources to implement the practices that will help them maximize the profits on their investment property. In these situations I often see that a DIY landlord has lost thousands of dollars, and often they aren’t even aware of it. In this video you will learn the most common ways a DIY landlord costs themselves money.
Here are the Top 6 Ways a DIY Landlord May Lose Money or another way of thinking about it is the Top 6 Ways a Landlord Saves Money by Hiring the Right Property Manager:
- Delays in getting vacancies filled. A DIY landlord has other responsibilities such as their full time job, family, home, and enjoying the things that matter most in life. Sometimes an upcoming vacancy doesn’t get advertised right away causing it to sit empty longer than it should. Most of the time, at Kasteel Property Management, we can have tenants lined up to move in right after the current tenants move out. One month of lost rent is almost equal to an entire years worth of management fees. Property management will pay for itself in just this one aspect.
- Poor tenant screening. Most DIY landlords do not have access to all the tools a good property management company has for screening. Approving an application that a property manager would have denied, may cost a DIY landlord thousands of dollars in damages, lost rent, eviction costs, and collection costs. See our video “Best Practices to Screen Tenants” to learn about the resources we have for screening. You can also see our video “Top 7 Red Flags to Watch For When Screening Tenants” for more helpful information.
- Putting off inspections. As a DIY landlord, your investment property isn’t your daily or even monthly focus, especially when the rent is always coming in and no problems have come up. This can lead to putting off inspections. Sometimes inspections can feel awkward and a landlord would rather just trust the tenants and hope for the best. However, regular and consistent inspections are critical in order to find and resolve issues before they become bigger problems. If the home is being mistreated, you want to get that situation resolved right away rather than allow it go on for several more months or years.
- The most obvious is low rent. Almost every time I take over managing from a DIY landlord the rents have been below market value. Sometimes this is because the DIY landlord doesn’t have his or her eye on the market the same way a property manager does, and other times it is just hard to raise the rent on someone when you are the owner and interact with them personally. Either way, a property manager has their eye on the changing market rate for rents and as a third party they can raise rent without it feeling personal. One situation I had was a new client of mine that had been a DIY landlord. He had 6 units and all of them were at least $200 too low. After taking over I was able to increase his combined rents by $1200 every month. Even with my management fees we was making more money than he was doing it himself.
- Opportunity Cost. As a DIY landlord you can only fit so many things into a day. Your time may be maxed out with only one or two properties. If you didn’t have to worry about the time needed to manage them, you may be able to get several more. Over time this can be a difference of hundreds of thousands of dollars in appreciation and profits. On the flip side of that, I’ve heard many stories from DIY landlords that say they used to have a rental property but it became too frustrating to take care of, so they sold it. They usually say they had an experience with a bad tenant that kept them awake at night and it cost them a lot of money. This is always sad to me when the property they sold had likely appreciated tens of thousands of dollars from when they sold it and it is still appreciating in value. They lost out on all that appreciation because of the hassle and stress involved, that I on the other-hand could have alleviated for them.
- Unnecessary services and equipment provided. DIY landlords may think they need to provide things that in that local market or for that type of home is not necessary. For example should you provide a lawnmower or lawn care? A refrigerator? A washer and dryer? What maintenance should a landlord take care of? What about air filters? All of these questions would be known by a good property manager and having the right answer can save the property owner thousands of dollars.
There are many other ways the right property manager will save a DIY landlord money. For more examples see our other video resources for landlords at https://www.
It’s also important to know that not all property managers are equal. Just as a DIY landlord can lose money, a poorly run management company or an inexperienced property manager can cause just as many problems and loses. For help in hiring a competent property manager see our video “Top 5 Important Questions and Answers When Hiring a Property Manager.”
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At Kasteel Property Management we do more than just watch your rental property. We protect it, cultivate it, and help your investment grow.