When it comes to self-managing rental properties, some landlords are happy to do it, some landlords reluctantly do it to save costs and increase gross yields, and some landlords hate it so much that the cost of paying for professional management is considered money well spent. Obviously, there are other landlords that have little choice but to pay someone to manage their properties as they have invested in real estate that is located hundreds, or even thousands, of miles from where they live.
Personally, I have seen both sides of property management. I used to work full-time at an estate agency, managing more than 100 rental properties. Drawing from that experience I would say that the 80/20 rule is pretty accurate. Around 80% of properties would tick over without a hitch, with the rent paid every month, virtually no maintenance issues and with the tenants remaining in their rental properties for several years. I would see how much these landlords were paying each month, (at the time, the going rate was 10% of the annual rent for management and 5% of the annual rent to find a new tenant), and notice the enormous profits the estate agency was making for doing very little and think ‘why don’t these landlords manage their properties themselves?’
However, shortly after this time (the late-1990s) I owned a couple of rental properties myself. Obviously, I was going to self-manage them as that had previously been my full-time job. But the 80/20 rule did not quite stack-up for my personal experience. From six long-term tenancy agreements, three were OK and one was even perfect - a couple that treated the home as their own, self-repairing faults, decorating nicely at their own expense and always paying rent on time. In fact, they were such dream tenants, when they told me after five years that they were moving back to Portugal I almost shed a tear!
But two of the six tenancy agreements were firmly in the ‘nightmare’ category. One would never pay rent on time, requiring 3-4 phone calls from me each month to ‘harass’ them to pay. After eight months of this, I decided that enough was enough. I evicted them and refunded the deposit as the flat looked to be in reasonable condition. However, one hour before the new tenants were due to move in, I sat on the sofa and hit the floor! The previous tenants had kicked out the base of the sofa as a ‘parting gift’, leaving me around 59 minutes to remove the broken sofa, buy a new one and lift it up three flights of stairs before the new tenants arrived.
The other nightmare tenancy was a 3-bed house that I let to three 20-something sharers. Unfortunately, one was a wannabe DJ, which resulted in complaints from neighbours as he played music full-blast into the early hours on the weekends. One of the other tenants was actually a cocaine dealer that fooled me into thinking he really was a professional DJ as he had set up a company pretending to be a professional DJ as a way of laundering his drug-dealing profits. This ended in disaster when the police smashed down the front door of the house, arrested him and marched him off to prison.
As a landlord reading this, I am sure you will have some tenant horror stories of your own. If you don’t, congratulations! The point I am making is that in my experience, around one-third of my tenancy agreements were so bad that I was left asking myself ‘why did I not pay an estate agency to manage these properties for me?’