The Cost of DIY Property Management vs. Hiring a Professional

Becoming an owner of a rental property is one of the most effective ways to build long-term wealth. However, the next big decision you will need to make is whether to manage it yourself or hire a professional property management team.

At a glance, it may seem like DIY property management is the more cost-effective choice. Yet, a professional team does come with its perks as well. This guide will help you answer that question. We’ll break down the true expenses of DIY management and professional management, and everything that comes along with both choices. 

Cost of DIY Property Management

Choosing to manage your own property, it eliminates the middleman and gives you more control of your property. However, when making this choice, it can introduce other financial and operational responsibilities. Managing your own property comes with the benefit of avoiding a professional property management monthly fee, which can save you annually. However, the cost responsibilities of repairs and maintenance fall back to the owner. The decision to self manage brings new financial, legal, and maintenance duties that must be personally handled, which can become very time-consuming.

Financially, while you save the management fee, you are also now responsible for advertising costs, running background checks, and paying for legal fees for lease drafting or eviction proceedings. Operationally, you become responsible for all maintenance and repairs, rent collection, and dealing with tenant emergency calls throughout the day.

Altogether, self managing a single rental can take an average of 4-8 hours per month. At a rate of $50/ hr, this can come out to $200–$400 per month spent on management responsibilities. In certain situations, this can exceed the typical 8-10% property management fee. While the management fee is avoided from your expenses, it is replaced by an investment of time, effort, and money.

Cost of Hiring a Professional 

When hiring a professional property management team, it does involve an upfront cost or a percentage of the rental income. While that may be costly, it can also provide you with significant returns in terms of personal time and peace of mind. The price of professional management is often offset by the cost of the owner's personal daily involvement in the operations of a rental property.

A professional management team takes over the time consuming tasks that property ownership calls for. This can usually include marketing the property, obtaining possible tenants, background and credit checks, offering showings, drafting and executing lease agreements, and handling the move-in and move-out process.

In addition, the management team also has the responsibility for collecting rent and coordinating all maintenance and repair requests. Given the services provided, hiring a professional management team offers significant benefits. Owners can enjoy a stress-free experience, minimizing their involvement in day-to-day operations. This frees up the owner's personal time to pursue other aspects of their life while still profitably investing in their property.

Time vs. Money

When comparing DIY management to hiring a professional, the decision ultimately comes down to how you value your time and money. The financial aspect involves weighing the direct cost of a property manager's fee against the costs associated with managing the property yourself.

DIY Cost breakdown

If you manage a $2,500/month rental yourself, your annual gross rent would be $30,000. While you avoid the 10% management fee, there are still real expenses involved. The cost of self marketing your property, which may cost you a fee to list it on certain website, doing background checks on possible tenants (which can cost between $50-$100 per tenant, fees of drafting legal documents, maintenance and repairs (whcih can be expensive and unpredictable), and many more hidden costs that may come with DIY management. With the time spent on managing your own property, it can become a full time job if you have multiple rental properties. 

Hiring a Professional Cost Breakdown

A professional property management team typically charges a service fee equivalent to about 10% of the monthly rent collected. For a property renting at $2,500 per month, this annual management fee would be approximately $3,000.

Additionally, a one-time listing fee, which may equal one month's rent, could also apply. This means the total yearly cost for using a professional management team could be around $5,500. Yet, the expenses allow the owner to sit back and have peace of mind over their property. 

Which Option is Right for You

The right decision may depend on multiple factors and can vary depending on the owner. DIY management may be best if you live in the local location of your property, have experience in property management, and have the time to manage tenant issues personally. Professional management may be best if you own multiple properties, live in a different state than your property, value convenience and time flexibility, and if property management is not your full-time job.