There’s certainly a passion for DIY culture, and in many instances, we’re all for it. Bake your own bread. Build your own bookcase. Take on a major new project or passion that will give you both a sense of accomplishment and pride.
One area that we don’t recommend a do-it-yourself approach is property management.
Not only is managing tenants, properties, and maintenance schedules time consuming and complicated, there’s also a lot of risk involved. California has strict landlord and tenant rental laws, and even the most minor mistake can cost you thousands of dollars.
Any Roseville real estate investor will tell you that professional management is one of the many keys to their success. We’re taking a look at some of the hidden costs of DIY property management because we know a lot of self-managing landlords believe they are saving money by avoiding professional management.
That’s rarely true.
Typically, you’re losing money when you manage your own property.
Risk, Liability, and the High Cost of DIY Mistakes
There’s always risk with any investment, and the risks that come with real estate investing are even higher because you’re not just dealing with a property. You’re dealing with people. The liability that comes with renting out a home is one of the best reasons not to manage it yourself. A professional property management can provide exceptional risk management and protect you from legal disputes, tenant conflicts, and lawsuits.
We have talked to a lot of self-managing rental property owners who weren’t sure how to enforce a lease, collect rent on time, or return a security deposit. You need to understand rent control, just cause eviction, and the difference between pets and service animals. California has new laws in place around application fees, screening, move-in and move-out inspection photographs, and credit reporting.
A fair housing mistake can cost you around $16,000 for a first offense. Often, landlords don’t even realize they’re violating a fair housing law. It can be as simple as using the wrong language in your marketing materials or not having a consistent set of qualifying rental criteria when you begin screening.
These things can get complicated quickly, and the wrong decision can come with terrible consequences.
Vacancy Costs and DIY Property Management
Let’s talk about vacancy and the cost of not keeping your property occupied.
If your rental home is vacant for weeks and months, you’re losing money. Not only do you have no rent coming in, you’re also paying for utilities, maintenance, landscaping, security, and marketing. Vacancy is expensive, and most landlords don’t realize how much it can cost and how long it can take to find a tenant, especially if you don’t have access to marketing resources and advertising networks.
Leasing a vacant property takes a lot of time. It requires an understanding of online rental sites and social media positioning. You have to do some research to establish the correct rental value, create a listing that will get the attention of tenants looking for homes, respond to the phone calls and messages that start coming in, and schedule showings at the property. Then, you have to manage the application process and screen all applicants in accordance with fair housing laws. There’s the lease agreement and the security deposit.
Unless you have a lot of time to dedicate to these tasks, and the experience to know how they need to be handled, it’s best to hire someone to do it for you. Otherwise, you’ll lose money on vacancy and struggle with profitability. Professional property managers place qualified tenants quickly.
Inadequate Tenant Screening
Choosing the wrong tenant is a huge mistake.
Good tenants pay rent on time, take care of your property, and contribute to a successful and stress-free rental experience by following the terms of the lease. It’s more expensive than you might think to chase down late rent, encounter damage that exceeds the security deposit, or evict a tenant.
Sometimes, self-managing landlords will not conduct a full and thorough tenant screening. Or, the more common DIY mistake is to run a credit check and nothing more. A thorough screening process is necessary, and should include searching for past evictions nationwide, evaluating rental history, and validating income. Tenant screening is too important to be taken lightly.
If you’re managing your own property, establish standard rental criteria and document your process.
Unexpected Maintenance Costs for DIY Owners
Maintenance costs are rising for California rental property owners. You might experience a shock when you call a plumber or a roofer or an HVAC technician to respond to a repair need at your rental property. There’s also the matter of finding a contractor or vendor who can provide the service you need in the timeframe that you need it. Their services are in demand and there’s been a labor shortage for several years. Finding a good service provider can be a challenge, especially for a self-managing landlord.
Self-management can be more expensive when it comes to maintenance and repairs. Professional property managers in Roseville and the surrounding areas have more buying power. We provide vendors and contractors with a large volume of work and in turn, they give us their best rates and deepest discounts.
Lease Enforcement Mistakes
Your lease agreement is a written contract between you and your tenants. You have to enforce it and hold both yourself and your residents accountable to what’s included there.
If rent isn’t paid on time and your lease includes late fees, make sure you charge those late fees. If smoking is prohibited and you notice the entire property smells like smoke, address that with your tenant. When you don’t allow pets but there are dogs running around the yard, you need to enforce your no-pet policy.
Tenants need to know you take the lease agreement seriously. Don’t make the mistake of not communicating, sharing your expectations, or enforcing the lease.
These are just a few of the most common errors and expensive situations we see DIY landlords encounter while leasing, managing, and maintaining their investment properties. We advise you to avoid both the risk and the expense. Contact us at Action Properties. We’ll help you have a better and more profitable rental experience.
