We understand the landlords and rental property owners who are tempted to manage their own rental properties. After all, a DIY approach to just about everything is woven into our cultural sensibilities. Everyone is taking on DIY home improvement projects, baking bread instead of buying it, publishing their own books, and taking matters into their own hands on everything from starting a business to planning their retirement accounts.
The DIY approach is fine for a lot of things.
When it comes to managing your rental property, however, the risk can really outweigh the rewards.
Some of the owners we talk to bristle at the idea of paying a management fee every month or a leasing fee just to find a tenant.
We can tell you, however, that a single fair housing claim or the wrong type of tenant can cost you a lot more than what you would have paid for professional property management.
What a lot of landlords committed to the DIY approach fail to realize is that there are a lot of hidden costs to DIY management. And, those hidden costs are quick to add up. In many cases, you could end up spending far more time, money, and stress than you realized.
There’s also the opportunity cost. As professional property managers, we provide our owners with expert service and we also identify opportunities to earn more and spend less. We help plan and achieve investment goals. We understand the local market, its competing properties, and the shifting demands of tenants.
We are taking a deep dive into the hidden costs of managing rental properties on your own. We want to make sure you’re well-informed before you take on a full-time job as a landlord. We’ll also explain why hiring a professional property manager might just be one of the smartest financial decisions you can make.
Hidden Costs: What is Your Time Worth?
Spending time on day-to-day operations is often more of a burden than landlords realize. This is especially true if you’re renting out more than one home, you have needy tenants, or there are ongoing issues that need your attention.
Managing a rental property is not a “set it and forget it” job. From handling maintenance requests and showing the property to vetting tenants and collecting rent, there’s a lot of time and energy required to keep everything running smoothly. For DIY landlords, this time often comes at the expense of other important tasks. Do you have a full-time job? A family to take care of? A personal life you’d like to pursue? Those things will have to take a back seat to your rental property. You never know when you’ll have a surprise leak or a tenant dispute with the neighbors.
When you manage the property yourself, you’re essentially working for free. Whether it’s taking phone calls at all hours of the day, responding to tenant complaints, or managing maintenance issues, the time you spend managing your property is time you could be dedicating to other revenue-generating activities or simply relaxing. Some landlords get lucky. They have an easy tenant and a well-maintained property and there’s little to do except collect the rent and check in from time to time.
Those situations, however, are rare, and the luck always runs out eventually. At some point, you’ll be wondering how to handle a tenant’s request for a service animal when you have a strict no-pet policy. You’ll wonder why rent is at least a week late every month. You’ll struggle to find a plumber in the middle of a holiday weekend when a water heater is flooding a property.
A professional property manager has a streamlined system for handling everything, which frees you up to focus on what matters most to you. You don’t have to be on call. You don’t have to prioritize the needs of tenants over those of your own. You don’t have to give up your free time to respond to repair requests and screen applications. You can be more protective of your time.
Tenant Screening Challenges
Tenant screening and tenant selection can be an enormous headache.
If it’s not taking up a lot of your time and resources, there’s a risk you’re not doing it right. And not screening tenants thoroughly is a huge problem.
One of the most important—and most difficult—parts of being a landlord is choosing the right tenants. Rent collection, property upkeep, and even legal compliance depend on having tenants who pay on time, respect the property, and follow the lease agreement.
There are two specific risks when it comes to screening tenants as a DIY landlord. The first risk is that you’ll place an underqualified tenant. This can lead to huge expenses and hidden costs such as evictions, late payments, property damage, and lease violation. The second risk leads to even more costs. That’s the risk that you’re violating fair housing laws during your marketing and screening process. There are certain phrases and terminology you want to stay away from. Rental criteria has to be established, documented, and disseminated. There are new laws around how you screen and approve tenants when you collect an application fee. If you don’t know these particulars, you’re in danger of stumbling over a legal landmine.
But let’s talk about bad tenants. When you don’t have the expertise or resources to properly screen tenants, you may end up renting to individuals who are unreliable, fail to pay rent on time, or damage your property. The financial implications of dealing with bad tenants can be significant, including the costs of eviction, lost rent, and expensive repairs.
A professional property management company has access to thorough tenant screening processes that include background checks, credit reports, and rental history verification. This ensures that you’re renting to responsible tenants, reducing the likelihood of costly mistakes.
We also know the law. We know that when we collect an application fee, it means we have to approve the first application that meets all of our criteria. There’s no ability to gather a bunch of applications, screen all the tenants, and then pick the one we like best.
Property managers protect you from the hidden costs and the hidden legal issues involved in poor tenant screening.
Legal Risks and Compliance Issues
Perhaps one of the biggest hidden costs in DIY management is that landlord and tenant law in California is strict. Tenant protections are serious. These requirements are complex and constantly changing. From fair housing regulations to eviction procedures, there are a variety of legal issues that landlords must navigate. DIY landlords may not be fully aware of the local, state, and federal laws governing rental properties, which can result in costly legal errors.
Mistakes made in lease agreements, eviction proceedings, or tenant communication can open you up to lawsuits and fines. For example, failing to follow proper eviction procedures could result in a lawsuit that drains your finances and damages your reputation as a landlord. Not providing the adequate documentation when returning a security deposit can lead to the courts ordering you to return the full deposit to the tenant, plus the equivalent of a couple months of rent as punitive damages.
Professional property managers are well-versed in current landlord-tenant laws and are skilled at minimizing the risk of legal issues. We ensure that your lease agreements are legally sound, handle evictions properly, and maintain compliance with all applicable regulations.
Here are some of the legal mistakes we see DIY landlords make pretty consistently:
| Fair Housing Missteps
In California, there are more protected classes under the state fair housing laws than there are under the federal fair housing law. Even asking someone “where they come from” because you detect an accent while showing the property can be seen as discriminatory. Advertising your house as “perfect for single professionals” could be problematic. If your standard rental criteria says that your minimum credit score is 600, but you end up approving someone with a 580 score, an applicant you denied could file a fair housing claim. A solid marketing plan that highlights why your property is attractive to all tenants will help. Establishing standard rental criteria and using it consistently will help. Understanding the rental laws around application fees will help. This is why you need property management. |
Security Deposit Issues
Changes have been made over the last few years to security deposit laws in California, and it’s easier than ever for a DIY landlord to make a mistake. New limits are in place to what you can collect. Photos need to be taken of the property condition, especially if you’re withholding money from the deposit, and there are strict timelines around how quickly you have to return the deposit and/or an itemized list of the charges that were made to it. Penalties are expensive if you make a mistake. Without a full understanding of security deposit law, you’re at risk for making a mistake that you may not even realize you’re making. That’s a lot of liability, which can be prevented if you partner with a smart management company. |
| Rent Control
Unless you have a new construction multi-family property or you’re renting out single-family homes, it’s likely that your rental unit is covered by California’s statewide rent control laws. You’re restricted in how much you can raise the rent from year to year. If you are exempt from this law, your lease needs to clearly say so. We’re always surprised at how many DIY landlords do not know this. Understanding rent control laws can be difficult. Complying with them can be even trickier. Professional management takes all of that off your plate and protects you from expensive mistakes. |
Just Cause Eviction
With the statewide rent control law comes a just cause eviction law which establishes the reasons in which a landlord can lawfully remove a tenant from their rental property. You know you’re safe when you evict for unpaid rent or a lease violation or a criminal act being committed at the property. What do you do if you want to take the property off the market and sell it? How do you handle it when your adult son or daughter wants to move into that rental home but there’s a tenant with three months left on their lease? Evicting a tenant in California is complex, and there are so many ways to make a mistake. Be careful. Talk to a property manager if you’re a DIY landlord contemplating eviction. |
These are just a few of the expensive legal mistakes we see DIY landlords make. There are also issues around service and support animals, Section 8 tenants, and even organic waste recycling and balcony inspections.
Don’t make a costly legal mistake.
Maintenance and Repairs
California has an implied warranty of habitability, and recent laws have compelled local cities and counties to enforce habitability standards with more enthusiasm.
As a DIY landlord, you’re responsible for dealing with any maintenance issues that arise in your property. You have to deal with them quickly, and you have to make sure you’re providing a place that’s safe and habitable for your tenants to live.
This might seem manageable at first, but as your property ages or the number of issues grows, the scope of maintenance becomes much more overwhelming. Finding vendors can be difficult. If your habitability standards slip, not only do you run the risk of violating the law, you also risk having your investment fall into disrepair.
Hidden costs include expensive repairs and delays. Without the right connections or experience, you could end up paying more for repairs than necessary or facing long delays in getting things fixed. Additionally, emergency repairs like plumbing problems or HVAC breakdowns can be stressful and costly if not handled promptly.
A professional property management company often has a network of trusted vendors and contractors, allowing us to secure better rates and handle maintenance efficiently. We also keep a proactive eye on the property, identifying potential issues before they escalate into expensive emergencies.
Marketing and Advertising Expenses
Are you equipped to market your rental property effectively?
When your property is vacant, you lose income. You also have to keep up with the landscaping, utilities, and security even while there’s no money coming in. Finding the right tenants quickly is essential, but marketing your rental property effectively can be more complicated than it seems. The hidden cost here, of course, is an extended vacancy period.
DIY landlords may struggle with creating the right listing, taking professional-quality photos, or advertising across the right channels. This could lead to extended vacancy periods, costing you valuable rental income.
Professional property managers know exactly where and how to market your property. We have technology that reaches listing sites. We create social media ads. We have the tools and experience to attract high-quality tenants fast, ensuring that your property doesn’t sit vacant for too long.
There is an Emotional Toll to Being a Landlord
Managing tenants and rental properties can be emotionally taxing. You may find yourself dealing with difficult tenants, emergency situations, or tenant disputes. It’s not uncommon for DIY landlords to feel overwhelmed or stressed out by the constant need to be “on call.” The hidden cost? Burnout. Stress. High blood pressure.
The emotional toll of constant tenant communication, dispute resolution, and property management can lead to burnout and frustration. Over time, this can negatively impact your mental well-being and make you less effective as a landlord. Professional property managers are trained to handle difficult situations with tact and professionalism, so you don’t have to bear the brunt of tenant complaints and property-related issues. This can relieve you of much of the emotional strain that comes with being a landlord.
When you consider all the time and effort you put into managing your property, it may seem like you’re saving money by not paying a property management fee. However, when you factor in the hidden costs of DIY property management—such as your time, legal fees, vacancy costs, and maintenance expenses, you may actually be reducing your overall profitability.
The costs of DIY management might not be immediately apparent, but over time they can take a significant chunk out of your bottom line. A professional property manager can help optimize your rental property’s performance, from finding tenants faster to reducing costly maintenance delays, ultimately improving your cash flow.
The Value of Professional Property Management
While managing a rental property on your own may seem fine, the hidden costs of time, stress, legal risks, and lost income can quickly outweigh any perceived savings. By hiring a professional property management company, you can save time, reduce risk, and ensure that your property is well-maintained and profitable over the long term.
Smart investors will tell you that professional property management is an essential part of their success. Let’s see what kind of hidden costs you may be dealing with as you manage your own investments. We might be able to help you have a more profitable rental experience. Please contact us at Krystle Properties. We lease, manage, and maintain rental homes in Benicia, and we also work in surrounding areas such as Vallejo, American Canyon, and Fairfield.
