Self-Manage or Agent?

As someone who uses managing agents for all of my properties, I periodically have the debate as to whether I should continue to use an agent or self manage myself. For any serious investor, this is an important discussion to have, particularly noting this could be one of the most significant costs, after mortgage interest. 

The Self-Management Argument

Could I do a better job myself? I have had a bumpy ride with my use of agents so far, particularly on one of my midlands properties where I have changed agent 3 times since I started renting the property out in 2011. Issues have included not performing to the standard agreed in the contract and not dealing with tenant and landlord issues in a timely fashion. What I took away from this experience is that it would be better to self-manage if the alternative was an incompetent agent. There are so many regulations linked to property management that it is absolutely key to ensure that if you use an agent they know what they are doing. This means that you have to actively manage the managing agent to ensure they are doing everything that they are supposed to do.

When you find a good agent, the story is very different and I do not think I would be able to do a better job than they do. The good ones are proactive in informing me of changes to regulations that I need to be aware of. I like to think I am quite well informed on emerging regulation impacting the private rental sector but there is always a risk that I could miss something and the risk of getting it wrong could result in fines or even worse case time in prison.

Cost Saving. There is a financial argument for looking to self-manage, particularly as your portfolio grows. . I worked out recently that I pay over £1,000 per month in agent fees, this is a significant sum and therefore I think it is right to revisit the self-manage/ agent argument as my portfolio grows, as from a business perspective this is a significant cost.

Cost saving Vs Opportunity Cost. Concurrent to the above I have realised that my potential earning from my trading business are higher than from the saving if I was to self manage my properties. Therefore the bigger picture would see me lose out financially overall if my working day was taken over by property management issues.

Systemise to bring in house. There is an argument that it could make sense to self manage if your plan was to later either employ someone internally to manage your properties, or even set up a letting agent as an additional income source. Here you could learn by doing and then create systems to enable you to then delegate these tasks to people hired directly by you. I think there is something to this argument. But to counter the argument, it would take initially a lot of my energy and focus to set up, taking me away from higher rewarding work to grow my trading business.

Time. Probably one of the most important (and often overlooked) resources in a property business is time. To actually organise reactive and preventative maintenance as well as all of the required compliance checks would take up my own time and this would ultimately mean I had less of it to spend on my trading business, job, family and leisure pursuits. This is something I would like to avoid if possible unless the reward compensates me sufficiently.

Tenant Interface. Although I do enjoy interacting with people, I am quite happy for my agents to be the primary point of contact with the tenants that live in my properties. This is particularly the case when I task them to have difficult conversations such as increasing rents. With property management I think a lot of the interaction with tenants is probably front loaded at the start of the tenancy with doing viewings, credit checks and setting up the tenancy. I could do this myself but linking in to the point above I do value my time.

Insurance Policy. There are months when it appears that agents are doing very little to earn their management fees, however equally there are times when they really do earn their fee. This is when there is a maintenance issue which they resolve or an issue with a tenant that they fix. My only input into this process is usually to reply to their email saying “please proceed with your preferred contractor” or something similar. Therefore even though it can feel sometimes like you are paying a large amount for little in return, the agents earn their fee when something goes wrong. A good agent is a bit like an insurance policy in this respect.

Conclusion.

For me the balance remains in favour of continuing to employ agents for the time being. In the future I may look at either bringing in house or setting up (or buying into) a letting agency to manage my properties. It may therefore make sense in the future to self-manage for a period of time in order to systemise the process beforehand. This is not a problem for the immediate future though so I will continue to employ agents for the time being in order to free up my time to pursue my trading business which pays better than the cost saving if I was to self manage. 

Each property investor will be different and should investigate whether self management or use of agents is best for you but ensure to include time, risk and hassle when comparing the two.

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