Many new duplex investors think the first thing they should do when buying a duplex is hire a property manager.
While I believe in property management for experienced and out-of-state duplex owners, there are a number of reasons I think this is a bad idea for your first duplex investment. Here are the top three:
- Managing the Duplex You Know Your Property – Granted, investment property management can be time-consuming. All of the maintenance and repairs necessary in home ownership are part of owning a duplex as well. Learning that furnace filters need to be changed periodically, or that a downspout has a bad habit of getting knocked off during lawn mowing (resulting in water in the basement), will ultimately help you better keep the duplex in better shape, as well as supervise and gauge the competency of the property manager you do hire.
- Tenant Selection And Management – If you plan to become a lifelong investor, learning how to advertise a property, screen tenants, and keep tenants happy will help keep your duplex occupied and profitable.
- Save The Money – On smaller investment properties, like duplexes, it’s often difficult to generate enough income to cover the costs of a property manager and have cash flow left over. In some communities, property managers typically retain somewhere between 5 and 10 percent of the rental income. In other markets, like Minneapolis and St Paul, duplex property managers charge as much as $100 per rental unit.
Once you’ve become confident in your knowledge of the duplex, and it’s generating enough income to cover the expense, it’s perfectly fine to hire a competent property manager.
That will leave you more time for things like buying other duplexes!