Should You Self-Manage Your First Rental Property in New York?
Go Back To Previous PageBuying your first rental property in New York, even for a first-time investor, can be extremely lucrative in terms of income potential. That said, managing a
rental is just as complicated everywhere else in the country. Many self-managing landlords assume owning a rental means saving money compared to using a property management company, and that’s often true elsewhere. In New York, though, the money you’d actually save is minimal once you factor in the sheer amount of time it takes to self-manage.
Is it wise to self-manage your first rental property, or would you be better off hiring a professional property management company? We break down what to consider below.
What Self-Management Actually Involves
Self-managing a rental property in New York is not just about receiving a check each month. Landlords have many legal responsibilities, often handled by property managers.
Here is what self-managing typically requires:
- Advertising vacancies and screening applicants
- Drafting legally compliant lease agreements
- Handling maintenance requests, often outside business hours
- Coordinating licensed contractors for repairs
- Managing tenant communications and disputes
- Tracking income and expenses for tax purposes
- Managing local laws concerning housing and rent
From cities to towns, counties, and states, laws governing rental housing are among the most complex in the country. The New York City Department of Housing Preservation and Development has outlined very specific requirements landlords must follow, or they risk serious consequences, including substantial fines and damaged tenant relationships. To avoid trouble down the line, landlords need to stay on top of these specific, changing requirements.
Outside of NYC, landlords are governed by the New York State real property law and must follow the rules and regulations regarding required disclosures, tenant rights, and habitability of rental properties. Eviction procedures have also become more complicated since the passage of the Housing Stability and Tenant Protection Act of 2019.
The Hidden Costs First-Time Owners Rarely Anticipate
One of the biggest mistakes first-time landlords make is comparing only the property management fee against the cost of doing it themselves. They only consider the property management fee that a property management company would charge them. They don’t realize that the highest cost of a self-managed property is their own time, and most people fail to assign a realistic value to it.
Take something as simple as an after-hours repair call, say, a burst pipe. You have to track down a plumber who’s actually available, coordinate access to the unit, oversee the repair, and then document everything for insurance and tax purposes. Suddenly you’re up at 2am dealing with a pipe, and you’ve still got your day job in the morning.
Other costs that catch self-managing landlords off guard include:
- Legal fees to handle incorrectly managed lease or eviction disputes.
- Deferred maintenance that escalates into costly repairs
- Fair housing violations as a result of inconsistent tenant screening practices.
- Fines due to your property not meeting code compliance standards.
- Vacancy losses from delayed tenant placement
Preparing a property between tenants also comes with logistical costs that many first-time landlords overlook. Coordinating a professional moving company when clearing out furniture, abandoned belongings, or staging larger renovations can significantly reduce vacancy time and help get the unit back on the market faster.
When Self-Management Can Work
Not all property owners need to hire a property management company. Sometimes, self-managing works well for a landlord.
It tends to work best when:
- You own a single rental unit in the same building where you reside.
- You have a lot of time to dedicate to your property.
- You are very organized.
- You have a long-term, very low-maintenance tenant on a very long lease.
- Your property is in a jurisdiction with simpler regulatory requirements
In these cases, you’d still need to study local landlord-tenant laws. In general, the law is not very forgiving of those who fail to understand it, regardless of intent. For example, many consider New York one of the most difficult states to comply with Fair Housing laws.
What Professional Property Management Offers
Professional property managers handle the day-to-day operations of rental properties for a fee typically ranging from 8% to 12% of the monthly gross revenue collected from tenants. This could save a lot of time and potential financial loss. For example, a $1,500-a-month rental would cost about $120 a month for a property manager, or $1,440 a year. In return, the property manager handles all correspondence, rent collection, maintenance requests, vendor contracts, annual inspections, and a yearly tax summary.
Most professional property management companies use a wide range of tools and can typically handle the following on behalf of the owner: tenant screening, lease preparation, rent collection, maintenance, financial reporting, and compliance with local, state, and federal laws. Companies like Best Property Management approach this by bundling all of these services under one roof, giving owners a single point of contact for every aspect of their rental. Many new property investors can save themselves a lot of headaches and financial losses by having a reputable property management company handle these issues on their behalf.
With professional management, your property manager becomes your vendor, handyman, maintenance team, bookkeeper, and marketing agent all in one. On the liability side, a reputable company can act as your agent. It helps protect your personal assets. Your rental can still generate cash flow.
For a high-rent property in New York City, that fee can be a great value to a landlord, since it saves a lot of time and helps reduce the financial risk of owning a rental. If you are also looking to purchase an NYC apartment as your next investment property, understanding total costs, including broker fees, is essential before you buy.
The Real Question Is Risk Tolerance
If you’re considering self-managing your very first rental property, realize that you’re not just owning a property; you’re signing up to be a full-time, 24/7 property manager. That means a huge amount of time and organizational skill to screen and retain good tenants, plus constant, in-depth study of landlord-tenant laws in New York State and whatever local ordinances apply to your property. Is that what you want for your new asset?
Protect your asset, reduce your liability, and save your time by paying for a service that someone does for a living. If you have enough time, enough knowledge of local laws, and enough commitment to stay current with changing housing regulations, go ahead and self-manage your rental property.
Whether you go with self-management or hire a property management company for your investment real estate in New York, you have to know what to expect. If you go in with blinders on to what it will take, you will end up losing a lot of money before you can correct your course.
Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.
