Should you manage your apartment block yourself?

@ Getty Images

24.08.2024 | 6 minutes

Whether you choose to manage your apartment block yourself or delegate the task to a property management company is a question of priorities – your priorities. It comes down to a classic trade-off between more income or making life easier. How much time and money are you willing to invest in managing the property?

The same applies to maintenance. If you have enough time and are handy, you can save money by carrying out maintenance work yourself – or you can have a company take care of it for you.

Option 1: do it yourself

To give you some examples what to expect if you decide to take over the management of your property yourself:

Apartment turnovers entail a great deal of work. You have to deal with phone calls, carry out viewings, evaluate applications, draw up a shortlist of potential candidates, check their creditworthiness and obtain references, call them, get to know them personally, discuss terms and agree a move-in date. You also need to issue a contract, coordinate apartment transfers between old and new tenants, and have tradespeople on hand who can carry out repairs at short notice. Ideally, apartment transfers go off bump-free, but in a worst-case scenario, an apartment could be empty for months.
If a burst hose causes water damage in the laundry room, you will need to act quickly and be well-organized! You will have to call an emergency service line – possibly in the middle of the night or on the weekend – have the water pumped out, organize temporary washing facilities for tenants and dehumidify the room. Afterwards, you’ll need to report the incident to the insurance company, check for any damage, have the room repainted and order a new washing machine. Needless to say, this takes a great deal of time and can be very stressful.
Who can provide the cheapest quote for a fresh coat of paint? If you want three quotes, this will mean three appointments with three painters, all of whom are very busy and hardly have time to provide a quote. Two weeks later, you then have three offers that are difficult to compare, two of which are also incomplete. You will then have to follow up over the phone and wait for a new offer. Even the cheapest option will have cost you a lot of time and – by extension – money.

To be prepared for this, basic business acumen and an aptitude for admin are required. You can acquire the necessary expertise from books or a course; both are available, for example, from the homeowners’ association. However, it should be borne in mind that your capacities are limited even with good prior knowledge and routine.

As a rule of thumb: as the owner of an apartment block, you can manage a maximum of 15 units. If you are a layperson and you own several (large) properties – possibly in different locations – you will be overstretched. In this case, you would probably do better with a property management company.

List of requirements for managing an apartment block:

Acting as point of contact for tenants and tradespeople
Advertising for a new tenant
Organizing and carrying out apartment viewings
Checking and clarifying the references/creditworthiness of potential tenants
Coordinating apartment transfers and drawing up inventories
Arranging maintenance work, repairing damage
Handling correspondence with insurance companies, banks, authorities, tradespeople, etc.
Doing the accounts for the property
Checking and posting invoices
Drawing up, checking and monitoring the budget
Calculating and optimizing income
Calculating rents including operating costs for initial and re-rentals
Adjusting rents in case of changes to the reference interest rate or index
Communicating with tenants; this requires knowledge of and compliance with procedural regulations and deadlines
Drawing up bills for annual expenses and ancillary costs and writing a report
Handling payments
Collecting rent arrears and issuing reminders

Visiting and inspecting the property regularly

Hiring and assigning duties to a janitor, paying their salary and social security benefits
Planning, commissioning and monitoring repairs and maintenance work

For major renovations and maintenance work: project planning, tendering, acting as a contact, assigning work contracts and monitoring

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Option 2: hire a property management company

Property management fees depend on several factors.

Number / location of properties and apartments: It is cheaper to manage, say, 12 apartments in one block than 3 properties each in different locations within a 50 km radius.
Scope of services: Is the property already fully rented or is this a first rental? Who bears the risk of rental voids? Who recruits and pays the janitor? Are there target yields? How autonomous is the company in its decision-making?
Fee structure: Lump sum, percentage or according to work performed? As a percentage of gross or net rent? Calculated on the basis of target rent (all apartments rented) or effective rental income? Basic fee with profit-sharing or fixed price? What about charges for services not included, such as renovations? What about personal expenses?

The fee for managing a fully rented apartment block is usually four to five percent of the total rent. This includes the cost of hiring and managing the janitor (but not their salary or social benefits). This fee also depends on the number of apartments (fewer apartments means higher fees, while more mean lower fees) and the property’s location. Property management is also more expensive in regions with low rents, costing between five and seven percent.

Granted, this doesn’t sound like much. However, if you rent out 10 apartments in your building at CHF 1,500 each, then you make CHF 15,000 per month, or CHF 180,000 each year. Five percent of this is CHF 9,000, a sizable portion of your income.

What you need to bear in mind when agreeing property management fees

Think net, not gross: insist on using net rent as a calculation basis. This will make it easier to budget, since fuel costs, for example, do not impact management costs.
Fixed fee: ask about fixed fees when considering a new property management company. If you have to raise rents due to rising interest rates, a percentage fee will increase your management costs. A fixed fee makes it easier to budget.
Profit-sharing: property management fees reduce your income. However, property management can affect both costs and income. For example, if you re-rent an apartment, should you adjust the rent? And if so, by how much? How long will it take to find a new tenant? How much will maintenance work cost? Can these costs be reduced?
Services offered: make sure that the fee covers all of the services offered by the company. A discounted offer will cost more if, for example, creditworthiness and reference checks for new tenants are not included in the fixed fee, but charged according to expense incurred. You should also inquire about night or weekend rates in case of emergencies.
Initial rental: there is more work involved if a building is brand new or has just been fully renovated – more viewings are required, more applications have to be assessed, more rental agreements have to be issued and so on. Management costs also will increase accordingly. In this scenario, you can either choose to pay a fixed amount per apartment (CHF 1,000 to 1,500) or a higher percentage fee (between 10 and 12 percent). In the case of an initial rental, there is the risk that the tenants will not be selected carefully enough, leading to higher tenant turnover. Read “Pitfalls” to find out what you can do.
Rental voids: in some fee agreements, property management agencies take responsibility for any rental voids. They will not do this free of charge, however, as void periods have serious cost implications. The higher the risk of a void period, the greater the temptation to select potential tenants less thoroughly in order to rent out more apartments (see “Pitfalls”). As the property owner, you should budget reserve funds for such risks. In a worst-case scenario your income would be reduced by this amount – but you would still have to pay the administration’s risk premium.
Liability: define at the outset who is liable for procedural errors, missed deadlines and suchlike (see “Pitfalls”).
Hiring a janitor: this is so important that we have dedicated an entire section to it! At this point we’ll just say that there are good reasons not to ask your management company to find a janitor. But if you do, you should at least agree a right of veto. You should also insist on meeting the candidate in person.

A woman calculating costs — @Getty Images

Finding a property management company

This list is not exhaustive, but is intended to help you find what you are looking for:

Professional associations (e.g., the Swiss Real Estate Association)
Homeowners’ organizations (e.g., the Swiss Homeowners’ Association)
Local or regional trade associations
Recommendations from other investment property owners
Own network: architects, tradespeople, homeowners, lawyers, etc.
Janitor
Internet search

What is the best way to go about choosing a company?

Check their offer. Most property management companies have a website. Consider how they present themselves and the range of services they offer: how big is the company? Ideally, they should have capacity to cater to your property. Has the company been around for long? What is its core business: property management or real estate? Do they describe their services in enough detail to give you a clear idea? Do they list any references or case studies?
Draw up a list of candidates and shortlist three. They should be located near your property so they can respond quickly to problems. They should also know local tradespeople.
Meet your chosen candidates. Arrange a non-binding meeting with your three preferred companies, outline your needs and request an offer. If the company is large, insist on meeting the person who would be responsible for you and inquire about their capacity and who will act as a deputy.
Get to know them personally. Trust your intuition, but take care not to be taken in.
Education, references and background information. Property management is not a regulated profession. If the company is a sole proprietorship, ask about the experience, education, training and diplomas of its employees, as well current clients and membership of professional associations. Contact the references.
Ask for references and contact them. For sole proprietorships, request an up-to-date extract from the debt collection register. A character reference would be ideal, but beware – asking whether they have a criminal record could be perceived negatively.
Compare the price of each offer and the offers themselves. Pay attention to the scope of services offered and read the small print. Follow up if something is missing. Don’t make any long-term commitments. If you are not happy, you should be able to switch companies at any time in the space of a few months.
Choose a company and sign the contract. If you are not sure about something, request another meeting. Read the contract through carefully. Have all services been included? Are they correct? Are the terms for remuneration of extra services as you agreed? Contact a lawyer, ask for their opinion.

Pitfalls

Commission, revenue share: at the initial meeting, establish whether and how commissions, performance-related fees, revenue shares, cash advances to tradesmen, etc. will be handled. Insist that any orders to tradespeople, construction companies, white goods suppliers, etc. be made net-net in your name and charged to your account. Ensure that commissions and suchlike are credited to you either in full or pro rata (in the case of annual sales premiums).
Undeclared work: ensure the management contract states that you will not accept any undeclared work and that you expect the company to enforce this policy.
Tenant selection: it can be tempting, especially with new rental properties, to be overly lenient when selecting applicants – for example, when assessing credit checks. Don’t just ask applicants for a current extract from the debt collection register; insist on a full list of their addresses and landlords from the previous five years. The debt collection register is only valid for the applicant’s current address; it won’t show whether they were subject to debt enforcement proceedings at their previous address. Insist that previous landlords are also contacted for a reference. Larger management companies also have subscriptions with credit checkers, who should also be consulted.
Profit-sharing: try to agree on a performance fee for new rentals. The basic fee is due immediately; the rent schedule after two years will determine the performance fee. Your annual fluctuation target could, for example, be 10 percent. If tenant turnover is lower after 12 months, a bonus will be awarded. If it is higher, there will be a deduction for each tenant who moves out. Voids reduce the bonus by a given percentage each month.
Liability: tenancy law sets deadlines and requirements which, if not adhered to, can cost you dearly. These apply to, for example, terminations, rental adjustments, ancillary costs, changes to the terms of the contract, etc. Stipulate in the contract that the property management company is also liable for the consequences of any unintentional or negligent errors, and not just gross negligence. Find out whether your chosen company has appropriate liability insurance.
Personal expenses: make sure that travel costs, meals and similar expenses are included in the overall fee.

Three people on the balcony of a new apartment — @Getty Images

Option 3: use your janitor’s network to your advantage

On paper, a janitor is only responsible for ensuring that everything in your property is in working order. As they are regularly on site, however, they are also the first point of contact for all your tenants’ questions and inquiries. Good interpersonal skills are therefore just as important as the ability to fix things. In addition to dealing with faulty lighting in the stairwell, jammed shutters or a sticking cellar door, they must also handle complaints about loud music, barbecue smoke or leftover powder in the washing machine. They repair, free up, lubricate, remind, arbitrate and fix any problem pragmatically, amicably and fairly, making them the guardian angel for everyone at the property.

The role of janitor is thus the most important to fill. It is sensible not to hire the first candidate that comes along. It was once common to recruit a janitor from among the tenants, so who knows – perhaps your property’s guardian angel already lives there and who has a network of craftsmen. What’s more, your janitor will probably also know several local property management companies from first-hand experience or a reliable source. Ask which were pleasant to work with and which they would recommend.

Summary

The decision to maintain investment properties with or without professional support is, ultimately, always a personal one based on skills and time resources. After reading our article, you should now be aware of the pros and cons of the different options available to you, as well as the rough costs of delegating the management of your property. Feel free to use our checklists and step-by-step instructions to help you make the right decision.

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