Which Is Better: Self-Management or Entrusting to a Management Company? A Comparison of Costs, Effort, and Risks for Apartment Owners
When you buy or inherit an apartment, the first dilemma is whether to manage it yourself or entrust it to a management company. With self-management, you avoid management fees, but responding to tenants and recruiting for vacancies takes considerable time and effort.
In this article, after organizing the tasks involved in rental management, we compare self-management and entrusting by costs, effort, and risks. We explain which option suits which cases, timing for switching from self-management to entrusting, and what to look for when choosing a management company.
What Does Rental Management Work Entail?
Although it is simply called "management," the content covers a wide range of tasks. In the case of self-management, the owner either performs these tasks personally or individually commissions contractors.
| Task | Main Contents | Self-Management | Entrusting Management |
|---|---|---|---|
| Tenant Recruitment | Setting recruitment conditions, requesting brokerage companies, arranging property viewings | Owner communicates with brokerage companies | Management company handles |
| Contracts | Screening, arranging guarantor companies, contract and renewal procedures | Owner handles (with support from brokerage companies) | Management company handles |
| Rent Collection & Dunning | Payment confirmation, dunning for overdue payments, reporting to guarantor company | Owner checks monthly | Management company handles |
| Tenant Correspondence | Handling equipment failures, noise complaints, emergency contacts at night | Owner responds directly | Management company acts as the contact point |
| Move-Out & Restoration | Attending inspections, settling cost liabilities, arranging repairs | Owner handles | Management company handles |
| Building Management | Cleaning common areas, statutory inspections, arranging repairs | Individually commission contractors | Management company arranges |
| Income and Expenditure Management | Record of income and expenses, materials for tax filings | Owner handles | Management company reports monthly |
Comparing Costs: Management Fees and Hidden Costs of Self-Management
Management fees are often set as a percentage of monthly rental income; at TLL, this is 3–5% plus tax of the monthly rental income (covering leasing, tenant correspondence, income and expenditure monitoring, monthly reports). Since the rates and scope of included tasks vary by management company, when comparing, check not only the rate but also "what is included."
For a property with a full occupancy annual rental income of 12 million yen, the management fee at a 3–5% rate is 360,000 to 600,000 yen per year (excluding tax). On the other hand, self-management also involves the following costs:
- Costs for individually commissioning cleaning, inspections, and repairs (often separately incurred even with entrusting management, but the effort to arrange is on the owner)
- Time spent responding to emergencies at night and on holidays
- Losses due to delayed responses causing tenant move-outs or prolonged vacancy periods
For example, if one unit renting at 80,000 yen per month remains vacant for three months, that is a 240,000 yen revenue loss. If vacancies or move-outs increase, the difference in management fees is easily offset. Saving on management fees via self-management applies only if tenant recruitment through to tenant correspondence is handled promptly.
Also, management fees can be recorded as necessary expenses for real estate income. Considering after tax, the effective burden is smaller than the stated rate. Conversely, time spent on self-management cannot be expensed. Including the opportunity to spend that time on main work or searching for and considering additional property purchases makes comparison easier.
Moreover, the valuation of revenue properties is generally calculated as "annual rent ÷ yield," so higher occupancy rates increase the valuation. If paying management fees raises occupancy, it also positively affects the sale price.
Advantages and Disadvantages of Self-Management
Advantages
- No management fees, increasing net income
- Can quickly decide rental prices, repairs, and tenant selection based on own judgment
- Direct interaction with tenants makes it easier to understand property conditions
Disadvantages
- Significant time commitment, including emergency responses at night and holidays
- Requires knowledge of laws and practices such as the Land Lease and House Lease Act, guidelines on restoration to original condition, and handling of personal information
- Must personally handle delinquencies and tenant troubles
- If relations with brokerage companies are weak, it may be disadvantageous for tenant recruitment
Advantages and Disadvantages of Entrusting Management
Advantages
- Can entrust tenant correspondence and emergency contact, reducing time burden
- Can utilize brokerage company networks and recruitment know-how
- Can entrust dunning and dealings with guarantor companies in case of delinquencies
- Monthly financial reports can be used for tax returns and loan applications
Disadvantages
- Management fees apply
- Occupancy rate and quality of response vary according to management company capabilities
- If decisions are fully delegated, recruitment conditions or repair details may diverge from owner’s intentions
Note that "sublease," where a management company leases the property collectively and subleases it, is a different contract type from management entrustment. Although rent is guaranteed, the rent received is set lower than market and may be subject to reduction requests. The Rental Housing Management Business Act, fully enacted in June 2021, prohibits false advertisements of subleases and requires important explanations prior to contract signing.
Cases Suitable for Self-Management and Entrusting Management
| Suitable for Self-Management | Suitable for Entrusting Management | |
|---|---|---|
| Number of Units | Small scale, several units | Many units, multiple buildings owned |
| Distance to Property | Close to home, easily accessible | Far away, living overseas |
| Time Available | Can spend time besides main work | Main work is busy, cannot respond at night or holidays |
| Experience | Has experience in rental management | First property or inherited property |
| Tenant Profile | Many long-term tenants, low turnover | High turnover for single tenants, many foreign tenants |
Timing to Switch from Self-Management to Entrusting
Even if started with self-management, consider entrusting when the following changes occur:
- Vacancies become prolonged or inquiries decrease
- Delinquencies or tenant troubles persist
- Major repair work approaches requiring contractor selection and construction management
- Purchasing more properties increasing the number of units under management
- Aging or wanting to prepare for inheritance with a form easy for family to take over
- Planning to sell within a few years and want to keep occupancy and financial records well organized
If fully entrusting is uneasy, partial entrustment such as only tenant recruitment or building management is also possible.
Points to Check When Choosing a Management Company
- Tasks included in management fees: Which of recruitment, renewals, move-out inspections, emergency responses, and monthly reporting are included and which incur extra fees.
- Occupancy rate and vacancy period track record: Ask about average occupancy rate and days from move-out to next contract for managed properties.
- Content and frequency of reports: Whether reports cover not only income/expenditure but also inquiries and recruitment status.
- Emergency response system: Contact information for nights and holidays and who actually responds.
- Rental housing management business registration: Companies managing 200 or more units must register with the Minister of Land, Infrastructure, Transport and Tourism. Verify registration number.
- Contract termination conditions: Notice periods and any penalties for cancellation.
Summary
- Rental management includes tenant recruitment, contracts, rent collection, tenant correspondence, move-outs, building management, and income/expenditure management.
- Self-management avoids management fees but involves time commitment and risk of vacancies due to delayed responses.
- Compare management fees not only by rates but by scope of included tasks.
- Choose based on number of units, distance to property, available time, and experience.
- Consider switching to entrusting if vacancies prolong, troubles arise, repairs are required, inheritance or sale plans appear.
TLL’s management agency service is offered at 3–5% plus tax of monthly rental income, covering leasing, tenant correspondence, income and expenditure monitoring, and monthly reports (our own managed properties have an average occupancy rate of 98.2%, based on recent 12-month internal statistics). For details, please see Asset Management and Operation Services. Also, refer to Measures for Apartment Vacancies and What Is a Rent Guarantee Company?.
About this article
- Author
- Kurihara（PM Business）Qualifications: Real Estate Transaction Specialist, FP Level 2, Chief Property Manager, Rental Real Estate Management Specialist
Has more than 10 years of experience in the property management field. Across both rental management and condominium management, has handled a wide range of responsibilities including owner relations, tenant relations, contract administration, repair coordination, and the operation of board and general meetings.
View profile → - Publisher
- TLL合同会社宅地建物取引業 東京都知事(1)第108202号住宅宿泊管理業 国土交通大臣(01)第F03424号
Data in this article cite their source and as-of date. Market conditions and regulations change, so check the latest information and consult a professional before deciding. Translated from the Japanese original.
