I have been rather outspoken regarding my dislike of outsourced property management. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free In Podcast 14, I stated my basic rationale that no one will ever care about my investment as much as I do, and that one of the advantages of real estate as an investment vehicle is precisely the notion that you can indeed manage it yourself in lieu of relying on someone… THINGS ARE CHANGING – SOME WHAT… Most of you know that currently on my agenda is syndication of 100+ units. I’ve isolated the marketplace and have been working to build systems within this marketplace so as to be ready for the eventuality of finding that needle in the hay stack which is an acceptable-to-me opportunity. As part of this process, I have in fact spoken with a number of management outfits and have isolated the people that I will be working with. Yes – I’ve become converted! I do believe that on larger projects self management is not a good idea for many reasons. From pre-acquisition due diligence and acquisition of market-specific knowledge, to repositioning, to placement of on-site personnel, to financial reporting, to disposition, a good professional property management is indispensible. I would sure as hell not want to do all of the work myself… Having said this, however, I am still of the opinion that most of you out there do not need and should not use management for smaller portfolios. For starters, you couldn’t afford truly professional management, and by that I mean a company with 2,500+ units under management, on anything less than about 80 units. Secondly, if you invest the right way, you plain don’t need them! I know that my current 28-unit portfolio definitely does not require outsourced property management… Related: 20 Questions To Ask Before Hiring Rental Property Management! WHAT – WHERE – HOW And with this we have arrived at the crux of the matter – what should you own and where, and how should you manage it so that you are not driven to outsourcing management because the process is too hard or too time-consuming… What Should You Own… This is a loaded question. I’ve shared some of my perspective relative to this in an article entitled Newbies Take Note: Why You Shouldn’t Buy Houses for $30,000, as well as in Podcast 61. For now, let me just sum things up: While most people believe that management is about the physical asset, it’s not. What makes management easy or difficult is people – tenants. If you attract the type of tenants who are reasonably easy to manage, then management is not hard and does not take a lot of time. Opposite is also true… Understand – you can not attract tenants. Your property, where it is and what it is attracts tenants. The ease with which you will be able to manage tenants is a function first of your property! Extrapolate this any way you want; if I get into any more detail this is going to become an e-book… Where Should You Own… Several things to mention here. First of all, the basic formula is the same whether talking about a 4-plex or a 150-unit apartment community, and it is this: C-Class Building in B-Class Location Past this, in order to successfully self-manage, it is imperative to own property within at most a half-hour drive from your house – you won’t go to your rental often enough otherwise. My portfolio currently consists of 28 doors. The farthest property I have is a 6-plex that is 40 minutes away – this is as far as is prudent in terms of self-management. And now we’ve come to HOW – how do we self-manage and keep our sanity. As I’ve stated in the forums and elsewhere on multiple occasions, my time-commitment on a typical month is 5-7 hours – that’s on the high side. Naturally, my time commitment is higher at times immediately following a new acquisition and during the repositioning process. But, relative to a stabilized portfolio my time-commitment truly is no more than 7 hours per month… Related: 10 Ways to Help Out Your Property Management Company 5 HOURS ?!?! I am going to tackle this by simply describing to you this month as it relates to property management. I currently have 1 vacancy. This apartment happens to be in the 10-unit which I acquired last February (I wrote about it in How I Bought a 10-Plex with 1.5% Down – A Case Study). In the first six months of ownership I turned over a good portion of the units, however a few received only a light clean-up – enough to get them rented. This reposition was fast-moving and cash-intensive, and I just didn’t want to bleed any more cash at the time than what was necessary. Well – one of the units that hadn’t gotten much attention became recently vacated. The unit required paint, flooring, lighting, door-knobs, etc. The appliances are older but in good shape. Here’s how I went about doing this turn: My handyman stopped over by my office (which is my houseJ) to pick up rotation locks with which to secure the property, as well as the key to the existing locks. He then proceeded to go to the apartment and began the turn-over by replacing the locks. Next, he ripped out all of the old flooring. While he was doing that, I had connected with my flooring guy and asked him to coordinate with my handyman a time to go over to the unit to take measurements. Thus far my time-commitment to this process is no more than 5 minutes on the phone, and 25-minutes that it took to drive over to the property and perform the walk-out with the tenant. Incidentally, this building is within a 10-minute drive from my house – wink, wink… The flooring installer coordinated with my handyman a time the next day to come take the measurements. He really didn’t need anyone to get in since there is a lock-box on the door, but I wanted my handyman there to make sure everyone is clear on the time-line…The next day, the flooring guy phoned the measurements into the flooring distributor. The distributor has on file all of the materials I use, including carpet, vinyl, and transition strips. Pay attention to this, guys – it’s always the same products that are used; I never change. I don’t care if something is on sale and I can pick it up at $2/yeard less – I have a package – it looks good – materials are sturdy and easy to clean – and if I happen to need to replace carpet in one of the bedrooms, I never have to wonder what the heck kinda carpet I used throughout the unit. It is always the same – period! And, by the way, so is the price! I don’t know if you are into nickel and diming, but I have a life and I have a family…there’s just not that much time left to worry about rehabs. The distributor called to verify the order, following which they billed my account. Done – 2 minutes of my time! Now, when my handyman is done with the paint and all the rest, the flooring installers will pick up the product and install it. They will bill me when done; they are not the cheapest, but they are good and I’ve been with them forever – I’ll pay… Coming back to my handyman, he has been busy painting. Similarly to flooring, I have an account at Sherwin Williams, where they have my mix in their computer. And, as you probably guessed, it’s always the same paint. My handyman (I should really call him my right-hand man) picks up whatever paint he needs and the store send me a bill in e-mail – this takes no time from me at all until I am ready to reconcile my accounts. Finally, I have similar accounts at a few of the other stores, therefore lighting, door knobs, appliances, etc. – none of this requires my presence, at least not usually. Only on major repositioning projects immediately following the acquisition do I ever spend time on the premises. Everyone knows how I like things and no one is further than a phone-call away, and if I pay a little more to work with reliable people then be it – my time is worth more. IN CONCLUSION By the time this turn-over is complete, my time-commitment to it will have been 1 hour, if that. And then there’s the rest of my portfolio. This month, I had a leaky faucet, a gutter which fell off of the fascia, and water heater tank went out. Guess how much time all of those took – ho long does it take to make a few calls…? Some times I wish I could be like Brandon Turner who gets up on the roof and climbs inside the crawl space, and knows what to do once he is there. But, my saving grace is that I don’t know how to do any of that stuff, so – I pay for someone else to do it. Now, as part of self-managing my portfolio I do drive by my properties all the time, in passing. I need to be very informed about everything that happens. But, with a stabilized portfolio of 28 doors, or even 50, management should not take any more than 10 hours per month, and should not be an extremely emotionally-taxing process, unless you chose for it to be by either buying the wrong kind of building or trying to do everything yourself – like some people we know named Brandon Turner. Here’s the thing – systems are key to management. And self-managing becomes very hard very quickly when YOU are the system. In my understanding, I am the guy at the top of the system, therefore by definition I can not be the guy on the roof or in the crawl space. This means that I can only buy certain kind of assets which lend themselves to this type of “passive” self-management… Does this make sense?