Landlording & Rental Properties

Before You Attempt to Manage Your Own Property, Answer These 5 Questions

Expertise: Business Management, Commercial Real Estate, Landlording & Rental Properties, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Personal Development, Real Estate Investing Basics
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In last week’s article I talked about being real estate entrepreneurs, not investors. This is a HUGE difference in mindset and also in practice. One result of having the mindset of entrepreneur is that you should not do all of the work yourself, but instead surround yourself with an awesome team and delegate. In particular:

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Don’t be a PROPERTY manager; be an ASSET manager instead.

What’s the difference?

If you're the property manager, you are the manager. If you’re an asset manager, you manage the manager.

You could manage your property(s) yourself, perhaps in order to learn how it works so that you can outsource it to a property manager later. Or perhaps you want to create your own property management company.

Before you attempt to manage your own property, ask yourself these 5 questions.

5 Questions to Answer Before You Self-Manage Your Property

Question #1: How valuable is your time?

Is it really the best use of your time to answer the phone at 10 o’clock at night when a tenant calls you that there is water coming through the roof and you have to rush to the property? Or to process applications, do background checks, show the property or collect the rent?

Couldn’t you delegate these activities to other professionals charging $15-$30 per hour?

Wouldn’t your time be better spent looking for more deals and raising money? What is an hour of THAT kind of activity worth? Fifty dollars, $100, $500 per hour?

Related: The Big List of Roles Property Management Companies Need to Fill Expertly

Spend your time on HIGH VALUE activities and delegate everything else.

Question #2: What are your strengths and passions?

Are you good at repairing stuff? Do you love dealing with tenants and their problems? Do you love the property management business?

If you answered “yes” to these, you might want to consider starting your own property management business, which would complement the real estate business.

However, chances are you answered “no” to these questions, so why do them? Why not focus on what you’re good at and love: being a real estate entrepreneur, making deals happen, putting it all together?

Question #3: Are you relying only on yourself, or are you leveraging the strength of your team?

Do you have experience managing a property like this? If you don’t, do you really want to learn? If you have investors in the deal, how would they feel about you managing the property that you bought with THEIR money? Chances are, you don’t have property management experience, and therefore the risk of the project just skyrocketed. What should you do?

Leverage the experience of a professional property manager.

Use your manager’s resume to complement your own. This “partnership” makes you look stronger to banks and investors because instead of having no experience at all, you bring a track record to the table. You can say, “Here’s my team, look at our experience.” You’re mitigating the risk of the project by leveraging the strength of others.

Question #4: Is it consistent with your goals?

Didn't you get into this buy and hold real estate thing because you were looking for passive income and to grow the business? Then why would you want to work IN the business versus ON the business? Why would you do something (property management) that doesn't bring you closer to your goal of passive income and growing your portfolio?

Also, with regard to goals, you want to make money as quickly as possible, right? Why try to learn on the job and make a bunch of mistakes when you can hire a professional who will do a better job than you will?

Just saying.

Related: How to Choose the Right Rental Property Manager

Question #5: Are you running it like a business?

You should approach your real estate career from the perspective of an entrepreneur who wants to create and grow a business. As the CEO of this business, you’ll want to delegate those lower-value activities that you’re not good at or don’t like to do and focus on the high-value activities that actually grow the business.

Plus, real estate like apartment buildings (what I focus on) already has property management built in to its business model! It just makes sense.

Unless property management is strategic to you, it should be one of those lower-value activities that you delegate. If you do, it will free you up to do the things you’re good at and that will grow the business: looking for more deals and raising money.

What do you think about this? Manage yourself or manage the manager?

Let me know with a comment!

Michael Blank is a leading authority on apartment building investing in the United States. He’s passionate about helping others become financially free in 3-5 years by investing in apartment buildi...
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    Mike McKinzie Investor from Westminster, CO
    Replied over 5 years ago
    I couldn’t have said it better myself Michael. Folks managing their own properties, they save PENNIES and yet lose DOLLARS. I can hear them crying out, “But no one cares about my properties as much as I do!” As if “caring” equates to better care. No one cares about my BRAIN as much as I do but you can bet that I get an expert if there is a problem (some might say I already have a problem in that department) No one cares about my car as much as I do, but I still take it to a mechanic when it needs repair. While a good property manager can be tough to locate, you may have to “kiss a few frogs” at first before finding one. They are invaluable in growing your business. The Real Estate investing game is rife with FAILURES. And one of the reasons why is that people try to manage their own rentals. Then they become ‘friends’ with their tenants, and then their tenants take advantage of them. You all know the stories! So consider a PM as just part of the expense of owning rental property. Imagine if you had a fleet of 100 rental cars. Are you going to wash, wax, repair and sign each rental contract? Or do you hire staff so that you can get to 200 cars as quickly as possible?
    Timothy Friars
    Replied over 5 years ago
    Dang. Very well said Mike…
    Timothy Friars
    Replied over 5 years ago
    Dang. Very well said Mike… Reply Report comment
    Joe T. from San Antonio, Texas
    Replied over 5 years ago
    This makes sense but when you only own 1-2 properties I feel like the lost cash flow hurts more than it helps. People with more than 4 properties already know this, which makes me believe this article is geared more towards beginners. That being said, beginners are short on cash flow, which means they are not likely to use this method.
    Anthony Gayden Rental Property Investor from Omaha, NE
    Replied over 5 years ago
    I knew when I started investing that I didn’t need or want another job, especially not as a property manager. I knew I was starting small, but would grow very big, and it just wasn’t what I wanted to be doing. I built my investments around the model that I would always use a PM. The reason a lot of people don’t use a PM is because they have such slim margins that a PM would push them into the negatives. Others have less of an entrepreneurial mindset, and instead are stuck in the mindset of small business owner. These are the kind of people who may own 10 or 20 houses, but unable to scale larger because they would have to delegate and set up systems that allow others to do the work.
    Chris Harrington Investor from Overland Park, Kansas
    Replied over 5 years ago
    We self manage and I agree completely about being an asset manager vs a property manager. We have 54 units currently and have a contract on an 18 unit in dire need of repositioning. We are also looking at a great 14 unit building for $1.1 and should have a contract on it shortly. Both of them will be managed by us. The key to “self” management is to have a team; employees; who do the work. I don’t swing a hammer or clean apartments. I have folks who get paid to do that. I have a long list of contractors, vendors and repairman to handle those issues we can’t handle in house. And I know that when a tenant calls with an issue or someone calls to see a vacancy that they will not be treated as someone else’s tenant. I have purchased plenty of properties at a discount from owners who had a management company. As long as the average property management company operates they way most seem to do, I see no end to great properties being purchased at a discount.
    Anthony Gayden Rental Property Investor from Omaha, NE
    Replied over 5 years ago
    I see no end to great properties being purchased at a discount from people who self manage. I actually got two of my properties that way. One kept a list of how nearly every tenant in the building owed over $1000 in late rent. I step in, set up good property management, get the tenants to pay or get rid of them. There are two sides to every coin. For every person who successfully manages their own properties, there are 2 who are horrible landlords. They do no tenant screening, they let the tenants walk all over them and not pay. They rarely fix anything, and they lose money because they have no clue what they are doing. I have had great success with a property manager partially because I never was under the impression that I could just sit back and sip cocktails all day. Every week I speak with my PMs by email or phone. I have them send me pictures of my property that is far away, and I physically inspect my property that is close. I go over the financials with a fine toothed comb. When I have a unit become empty, I am on them nearly daily to make sure they are doing their job and getting it cleaned/repaired and rented. The problem is not the property management. The problem is that a lot of people want to be 100% hands off. As the owner, your job is to manage the manager. Tell them what you want and what you expect. That could be as simple as phone calls, text messages, and emails.
    Karl B. Rental Property Investor from Columbia, MO
    Replied almost 4 years ago
    What’s funny is my last deal was purchased from an out-of-town owner who had inept property management. I got a great deal and manage all properties from 2000 miles away. I’ve had two calls in four months. Ironically, I was in town both times (the first call was right after the closing and the second was when an igniter went in the furnace and needed replaced). When I get up to 20-25 doors I’ll consider hiring someone part-time. Until then, my boots on the ground can help me.
    Anthony Johnson Real Estate Broker from Dunedin, FL
    Replied over 5 years ago
    I self manage 12 SFR and my original business plan was with a PM. When I got to about 6 houses, I had to fire her. I know that it is not only the 5-10% I paid that I save, I am talking to my tenants, and I am in my houses and no property manager will catch the details like I do. Also, when I have a checkout, I am always able to get it rented with no gaps, the PM always had a week or three where she was advertising & showing, so I figure I am making about $14-16,000 annual by self managing. I have a GC that does 100% of everything and I have never even changed a light bulb. I also like showing properties at rental time and I do have the advantage of being a Broker. When I am older, and have enough properties to travel & retire, my plan is to hire the PM then.
    JP Hill
    Replied over 5 years ago
    Well said!
    Katie Rogers from Santa Barbara, California
    Replied over 5 years ago
    I considered a property manager once, but I did not like the contract the property management company gave me, and they were not willing to edit the contract. It basically told ME what the policies for my property would be. Meanwhile, if tenants complain about a policy, the property manager would say that they were merely enforcing the OWNER’S policy. I also did not like the double dipping. They charge me 10% AND they charge the prospective tenants an application fee, etc. I suppose if I ever want a property manager, I will interview and hire an individual myself, on my own terms.
    Jiri Vetyska Investor from Normandy Park, Washington
    Replied over 5 years ago
    When it comes to multifamily units, you are spot on! But it doesn’t make sense for a lot of folks that own several SFRs to deal with another hassle of property management, that takes long time to find the right company and you still have to spend a lot of time making sure they are doing good job and not ripping you off. And managing homes is rather simple and doesn’t require much work each year. It’s not really worth the 8-10%.
    Replied over 5 years ago
    It really depends on your goals, skill set, and age. We’re in our 50s. I’m weird. I like managing our properties and dealing with the tenants. My husband likes fixing things. It’s basically a very part-time job for us, leaving us plenty of time and flexibility for family. Neither of us likes buying, selling, or putting together deals. Our needs are simple because we are working class people so don’t need a lot of money to live on. We mainly socialize with family. We don’t like talking to lots of different people like you do if you are putting together deals. Tenants are manageable. We can communicate by text messages. If you keep your properties maintained there’s not really many emergencies. We’ve been using the same heating/cooling service and sewer cleaner for many years. I don’t want to manage other people’s properties because we can chose specific types of single family homes in specific areas. Maybe if we get feeble, can’t do the work, or just get tired of it we will hire it out. However, until then we will just continue on the way we are.