Why Managing Your Own Properties is (Almost) Always a Huge Mistake

by | BiggerPockets.com

Being a landlord seems to be the go-to for many real estate investors new to the game. However, I can’t stress enough that from my personal experience, this has been the worst decision that I ever made as a real estate investing newbie. This is simply because now that I have been able to witness it firsthand, I can finally understand exactly how much work, effort, and sweat goes into managing your own property. Therefore, trust me when I say that I am totally convinced that this so-called “passive source of income” is far more active than it seems.

Time is Scarcer Than Gold

Managing a property all by yourself without the help of a property management company will occupy so much of your time, and the thing is, the amount of time that you put into chasing after rent, screening for potential tenants, and fixing the broken sink, you could easily have used to either educate yourself, perform research, or invest in new properties. So while you might be able to save money managing the property firsthand, you will be losing time, which is your most precious asset. Sadly, time is often placed on a lower pedestal to wealth. However, it is important to keep in mind that while you can always generate income, you can never make more time.

Related: Investors: Believe Me, You CAN’T Afford Property Management. Here’s Why.

Living Life Like a Medical Resident

If you want to take on life as a landlord, you will have to brace yourself for some tough times ahead. You have surely heard stories about terrible tenants who completely destroy your home or run off without paying, getting evicted and so forth, but the truth of the matter is, even good tenants can be a real handful!

If you are the landlord, if the sink decides to play up during dinner time, who will the tenants call? You. If you are the landlord, if the electricity suddenly goes out in the middle of the night, who is in charge of fixing it? You. Every little problem with the property is always the landlord’s responsibility. So essentially, being a landlord means that you will always be on call — day in and day out. There is no holiday or designated “break time” for you, as you never know when a problem will suddenly occur.

Still don’t want a property manager/management company to handle all the ups and downs for you? Well, be prepared to embrace being the first one who gets a phone call, even if it means interrupting your much-needed beauty sleep at two o’clock in the morning.

The Nice Guy Syndrome

The truth of the matter is, being a landlord requires guts. You have to be strong, persistent, and (almost) mentally unbreakable. However, the vast majority of us probably relate more to the everyday “nice guy” — as in, you’ll far prefer being an understanding landlord than one who enforces rules with a mighty fist if they ever come head to head with a difficult situation.

For example, imagine having a tenant whose lived in your rental for the past three months who suddenly loses their job — and their mother just passed away. They ask you to let them stay and promise to pay you back once they find a new job. However, four weeks pass, and they haven’t found a job yet. Tell me, what do you do? Sure, it might feel good to play the nice guy, and you might not have the heart to insist that they move out, but being a landlord involves making tough choices — even ones that you don’t like.

Getting Organized Will Make You A Better Investor

Related: 80 Smart Questions to Ask BEFORE Hiring Your Next Property Management Company

Remember, this is a business so you have to treat it that way. If you don’t have the heart to play the “bad cop,” then let the property manager/management company handle it. It will take a huge load off your mind (literally).

All in all, being a landlord isn’t a bad thing per se, but it isn’t something that you should leap into without some prior education. It is mentally tough, time consuming, and requires a whole lot of DIY. So if that doesn’t sound like something you’re into, then don’t jump on the landlord bandwagon, and instead, try looking into some other options that are available out there!

We’re republishing this article to help out our newer readers.

Investors: Do you believe in self-managing your properties or hiring it out? Why?

Let me know with a comment!

About Author

Sterling White

With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.


  1. Curt Smith

    Hi Sterling, I appreciate your efforts, one’s time is valuable. But I respectfully disagree and actually take the opposite view. The linked topic above by Ben L I think covers this topic pros and cons.


    There’s alot of PM threads in the forums. Summary: PMs are a plus when they are a plus, but it’s difficult to find a good one and the interviewing process is imperfect.

    We self manage 34 rentals with near zero effort, but if one finds my forum posts will read that to have zero effort experience requires setting some goals some before you buy the house, others when you screen the tenant. PMs actually cause turn over and owner frustration because of the defective contract that is typical: 1/2 to 1 mo rent goes to the PM on turn over. Maintenance is at cost+mark up. Guess what this contract leads to: turn over and marked up maintenance (some of which is ficticious).

    The best relationship with a PM is to give the PM a master lease at a fixed monthly. The PM is then incentivized to keep the place filled, paying and without damage.

    • Sterling White

      Those are some great points Curt. Everyone has different perspectives and when it comes to managing property I am a firm believer that a professional should handle it. Hopefully the professional is a well vetted PM company.

    • I agree with you. For the life of me i cant figure out what people complaining about rental house have to complain about. I have 8 paid off, they net over 100k (+100k unrealized cap gains), in 5 years Ive never gotten a call at odd hours. I usually wake up, eat an apple, go ride my mountian bike or road bike for a few hours, come home, eat, take a few bong hits and take a nap or do stuff around the house and thats my day. I work maybe 20 days per year for 200k. You mist have a super easy life to complain about that.

      • Bryan Trelegan

        Bill Gates had been quoted as saying ” if you want to solve a problem assign a lazy person to the task, because they will find the easiest way to get it done ” . If earning enough income to free up our time is the problem , then David , you have set a high standard. I am not suggesting you are lazy .I have much respect for your time efficient income strategy .

    • Matt NA

      My opinions are mixed about this, but I do agree with the “Nice Guy Syndrome” you so accurately stated. I manage my own rentals and at times have thought how much easier it would be to have that buffer of the tenants not knowing I’m the owner – being able to tell them “I’m just the manager enforcing the rules”. Hard to do for us “nice guys”.

    • Jennifer Alexandra

      I grew up learning carpentry, plumbing and elec with my father. I would never consider allowing a PM company to send someone to something I own to destroy. Most so called “professionals” are a stones throw away from unreliable or over charge for easy work. I enjoy getting my hands dirty sometimes. If it will save me a close to a grand or more to get up at 2am and unclog a main line stop I will do that. I am currently living below poverty to save most of my checks to get my first rental. I am living in Colorado but would like to goto a different market. Things are too expensive for what they are here. Boulder is a prime example. I am grateful for these articles and read alot of investing books/blogs on my commute to and from work.

  2. Marcus Robert

    Well… Not sure I agree. back to the philosophy of “no one will care about your property the way that you do”. I have had horrific experiences with multiple property management companies within a certain area. I am much more organized, have systems in place and no my legal stuff surprisingly better that the PM’s I’ve dealt with. I have been lied to by both PM’s and rental agents claiming they have fully screened to find out that they never called the previous landlord and to boot, they were REALLY, REALLY BAD TENANTS That got booted from their last place. I work in the customer service industry, have a good for detail as well as a good sense of urgency. I have a great general contractor and handyman, electrician and plumber and I am most likely going to have a position opening of “building superintendent” who does some of the duties, however not all that would be of a property manager’s typical duties. MR.

  3. Interesting Post. One of the best and most professional property management firms I’ve in the fast had the pleasure of doing business with in Deering Property Management of Portland, Oregon.

    I know they do commercial PM, not sure if the do multi-family or residential.

    Those within there operating area should consider using Deering.

  4. Not sure I agree with you Sterling unless one has 100 houses like you. I just rent 20. Any Landlord that answers phones at 2 AM should take up bowling and quit real estate. In fact any one that answers a phone call that does not have caller ID that you recognize should do the same. 95% of my calls go direct to a answer machine. 90% of these never leave a message. There are two species of property managers. Maintenance Managers and Financial managers. I have yet to find a good Financial manager to take care of renting, vacancies, screening and collecting. They mostly do nothing, don’t communicate, and collect 7% every month. I give up , I do it myself.

    Maintenance managers are a bit easier to find. They have a notebook of good reliable tradesmen that react fast, are trustworthy and do excellent work. The first contact goes thru me. I then forward the information to the maintenance manager to handle. I don’t like to get caught between the tenant and the worker over scheduling. On long term tenants I give them the Maintenance Managers phone number and the manager a list of their names and numbers.

  5. Mike mckinzie on

    Sterling, I agree 100%. While thre are bad PMs out there, aren’t there also bad auto mechanics, bad pastors, bad carpet cleaners, bad restaurants, etc… But most of us still take our cars to mechanics, or go to services of whatever faith we follow, get our carpets cleaned and go out to eat. One thing I Have noticed is that people get all EMOTIONAL when it comes to REI. No one cares about my house like I do! I like to know my tenants! I will do a better job than a PM. All emotional arguments. Also, remember, if you have a TEAM. then you have a Property Manager. When people tell me they “self manage”, I ask them how do they handle their rentals when they are on vacation and I get one of three answers. One, they have the tenant call them while they are on vacation (some vacation)! Two, they let the tenant know they are gone and give the tenant their handymans number ( BIG MISTAKE). Three, they have a relative, friend, agent manage it for them. Investors, ask yourself one question; Do you own rentals or do rentals own you? And, if you died today, would your rentals go on producing income or would there be a disaster for your heirs?

    • Shannon Sadik

      This is a great thread and everyone makes good points. We have 10 rental units and the only one that “owned us” so far was a duplex where we inherited horrible tenants. We have gotten rid of one tenant (had to evict them) and are now in the process of getting rid of the other. After that, it should be smooth sailing, like it is for all of our other units. Everyone’s rent is on auto-pay and they all know to send me an email with maintenance requests. I don’t take texts unless it’s something short and simple or an emergency. I don’t answer the phone after business hours and will listen to the voicemail to ensure there’s no emergency. Our apartments rent quickly, i do large group showings so I don’t spend too much time showing them. We screen very well and our units are in good shape, so for the most part, we don’t tend to hear from anyone until the next year when it’s time to renew their lease.

      Everyone values things differently. Some people want to be really hands off so it makes sense for them to have a PM, but I actually do as well to as large of an extent as possible. And with the right systems, boundaries, leases/rules set in place, explained and enforced, and homes that are in good shape, it doesn’t have to be that much work (of course there are always exceptions when everything seems to go wrong at some point). I think it ultimately comes down to someone’s priorities and their personality. Many on here (myself included) are very organized, good at setting boundaries, sticking to the rules, and seem to stay on top of the rentals easily and without much frustration. Others (like my husband) don’t possess those strengths and find it annoying/messy/cumbersome/hard to be “mean”/stressful/fill in the blank. However, he does all the maintenance and is great at that, so it’s a good partnership.

      All in all, we are able to pay ourselves for everything we would pay to someone else. Our cash flow for 10 apartments is higher than my salary was and that has enabled me to quit my job and stay at home with our new baby. Even if I had to deal with half of the tenants 2-3 hours every week (which would never happen), that’s still better than a full time job and I can do it from home! To me, that is definitely worth it. So I “bought” a job? I’ll take 5 hours a week that directly benefits me over 40 mundane hours benefitting “the man” any day!

  6. Cory Binsfield

    Totally disagree assuming you have basic people and management skills and view tenants as customers versus complainers.

    If you build a system to manage your properties just like a property management company, you don’t need a property manager. I agree that there is nothing passive about passive income. On the other hand, I’ve found that passive income streams afford me way more freedom than a cubicle.

    What people tend to forget when they tell tenant horror stories is the fact that a tenant hates bothering the landlord. Who wants to deal with a crabby landlord at 2am? Better yet, when you were a renter, did you call your landlord in the middle of the night?

    We never hear stories about the great tenants. The ones that pay early, pay online and you check your bank account and see all these deposits accruing at the beginning of the month. 90% of my more than 150+ tenants are rock stars with good credit who never bother me unless it’s a simple maintenance issue that is a simple text away.

    Here’s a typical text.

    Tenant-Yo…Cory. My dishwasher won’t work.
    Me-Ok, I will send my appliance guy. Tomorrow work?
    Tenant-Sure, thanks
    Me-No problem

    When you start out, I believe it’s critical you self mange so you know the process. If you discover it’s easier to build a team then hire and fire property managers, you are set and know how to manage the property manager.

    Bottom line, nice properties attract nice tenants and make self managing a breeze.

    • Alex Craig

      That is the ideal tenant, but then you have this tenant. Real life thread below:

      On Apr 2, 2016, at 5:27 PM, “Andrew Akins” wrote:
      Yeah I told her this morning. She was asking how to handle without fists.

      Sent from my iPhone

      On Apr 2, 2016, at 5:11 PM, Alex Craig wrote:
      I think the tenant should nicely explain to their neighbor what happened and ask the neighbor to pay for it.

      Sent from my iPhone
      Alex Craig

      Begin forwarded message:
      Date: April 2, 2016 at 2:51:06 PM CDT
      Subject: Broken window (1330528 | Arrendale 3103_Yerington Investments – 1)
      This email message was sent from an email address that cannot accept email.

      You can process the request online.

      1330528 | Resident request | Arrendale 3103_Yerington Investments – 1
      Broken window
      created by Jasmine Kerr at 4/2/2016 2:50 PM

      The neighbor’s son was mowing their yard and a rock flew through the top window and broke it. I am unsure how to handle this.

      image.jpeg (2513 Kb)

      image.jpeg (2451 Kb)

      Process request

    • Mike McKinzie

      I think we need to define SELF MANAGING. My cousin in Fort Collins ‘self manages’ his 20 apartments (five 4-plexes). He goes over every week to mow the grass, clean up the trash and check on the properties. In the winter, he shovels the snow. He repairs the toilet, sink or dishwasher. He fixes the leaky roof. The funny thing is, he had the same twenty units, 25 years ago. He has NOT added a single unit since, he is too busy SELF MANAGING. He has saved PENNIES and lost DOLLARS.
      So if YOU are not the one making repairs, or showing the vacancies or answering calls, then you have a type of PROPERTY MANAGEMENT in place. Whether it is a SYSTEM, a receptionist, a handyman, a gardener, etc…., you have people that you have to PAY to assist with your management. In the past, the DISTANT past, I did self manage, including mowing the yard every week. But today, owning property in seven different states, mowing the grass every week would be a CHORE! Besides, why should I let a failed HUD Section 8 inspection interrupt my $50,000.00 Baltic Sea Cruise? Yes, there is PASSIVE income, I have it. If I DIE in my sleep tonight, NOTHING changes, none of my heirs have to worry about anything, it will all keep on working.

  7. joe moore

    I own 6 properties and self manage. There are times I don’t hear any words from my tenants for 3 to 6 months. I had a tenant who was with me for 4 years and only got 1 phone call which was a broken back door. i place that tenant myself. I do have repairmen that I have found on Craigslist, asking BP for recommendations, from Yahoo. I used SmartMove to screened my tenants. My tenant deposit their rent into my bank accounts. Why would I put a middle man in my rental business? If my rent is 6k a month and pay the the PM a 10% fee, that is $600 a month or $7200 a year from my bottom line. Also I am sure most PM used any repairs as profit centers by padding the repair bills. For me, this will be used to buy more properties and do repairs on my properties. Its pays to self manage your properties.

  8. Steve Vaughan

    Seems like just us DIY LLs are chiming in, right? Surprised to not see a PM on here backing you up more, Sterlling!
    In my area almost all of my most motivated sellers have thrown up their hands with bad management. Fired one, tried another. After the 3rd, they finally call me. The major brokerage in the area begged me to get licensed so I could manage for others and she would have someone to refer her clients to. “Where am I supposed to source my motivated sellers then?” j/k. I studied the stuff but chose not to hang it.
    Anywho – it does take a certain kind of animal(?)/personality type to be in the trenches with renters and repairs and maintenance everyday. I like it. I also see the biggest cost of a PM isn’t the mgt fee, but the repair costs. $100 faucet drips and breaker flips will bleed ya dry. I easily save $600/wk asking key questions while on the phone with tenants about service calls and just going over and taking care of it if needed. When someone’s dishwasher or sink is ‘broke’, you bet I ask a question or 2 before sending out Mr Maytag at $300 a minute. Thanks for writing again, Sterling. Just hope all new folks don’t get the wrong idea and go broke paying high prices for mediocre repairs and (lack of) maintenance!

    • Sterling White

      Great to hear from you Steve & as you stated the feedback thus far is DIY’ers. Love to hear others perspectives.

      Totally agree with probing questions on maintenance calls. Those trips fees can really add up for the smallest things.

  9. Alex Craig

    I own a property management company and when tenants from my own houses come in my office, I never identify myself as the owner. I like the buffer zone. We also manage for several local landlords who simply do not want their free time to be interrupted, especially when the home is vacant. I think it depends on the person.

    • Sterling White

      I like the buffer zone you stated Alex. Its best that your actual position as owner not be uncovered.

      In addition agree that it depends on the person when it comes to hiring a PM company or self-managing. I prefer to have my time freed up & piece of mind.

  10. I self manage 37 properties with a total of 39 units. I never take a call past 7 pm in the evening. Rarely take a call before 8:30 in the morning. All calls go to my cell which is set on vibrate overnight and is left downstairs with my dog. I tell my renters to contact me during business hours. If kitchen sink is backed up at 7:30 pm, they can wait until tomorrow, just like I do. I the power goes out, they call Com Ed, not me. The MOST important landlord job is thoroughly screening renters. Good renters will make you rich, bad renters will destroy you. I would never outsource that. I have a handyman that does plumbing, heat, A/C, and general repairs. Between renters, they paint and clean the unit up. I politely tell renters I cannot get a plumber or furnace guy out at midnight and they understand. It would be the exact same if they owned the home. Repairs have to be scheduled. Are there days that drive me crazy? Absolutely yes. But my limited experience with PM companies is that most of the work is done by a $10 per hour employee that does not give a crap about my property or my renter. Also, most of my rentals are SFH and I tell the renters that lawn care, snow shoveling and minor repairs are their responsibility. When I am 90 years old and my houses are paid off and I am living in Hawaii, I might hire a management company!

  11. Dalton Thieneman

    Mr White-Excellent points here. Thank you for this perspective! I currently live in Indianapolis and am in the process of starting a real estate investing company with my business partner. I would love to pick your brain about a few items if you have any availability in the coming weeks-coffee or even a phone call would be much appreciated!

  12. Andy Teasley on

    You should invest 2 days and about $400 and take property management from David Tilney he only teaches once a year and will be in Las Vegas in September I believe. You will learn how to shift responsibility for the stopped sink from you to the person who stopped it up, that is the tenant. My tenants are expected to treat my homes as if they owned them and they lose a $100 discount if they call me to make a repair they are responsible for. This is only one of the techniques you will learn from a man who splits time between Florida and Colorado while self managing over 100 doors.

  13. Mike McKinzie

    Here is a scenario for all of you DIYer’s out there. This is REAL LIFE and this is THIS YEAR. If you have read all the other notes on here, you see a post by Alex Craig. He manages a house we own in Memphis, TN. The tenant moved out on December 31, 2015 (don’t you just love those Holiday vacancies!). While that house was vacant, some moron stole my stove. At the same time, I got an offer from a tenant in the Dallas/Fort Worth area to buy the house he was renting. At the same time, a storm blew through Dallas and knocked down the fences of three houses of ours there (we own 7). At the same time, we got a notice from the HOA of a Duplex we own in Colorado complaining that one of our tenants was raising chickens on the property. Yesterday, we got an HOA notice about a house in Texas where the tenants left the trash cans visible from the street. At the same time, we got a notice that an HVAC system went out on a house we own in the Fresno, CA area. On another house in the Fresno area, the fixed income elderly man stated his SS check was late. Today, I got a notice from Texas that a tenant is moving out. We came to terms with the tenant who wanted to buy the house in Texas and went under contract to buy two more homes in Kansas City. The inspection on our Texas house required a new roof, which required an Insurance Claim. I got the inspection back on one of the Kansas City houses and had to delay closing until the Turnkey Seller made the repairs. And a LOT more, JUST THIS YEAR. So I ask you, is my time better spent chasing down tenants who have chickens or leave their trash cans out, or chasing down new deals to buy? Why do I buy all over the country? Because, in Southern California, you have to spend $750,000 on a house that rents for $2,500 a month. In Kansas City, I am paying $128,000 for a house that is already rented for $1,350 a month. The house we sold in the Dallas area, we paid $150,000 for it in 2012 and just sold it for $190,000. We only put $50,000 down so we nearly doubled our money in less than 4 years plus it was a positive cash flow from day one. So you think you can self manage? I paid about $25,000 in management fees last year but made over $500,000 in appreciation and a nice income. Two years ago, I put a deal together that I paid $500,000 for $800,000 worth of property and only put $100,000 down, for properties located in three different states (8 houses in total). If I were self managing, I would have NEVER been able to put that deal together. So let me say it again, all of you Self Managers, you are saving PENNIES and losing DOLLARS. I chuckle when I see someone post “I save $5,000 by self managing.” Well, I made $300,000 by NOT self managing. But I have been in this business since the 1970’s so maybe things have changed over the years. Computers, cell phones, social media and the internet have really changed how business is done and it might be easier to self manage. It just doesn’t work for me. Except ONE, I do manage one, two of our sons live in the house, five miles from me. The best tenants I have because I told them whatever they do to the house is how they will inherit it. It is IMMACULATE!

        • Mike McKinzie

          Its a good thing you weren’t concentrated in Las Vegas in 2008. I had a friend who owned 62 rentals, ALL in Las Vegas, in 2008 and by 2010, he had ZERO. The old saying “Don’t have all your eggs in one basket” really pertains to real estate!

      • Mike McKinzie

        And my above scenario is why I was able to retire at age 50, very comfortably. As has been said on BP before, if you manage your own rentals, you did not buy an INVESTMENT, you bought a JOB. And there is absolutely nothing wrong with that. If I invest in Apple or Microsoft or BP or Disney, I don’t go to work for them. For me, I treat Real Estate the same way. When I was much younger, I did ‘buy’ a job as I self managed and ran my own PM company. Not only do I NOT want to manage my Real Estate, I don’t even want to SEE it. The house we just sold in Texas, we NEVER saw it, NEVER talked to a tenant, and nearly doubled our money in less than 4 years. THAT is an investment.

        • Andy Teasley on

          Two things Mike, First your friend who lost everything in Vegas in the crash, Why did he lose all his rentals? it wasn’t because renters disappeared was it? I’m in Palm Springs so my rental experience would be similar to his and after a slight dip rents have steadily increased since the crash. He probably didn’t have proper financing on those units and they only cash flowed while he was getting discounted payments. If his properties had normal fixed financing he would have kept his rentals and bought more in 2009-10.
          Second, properly training your tenants is the solution to the amount of time spent on management, while my units tend to stay vacant longer than average when I lose a tenant and it takes me around 90 minutes to go through a lease signing my turn over is miniscule. Since it costs my tenants $100 to interrupt my life unless a repair exceeds $100 they very rarely call.
          Third my experience with property managers has been very poor since I accepted responsibility for management cash flow is up, expenses and hassles are down.

        • Mike mckinzie on

          Andy, my friend went to one of those weekend real estate seminars that taught NO money down. He then found a lender who would do it, and the domino affect started. There is nothing wrong with managing your own rentals. My beef is for those that ridicule those of us who chose NOT to manage our rentals, as if they are some how superior because they manage their own rentals. Different strokes……..

  14. “Everybody wants to be a diamond, but very few are willing to get cut.” The experience gained from managing your own properties is an invaluable part of wealth building. Books, seminars, mentors are all important as well, but the experience of managing properties establishes a database of knowledge that will generate a lifetime of benefits.

    You are correct that a landlord has to be “strong, persistent, and mentally unbreakable,” but how do you develop those traits without the nitty-gritty experience that “doing” offers. I’ve owned and managed many properties – commercial and residential – over the years and wouldn’t trade that experience for the world. My recommendation would be that all new RE investors, for reasons too numerous to mention in this blog, manage their own properties. This experience, if you are serious about building wealth through real estate, will help you develop into a “strong, persistent, and mentally unbreakable” landlord/investor.

  15. Paul Salmela on

    I own 25 rentals and manage them all. The way I see it, the management of a property requires three different tasks: 1) Tenant Management 2) Leasing 3) Property repair/maintenance. For my units alone assuming an 8% property management fee it would cost me 30k to have someone only do the #1 task above. To have someone do task #2 would cost between 10 and 20k (my average tenant stays between 2 and 3 years). The 3rd task above I have found to be quite expensive. I signed a maintenance contract with a PM company and found their prices to be about double what I pay when I use one of the several “handy men” I use. Currently, I only use them when I head out of town and want to ensure that everything is covered. In total by managing my properties I feel I save 60k/year (or more) and this is a very part time job – probably a few hours a week. If I said I worked 5 hours/ week on this (which is high) that would put me a 260hrs/year. 60k/260hours = $231/hour. I have a full time job in addition to this and I don’t make anywhere near this!

    • Mike McKinzie

      I don’t experience any where near your numbers. First, my average monthly fee across 25 rentals is 7%. Next, I average 2-3 vacancies a year and currently, 12 of my rentals have tenants who have been there longer than 5 years and half of those are over 10 years. Third, I also call for bids on repairs so that I get the best price possible. My PM got me 3 bids on a roof in Texas and I called and got 5 more bids. I don’t get bids on small jobs, only the ones over $1,000.00. According to your numbers, you collected $375,000 in rents last year, $30,000/.08. I collected just a little less than that but still in the 300s and the TOTAL cost for number 1 and 2 was $25,000.00. You just have to put a non monetary value on your time. For instance, anyone could easily make a sub sandwich at home for under $1.00 but most of us run down to Subway and plop down $10-$12 for a sandwich. Why?

      • Paul Salmela on

        I’m not certain I understand your statement “You just have to put a non monetary value on your time” with respect to managing my properties. If I can do a task that is somewhat simple and doesn’t require too much energy and I can save significant money, why wouldn’t I do that? At some point in time in my life I’m certain I will tire of doing this role and will either seek out a PM or sell the properties but spending an extra few hours a week isn’t too much of chore for me.

  16. Wow. Very interesting thread! I own a small real estate brokerage in Fayetteville, Ga which as a property management division. We currently manage 35 units owned by 8 clients, the majority of which are out of state and international. We have a very high tenant retention rate. I think all of my clients think we are the cats pajamas. I think it all boils down to fact that everyone can DIY if they want to. Its a matter of choice. I pride myself on adding value to my clients’ PM experience and being a resource for them as well as our residents. We offer Section 8 consults for those who choose to consider subsidized tenants, assistance with tax appeals, etc. This thread is a great reminder of what I need to KEEP doing right!

  17. Penny Clark

    Nice, insightful article, Sterling! I do property management for a living as well as self-manage the ones we own outside of the company. I think all owners should manage their properties for a short time to decide if they can get along without a PM. Doing so, will not only provide them a crash course in landlording 101, but if done well, they will know what to look for and demand from a PM if they desire to hire one. They will also appreciate the excellent service a good PM can provide. For example, a good PM should treat a client’s property like her own. She should get bids/estimates on any repair job over $250, she shouldn’t rent to any tenant that wouldn’t qualify for her own property, and if a property is between tenancies, do routine checks to ensure it’s not been vandalized. I realize finding a good PM takes time, but it will save you money if you vet them properly.

  18. Brian L.

    Some great comments. . I manage dozens of properties as owner and I see pros and cons of doing it myself. Im local to them and my tenant base is pretty easy to manage as I have good quality and mostly SFRs. Most propery managers I know I would not recommend but I can see how they are useful if you want hands off or if you have lots of multifamily which I find are more hands on vs. SFRs. I am able to rerent and turnaround rentals much faster than property manager and usually have less than 1 week vacancy in between tenants as many property managers I find are slower to find tenants and do showings so my vacancy costs are very low and would be another cost of having a property manager..

    I think people views should consider the tenant base they are dealing wiith and locations they manage. I do think if I was more aggressive investing out of ny area I would definitely use a property manager as the higher returns I would see outside by area would more than offset the added cost of property manager.

  19. Erica Payne

    I think I would have to agree with you Sterling. I have never been interested in owning multi family properties or any passive income properties due to the fact that I don’t want to be that accessible. But one real estate investor told me to control everything and own nothing.
    I have carried that with me on my venture and I don’t believe in hiring other companies outside my own. That really is the only advice that would make me even consider owning rentals.
    Is it difficult to create your own property management company? How much hassle would the control of having someone else do all the work be if your the one calling the shots?
    Compensation is a relative term. Anything from free rent to an actual paycheck can always be arranged, depending on the employee’s motivation.
    Does this sound plausible, or are we still looking at major losses in profit? And what are the risks involved in the venture? Thanks

  20. Cory S.

    Great post Mr. White.

    I myself own two rentals and a third on the way and I cannot imagine running these properties myself with having another career and a family of three that need most of my time and attention.

    Nothing like having a whole PM team working for you to take care of all the little and big things. Having a PM team was the only way I was going to get into real estate investing as I was looking toward an absentee landlord approach.

    My PM team rehabs, advertises, screens, repairs, collects, etc.

    To each his own, but PM teams are the way to go for me.

  21. I really liked reading your tidbit about how much time you might spend chasing after rent or performing menial tasks on a property you own. I can definitely see how that might not be the most productive use of your time. Hiring a good property manager could be one of the best ways to safeguard your precious time.

  22. Andrew Syrios

    I have to disagree, although not in every case. There are so many bad property managers out there that you can really get burned by them, and learning the management side is also very helpful. But it’s only a good idea to manage yourself if you systematize things and basically build a management business.

  23. John Murray

    I own 8 SFH rentals and do all my own management and repairs as well as renovations. If you want to make maximum money it pays to know what you are doing is the right and effective course of action for all the problems encountered. Pro active retrofit and repair is the key to success. Minimize failures and repair as quickly as possible. Preventing large catastrophic failure is pretty easy if you have experience with large catastrophic failures. Constant improvement and learning will make you a whole lot more money than entrusting someone that does not have money invested in your business.

  24. David Lehane

    We are a real estate Investment Company, who owns a Real Estate Management Company, we currently own 23 doors in 3 states and manage our properties via our own Management company.

    When we were living is Australia we had Property Managers looking after our Properties, I got so sick of paying them to do a crap job, nearly at my expense because its easy to go back to the owner than confront the tenant, that when we decided to move and invest here in the US, I wanted to make my own Management Company, do it right, do it well, and do it easy.

    So we set it up, but as mentioned above it had to meet the criteria above, now I am not going to tell you it was easy and a walk in the park, but after 12 months now we have the system almost down pat, so much so that we recently went on a trip to Europe, had 3 problems that had to be dealt with in 2 states, 2 blocked drains and 1 failed Hot Water Boiler, and guess what after about 2 hours of phone work and emails (in total) we were able to resolve all 3 whilst relaxing on our holiday. So what I am saying is that while I disagree 100% with paying for a Property Manager, who does not care or do a job as good as you would on your own. it can be done, but I also agree that it can be a challenge, after all it has taken us nearly 12 months to get our system to be where it works, so much so that we intend to expand it to take on Management for other people, but what I am wanting to say is that carefully consider if you want to do it easy and risk your asset, or do the hard yards for a while then taking it easy while protecting your asset, because it can be done. And after all its your asset and your business, so why hand over some controls to people who often more than not do not care?

  25. Theresa Minifield

    I disagree with this article. I have managed my own SF rentals both in state and out of state while holding on to a full time job and raising children. Most are out of state. I love it because I am in the know as to what is going on. I have tried 2 PMs but had to let them go after the first year. In 20+ years of being a landlord, I have not had a single rental that was destroyed or damaged. When I have a tenant turnover, applications are generated via email ahead of time, references and employment are checked, tenants are screened via phone, and only then showings are lined up before I leave home. I make a 2-3 day trip, mostly week-ends, and within that time I manage to find and place well-qualified tenants who meet my criteria. I clearly state what my criteria is and don’t waver from them. I get to build a professional relationship with the tenants which IMHO is crucial for business success. As for repairs, I have a team in place from referrals, some from past and present tenants themselves. My flooring guy, handyman, and cleaning crew are all referrals from past tenants. As for rent collection, I have changed this month to the old fashioned way of having the tenants use electronic funds transfers. No checks. So far no problems. All the rents were in my account by 5 pm Nov. 1st. No processing time and no third-party processors.

  26. Susan Maneck

    I am very slowly making the transition from activity managing my properties to turning them over to a property manager. I’m doing so mostly out of necessity as my mother’s health has forced me to spend more and more time out of state. I’m not using a major PM outfit. I’ve seen too many of their properties sit vacant for months. Instead I’m using the same broker/agent through whom I purchased most of my properties. Any properties which go vacant or where collecting the rent has been difficult during my absence are being turned over to her. Her husband does much of the repairs on even those houses which she is not yet actively managing. This is going so well that I am considering expanding my property portfolio, no longer afraid of what happens if I move out-of-state more or less permanently. But selecting a property manager is not that different from selecting a tenant. You have to be very, very careful. The terms under which my property manager works are more than fair, IMO. $250 to find a tenant and 8% of the rent. No other fees.

  27. Dave Chow

    I have seen quite some landlords who have been successfully managing their own properties for years without paying PMs. It greatly contradicts posts like this. I guess the title of this post would make more sense if everyone is having properties more than 100+. But still good to have those information if face scaling property units up.

  28. Matt Altrich

    As a new investor, I would never pay a PM company to manage a handful of (local) doors. In my opinion, that is foolish and a waste of money. I also invest in quality homes (that I would live in) so it’s relatively easy finding great tenants. Toilets are not randomly breaking at 2AM. It’s challenging to understand the business if you’re not involved and you’ll easily be separated from your profits.

  29. Frank Greco

    I manage my own (22) and do it very well (if I may say so). I agree you have to have a certain mindset and stay focused. You have to be fair, firm, non-emotional and act within the confines of the law. I think it all comes down to training, your ability to read people and diplomatic skills. It’s been tough at times but I’m thoroughly connected to the properties and have had tenants that moved out to come back after spending some time with my competitors. Thanks for posting an informative article!

  30. Rob D.

    Self manage here. Once in a great while I may get a late call. I have my own handyman, electrician and a plumber. Rarely do I get such emergency calls. Most calls are mundane something broke and I’ll get someone out there non emergency calls.

    Sorry but most PMCs are horrible. They charge a lot of money, have crappy service people and do bad jobs managing. They will suck all the profits out of your investment. They could care less if you make any money. If I were to use a PMC it would cost me a minimum of around 12,000 dollars a year. That’s a big chunk of money. That’s just the maintenance fee of 8%. Not counting any repairs or fee me to death charges. They simply go by numbers and place anyone in your rentals. You really think they care if that tenant trashes your place? Or they will do anything about it?

    As for agents most say they screen, but they really don’t. They write these letters as if they personally know the applicants but really know as much as I do about them. I had these agents present these “great” tenants and when I start digging they wouldn’t pass muster.

    I wouldn’t trust any agent or PMC with my properties.

    If you’re managing anything over 6/7 properties you would have a few tradesmen on stand by in case you get swamped. If you have 30-100 you would have tradesmen to take care of them. I couldn’t imagine a investor building up 100 units and not having a crew of tradesmen. That coordinating would be your job. Even if you are into expanding you can hire some answering service to field calls. Someone to do the accounting of receivables. All my rental payments are electronic. Due by the 1st. Anything after the 4th is late and fees apply.

    Sorry but this article is nothing more than a cheer for getting a PMC to manage your investments.

  31. Owen Franks

    I fired my PM last year, at lease renewal. They got so much of the legal side of it wrong it was embarrassing. But they were also useless in so many other ways. Now I self manage, and the property is overseas.

    Here’s an example of what happened yesterday – I got a message from the tenant saying the oven kept tripping out the electrics, so they couldn’t cook. It was 9pm their time, 4pm my time. I sent a message to my appliances guy, and asked him to go over the next day and to schedule the appointment directly with the tenant. I woke up this morning to find that all had been done whilst I had been sleeping. Problem solved. Happy Tenants.

    If the PM was still in place, the tenant would have left a voicemessage at 9pm. The PM would have picked it up this morning. They would then tell me what the problem was and suggest they contact the appliance guy. They miiiight then call the appliance guy immediately but more likely it would have gone to the back of the ‘to do’ list for the day. When they finally do bother to reach him, he’ll already be out on jobs and so will have to schedule it for Monday instead. Email tennis ensues. And a weekend without being able to use the cooker = unhappy tenants.

    When I took over the management, I came up with a system that would work for me. Here’s what I did:

    1. Set up a WhatsApp group between my self and my tenants (a married couple) so that I would be easily available to them and told them that they should message me for any issues. This is especially useful considering the time difference between us.

    2. I gave the tenants my list of service people (plumbers, electricians etc) and said if for any reason they can’t get hold of me, if the issue was urgent they could use their judgement and call the appropriate service person on that list and that I would cover the call out cost. I had already cleared this with my service people. Even if they made one call out every week it would be cheaper than paying the PM.

    3. I set up gmail to automatically send scheduled emails to the right person at the right date for predictable things e.g there is a regulatory requirement to have boilers serviced every year in England and Wales. Mine must be done by 5 July. So on 4 June my gmail automatically emails my plumber saying ‘Hey Joe, I’m due another service at the property this month. Are you able to liaise with the tenant to find a date that suits you both? She is CCd?” Problem solved. I set all this up at lease renewal.

    The above is all completely reliant on having sensible tenants. Obviously its hard to know if they really are sensible, but picking the right tenants is key here. I’m moving on to my third property soon, and if I find this system doesn’t work as well at a bigger scale I think I will add a Virtual Assistant to help iron things out…

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here