Property Mgmt - self or source?

[Chi Sastry]

I bought a 4plex in Raleigh. I live in VA- 4hrs away. 100% occupied and LTRs.
got a few quotes to manage the properties- it comes to 8% commission, +200 lawn care - approx 470 a month for the 2 combined. 
Mgmt company keeps late fees and all expenses are paid by me. 
they also take 1/2month rent. 

Question is - should I try to self manage? This seems high. I won’t cash flow at all. 
what other considerations or issues should I consider- when I try to self-manage?

I work full-time. 
Thx for the insights! 

[Charles Carillo]

@Chi Sastry

You need to review all of the fees when speaking to 3rd party managers. How much per hour are you paying for a handyman when needed (how much after hours)? Is there a common area monthly cleaning fee? Will they call your contractors if there is a bigger issue?

On the face, 8% is normal (maybe a little low) for a 4 unit property. You are going to be paying for lawn care one way or another. You could also find your own landscaper but if the cost is similar; just use theirs. 1/2 month of 1st month rent is normal for a small property.

Yes, you can self-manage it but how good is your team on the ground? If there is a clogged toilet right now; do you have a handyman with keys that can go over there and snake it? Will tenants call you directly or the handyman? How much time are you able to allocate weekly to taking calls and arranging the make ready units for rental? Who will show the units and sign the lease? 

Figuring out who will manage the property is best done prior to purchasing a property but, now it depends on your schedule and team.

[Eliott Elias]

Hire the property manager, they will save you so much headache. You don't want to be the one answering calls and knocking on doors when rents due 

[Andy Sabisch]

That is the problem with investing long distance . . . how do you respond to issues before they result in more damage to the property, how do you deal with tenant payment issues, etc.  As Chris said, 8% is a bit on the low side (we are getting quotes of 10%) so you need to put that in the calculator to assess a deal before you put in an offer.  

We have focused on an area 1,000 miles away but have family in the area and one is our on the ground handyman and issue addesser (is that a word??).  It saves us the management fee and we know it is getting done.  Without him being available, some of the properties would not have had a positive cash flow.

If the property does not cash flow based on the calculations with a management fee, see if you can adjust the rents to see where it does.  While you have LTR tenants, have you raised the rent even a nominal amount.  An older property owner once told me that she had a $25 / month increase each year and most people see that as negligible over packing up and having to move.  How much would the property management fees impact your cash flow and is there a way to increase intake to push cash flow into the black?

[Nathan Gesner]

Quote from @Chi Sastry:

$3,240 a year for management plus 1/2 a months' rent ($1,700?) = $4,940. I don't include lawn care because you'll be paying for that even if you self manage.

The property is four hours away. One trip to look at the property will take an entire day. If you earn $30 an hour, that trip will cost you about $300 in lost salary plus $150 or more in gas and food. How many trips would you have to make during a turnover? Regular inspections? Checking up on landscaping? Looking for extra vehicles in the driveway or four unauthorized dogs in the back yard? How much time will you spend marketing, dealing with maintenance, lease violations, application screening, etc? How well can you handle an emergency or deal with an abandoned unit that's been trashed by the tenant that failed to pay rent last month? How well do you know the market to ensure your property is rented for top dollar? What's your relationship with vendors to conduct turnovers quickly and reduce vacancy? How well can you stay up on local laws to avoid being taken advantage of or to stay out of court?

Self-management is possible, but it comes with a cost and it can be very costly if done wrong. The majority of Landlords do it wrong and lose more money than they would spend on a manager.

[Drew Sygit]

@Chi Sastry why did you buy it if it's not going to cashflow with management fees?

Now, you want to justify your purchase by blaming PMC's as being too expensive, so you'll have to DIY.

By your questions, you've already decided to DIY manage and just want advice on how to do so.

First, you'll need to learn all the landlord-tenant laws for the state the property is located in. Otherwise, your ignoreance will increase the chances of you making a mistake and getting sued.

Secondly, you'll need a great lease! Otherwise, tenants will walk all over you. Yes, you've stated the units are all rented, so there is already leases in place, but how do you know they are the best leases for you?

Third, you'll need to start learning what you'll need to do when a unit becomes vacant: evaluate damages to cahrge against SD, lining up handyman to do repairs, taking pics, writing an ad, where to advertise, taking calls for showings, how will you do showings (?), screening applicants, moving them in.

What software will you use to allow tenants to pay rent, track their payments & late fees, track your expenses?

Or, you can take your lumps, hire an expert and minimize any more losses.

[Ricardo R.]

@Chi Sastry…. Geez Chi I think you’re a little late in trying to figure out if you’re self managing or if you’re going to use a professional PMC… it should have been something you should have researched BEFORE you made your purchase… but what’s done for now is done. The problem is MOST landlords ‘investors’ is that they forget to realistically account for property management within the numbers and then when trying to hire a PMC complain about the fees.

I highly recommend you hire a PMC and save yourself the frustration… sure you can try to manage it yourself but things are easy when they go smoothly but not so much when they don’t and then end up being horrid stories which then becomes an ‘investor’ seeking property management advice for a ‘situation’ on BP.

A PMC is a service similar to your mowing company… can you cut the lawn yourself… sure… but is it really worth your time? After all your landscaper already has all the equipment, has more experience and can do it faster and better than you on a consistent basis. Also as a side note you would end up paying more per month for weekly mowing if someone just mowed your lawn about 30mins. than you would probably end paying your property manager which is on call pretty much everyday and handles many, many, many, many many services/issues/tasks on your behalf and for your property… just food for thought when taking about PM rates.

[Marc Stevenson]

@Chi Sastry  I guess I'm a bit biased, but I own investment properties and would never self manage again.  It can work if you're local and already have a good circle of handymen, contractors that will be available with short notice and feel confident with tenant selection and all that goes with tenants.  I understand the desire to save as much as possible especially as a new investor, but most realize pretty quickly that it's just not worth the time and hassle for what you pay.  No dog in this fight cause we're Texas based only but thought I'd share my 2 cents.  Happy Investing!

[Brandon Vanderford]

Hi Chi, as a property manager local to the Raleigh area, I will second what most of the other folks have said. With you being several hours away, hiring the property manager is probably a good move on your part. (Fwiw, the rates sound fair to me. I usually charge 10% of collected rents and a 50% leasing fee, so it sounds like you are getting a good deal, imho.)