How to Manage?

Question

I currently own two properties and my primary. My wife and I live modestly and make about 55-60k a year. I am currently 33 yrs old. Starting at age 40 our rentals will be paid off and will cover our primary mortgage. We will also have college debt paid off. All that being said, we will net over 2000 a month in reserve monies at that time. (might not be alot for some of you but it's good for us) I don't trust any other investment and I'm committed to real estate because it has a solid return and the tax laws are currently beneficial. I would like to buy one property per year when I arrive at that point in my life. Getting hard money lenders is an issue but the greater issue is the ability to personally manage 7-8-10 properties. If I do things right, I could legitimately have 8 or 10 properties, and I know from experience that two properties takes some work. Even keeping track of rent payments for 10 properties would seem difficult. I have a friend that owns 7 rental properties and he tells me it's getting to the point of having to hire a property manager. My question is: at what point did you, in regards to residential SFH rentals, have to hire a property manager? Also-what are the main challenges when owning 10 properties? What are things people would generally not account for?

Michael Seeker · Answer

There are bigger and different challenges as you grow, however you should be able to put systems in place to handle them.

I own/manage 15 units (adding 3 more at the end of the week) and it's a lot easier for me to manage these than it was for me to manage my first 4 or 5 units because everything is in place.

I don't go over to the property to collect rent (huge waste of time) and I don't do repairs/maintenance unless I have the time to and am wanting to save a few bucks.

For rent collection, I set up a PO Box and check it 1-2 times per month. I've recently moved away from that and started requiring all tenants pay me electronically. I'm using Intuit Payment Networks and it costs me $0.50 per transaction which is great!

For maintenance, I have a general maintenance guy I can call and then also specialized folks each for HVAC, plumbing and electric. I have them reach out to the tenant to schedule a time they can come by (this is best for everybody except the contractor, but I am paying them afterall).

It definitely takes some effort to make things easier on yourself, but once you get there you'll recognize it and realize it's not nearly as bad as what you thought!

You also mentioned getting hard money lenders as being an issue - it sounds like you don't know what a hard money lender is, because you should never need an HML with the long-term approach you've outlined. If you're paying off properties then you'd likely only need to leverage 1 or 2 at a time which could easily be done through any conventional lending process. HMLs are typically used for rehabs, not buy and hold investing.

How to Manage?

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