What do we gain by managing our own rental properties?

62 Replies

I've listened to many of the podcasts on this site. Many recommend that a buy and hold investor should start by managing his/her own properties.  I was wondering if anyone could tell me what they have gained by managing their own properties?  If you work a full time job and are being charged a reasonable fee it seems like you would be better off letting someone else handle the land lording aspect of your business.  Right now I am viewing the time and headaches saved by hiring a property manager as being more valuable than the extra income gained. Any opinions will be appreciated.

You learn alot about psychology.  Managing people, problems and a day job is an art.  Some people don't like the pressure and worry much more than they should.  I thinking managing your properties in the beginning will help you manage the manager.     

@Brian Mathews  

My husband and I both have full time jobs. We self manage from long distance as my husband is active duty so being "local" is all relative. It has been very successful for us because

  • More Control- no middle man
  • Extra Income- I can keep the property management costs of 10% and one months rent.
  • Control Freak- I like being in control of my houses 

it keeps you more in touch with your properties if you are going out there checking on them and I think you will screen your tenants better.  I only have 2, but I do so little work managing them so far that I'd get sick to my stomach knowing I was paying some one else to do them.  If you have the stones to be firm when you need to be firm I think you should self manage.  If you build up a network of repair people, repair claims shouldn't be too bad either.  I have had 2 and I called some one, they showed up, they emailed me bill.  It was pretty easy.

@?  if they are close to you.. it will save you roughly 20 to 30% in annual cash flow.

No management fee  no first month placement fee and no mark ups on repairs and or excessive repairs.

It also depends on what asset class your playing in.... and if they are in town or out of town.

For me personally my A stuff in Madison MS I can manage myself no problem  My C  in Indy MS AL GA all needs local management other wise tenants would kill you far worse than the cost of PM

@Brian Mathews  

  hows the market there in Starkville that might just be a nice under the radar city for investors?

Originally posted by @Brian Mathews:

I've listened to many of the podcasts on this site. Many recommend that a buy and hold investor should start by managing his/her own properties.  I was wondering if anyone could tell me what they have gained by managing their own properties?  If you work a full time job and are being charged a reasonable fee it seems like you would be better off letting someone else handle the land lording aspect of your business.  Right now I am viewing the time and headaches saved by hiring a property manager as being more valuable than the extra income gained. Any opinions will be appreciated.

 You gain:

- people experience in dealing with prospective tenants

- how to read people better and conduct due dilligence on tenants for the qualification process

- the day to day's of property management

- clauses, addendums, and your contract - to protect yourself

From all the experience you'll know what to look for in a property management company. Having to deal with all the book keeping I realized I dont like doing the nuances of book keeping for all the properties so good software becomes key at managing tenants. When looking for professional management later on you become a better interviewer for a suitable company to coordinate your investment decisions.

I'm 100% of the stance of letting a PM do the work for my properties. I would never manage my own. Not a fan of working for my investments.

@Brian Mathews  

  by starting out handling your own rentals you will gain the skills needed to know when your PM is not doing a good job.. instead of learning they are not doing a good job by very poor financial performance.. This is why those that sell first time buyers out of state properties and couch it that it will all work just handed it over to your trusted team etc etc that is like bringing the little sheep to a shearing  this out of state investors has no clue and then you get all these post about Hey my PM is terrible I need to switch. I am on my 3rd pm help me..

So I think the whole slant of BP is to learn this stuff your self.. And on your first one this is a good learning lesson then if you don't like it toss it to PM.. Or if you don't mind giving 25% of your cash flow to someone because you don't want to deal with it that's fine too.

This is why many recommend that you invest close to home instead of all over the country when your first starting out. Nothing worse than sitting in LA and your property in Philly or INdy or Atlanta is having issues and you have to rely on a for  profit 3rd party to handle it.

I don't care how good a PM or the team is or the boots on the ground are.. When your rent does not come in, your unit gets trashed your condenser unit is stolen etc etc. You really need to be right on top of the situation or your going to suffer financially far worse than you need to.

What do we gain by managing our own rental properties?

Control. For me that says it all.

I will manage my properties until it doesnt make sense to do so.  I really dont see how much time it would save- especially in the nicer neighborhoods.  I have few that are really just on cruise control.

By managing my properties on my own now,  I'm learning what to expect from a property manger in the future.  I actually started with a property manager and realized I didn't know enough about the business to know how bad they were.   In a few years I'll be much better equipped to oversee the PM. 

@Jay Hinrichs  

I’m personally a little iffy about Starkville. There is a large pool of tenants because of the college. However, there is also a lot of competition for those tenants which seems to lower the rent prices unless you buy in a prime area. As a beginner, I haven’t found one in my price range that is in a good area and also produces a cash flow I would be happy with. There is also a pretty high yearly turnover and if you don’t get your property rented before the semester begins it stands a chance of sitting vacant for three months.The entire town seems to be scheduled around college semesters. There are a lot of investors who do very well here. As a beginner it’s a little more than I want to start out with.

I actually like the area of Mississippi where you invest better. I grew up around there and it seems a little easier on beginners to me.

@Ali Boone  

I’m glad you chimed in. One of your articles was part of the driving force behind my question. Have you written anything about how you are picking your property managers?

I appreciate everyone’s comments. Twenty to Thirty percent of my cash flow is definitely something to think about. I value time enough that I would be willing to sacrifice some of my profit but wouldn't want to be taken advantage of either.

@Brian Mathews  

 my Madison go zone homes are the best rentals I have ever owned.. as you know the area has a huge medical so I have had doctors that were there for 2 years and other white collar professionals... And others that have moved for the schools the best public school system in MS.. So a few of them have had the same tenant since I bought them in 06 07.. other than filters and misc these are no issues. But again I bought them brand new. and paid 175 to 225k each for them. so they only hit the .05 to .75 rule.. but they break even which was fine with me because each one saved me 20 to 30k in direct tax payment to Uncle in the year I bought them.. And they have held value.. I am now liquidating them all and I think I will sell them for what I paid for them. so they served the purpose in my very high earning years of 06 to 08... But If I wanted to keep them real long term like let the tenant pay off the mortgage this is were I would do it... Because these homes will hold value won't turn into rental Ghettos.. etc etc.  Just be very cautious about having to hit a certain % return and going down the path of buying in lower end homes find a happy medium. Life is to short to take a risk on inner city if you are just starting out.  IMO 

CONTROL is SO OVER RATED!! While I agree it would be good to manage your first few rentals so you know what to expect from a PM, a good PM can do BETTER, a LOT BETTER, at screening tenants, getting good prices and quality on repairs than any individual investor on BP! If you want to manage your own properties, thats GREAT. You can save the 7-10% month management FEE. But you will NEVER convince me that you can screen a tenant better than a PM company that has over 5,000 SFR's under management and runs HUNDREDS of Tenant Applications PER MONTH!

When an investor says they CARE more about a house than a PM, that is actually a LIABILITY, not an ASSET.  If an investor "cares" about a house, that means he/she has an EMOTIONAL attachment and thus can be clouded when it comes to making decisions.

A successful Real Estate Investor will be DETACHED from the house, DETACHED from the tenant and DETACHED from CONTROL.  The ONLY concern should be the continued success of the BUSINESS.  It's growth, it's reputation, it's success and it's stability.

If my wife and I are killed in a car crash tomorrow, all our rents will continue to be deposited into our bank account monthly, our business will continue to run just as it does today and it did yesterday.  We have trained our children on the importance of growing the business and we know they will do a great job.  Now that is a legacy to pass on!

its gives you are more accurate idea of the true cost (not just financial) of ownership and the business.  That being said, I am now considering property management.

Originally posted by @Mike M:

CONTROL is SO OVER RATED!! While I agree it would be good to manage your first few rentals so you know what to expect from a PM, a good PM can do BETTER, a LOT BETTER, at screening tenants, getting good prices and quality on repairs than any individual investor on BP! If you want to manage your own properties, thats GREAT. You can save the 7-10% month management FEE. But you will NEVER convince me that you can screen a tenant better than a PM company that has over 5,000 SFR's under management and runs HUNDREDS of Tenant Applications PER MONTH!


Perhaps, if you have the option of working with such a PM company, you are correct. However, for those of us who invest a long ways outside a major metropolitan area, such companies are nonexistent.

Control is a major factor in our decision to invest in RE instead of stocks, mutual funds, etc. Control provides peace of mind, which is certainly NOT overrated.

As others stated by managing your own properties you will learn things you didn't know you needed to learn. Right now you don't know what you don't know and by managing on your own you'll constantly run into those situations that force you to learn something or tweak how you operate.

You say you value time (which i think we all do) but you won't realize the "time vs money" basis until you actually do it. You could manage for a year where the tenant pays on time every month and you have to go out to the property one time to replace a mailbox. You'd likely realize it wouldn't be worth giving up 10%+

I have managed my own for about 10 years now and it has taught me lots. Those that have chimed in here have it all right in terms of what you learn; people skills, maintenance issues, what you will eventually look for in a good PM. if you do decide to go with a PM then my recommendation is to interview no less than 3 and I would preferably have those come from recommendations of others investors. A bad PM can cost you lots of money and hard ache but a good one can give you so much also.
Good luck on whatever you decide to do.

Everyone is giving you good advice as to pros, cons, advantages, what you'll learn etc. But I think the real question comes back to what you want and what your why is. If you manage yourself you really haven't invested in anything, you just bought yourself another part-time job. Is that what you want, then great manage your own and you will learn everything you need to know eventually. Or consider management as part of your investment cost and move on to the next property.

Regarding management companies... most definitely get referrals, referrals, referrals. Then screen the heck out of the managers, those are the only people skills you need to have control over.

Do it yourself to start and learn the business. Then transition to a PM when you have enough properties. But if you hate being a landlord then don't do that either and just use a PM. I think it comes down to what you like and don't like. No use doing something you don't like even if it's good knowledge.

I am not trying to offend anyone.  While my opinion is that control is overrated, others may feel differently, and that is OK, I respect that.  But what others call "control," I call WORK.  I have invested in Real Estate to QUIT working, not to add to my work.  And because I did, I was able to retire four years ago, at age 50.

@Dick Rosen  

I agree with your point of view.. then there is reality for those buying in little towns all over the mid west.. Many times the only managers are mom and pops with no license and maybe they handle 30 homes etc etc. Really depends on the area your investing in and the asset class for sure. And then what your personal pain level is.. And or like some they want total control of their assets.. Or like Mike M who has a multi million dollar empire up and running and its a business to him with multiple layers of management between him and the tenant and absolutely no need for him to engage in PM by himself. But I know plenty of mom and pops that own 20 to 50 houses and this what they do for a living Wife handles management Hubby does fix it work and evictions,, this type of mom and pop bizz is very prevalent in the mid west were so many SFR's are rentals compared to other parts of the country..

End of the day as you say PM will make and or break you and interviewing and choosing a quality PM is paramount to your success..

Plus like I tell folks.. When your start looking out of state, why talk with some one sitting in LA trying to hawk properties in 4 or 5 markets. .YOu should start with a Good PM in the market and get the real low down on where to invest what price points are realistic what rent really is... I see so many buying form these marketing companies only to engage PM and rent is no what was advertised area is rougher than they knew etc etc.

Dick what is your take on Investors talking to you first instead of after they buy I would be interested in your take on that.

@Brian Mathews  managing your own rentals is a great way to learn that business which is a small business in of itself. I consider managing my places my business and enjoy it on a small scale. If you want to scale, managers will be a necessary piece unless you want to grow a property management business too.

You learn how easy is it when you do it right.

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