At what number of houses does management become more difficult?

6 Replies

At the local real estate meeting, one of the experienced investors, who has since reduced his portfolio, commented that he's comfortable at 50 houses these days. Apparently he downsized from 100 a few years prior.

I know this will change by area and tenant quality, and someone with a real bad tenant early on might have problems with a single house. But hopefully you guys could give me some insight on when the sheer amount of houses starts to require better discipline, systems, etc than what you'd been doing in the past.

For me, systems made all the difference.  I'm currently self-managing 33 units (21 different buildings).  My 'systems' starting out were very bad. I relied on excel spreadsheets to keep track of rent paid, then also had to enter income and expenses separately into quickbooks.  Late fees were very rarely enforced and therefore several of my tenants pushed the limits.  Of course I've learned a lot over the years about being a better property manager, but one of the things that helped the most was software.  About a year ago I started using Buildium to manage my properties.  It's been a night and day difference since.  I feel like I can handle twice as much now.  

Originally posted by @Gary Clisele :

But hopefully you guys could give me some insight on when the sheer amount of houses starts to require better discipline, systems, etc than what you'd been doing in the past.

For me, I really saw the difference around 5-10 units.  That was a pivotal point where I needed to figure out how to do things efficiently and effectively in order to take on more.  As far as how many you can own/manage - that's all about you and how you invest.  I would never have a goal to self-manage 100+ units.  My thought is that if you are doing well enough to acquire that much property and you want to scale you've got to get comfortable with letting other people take on responsibilities for you.  Somewhere around 40 units I will be looking to hire somebody to oversee the day-to-day stuff for me and only call me on the beach if there's an emergency :)

I agree with Michael. We have learned to get all of our systems in order. We own 5 houses, managing 9. We have full-time jobs so our systems have been very important. We also use buildium, I also have a 14 page lease and have learned to be considerate but "VERY" strict with out tenants!. I have learned that if you give an cm two miles are taken. So I operate my houses like a business.

@Gary Clisele   We invested in a property management software Buildium when we purchased our third investment property for total portfolio of 8 units. I was very hesitant to invest in the software because we could've very easily continued to manage the portfolio using Excel spreadsheets. However, the phrase fro my favorite book E-Myth kept ringing through my head "Work on your business not in your business". With that in mind we made the investment and created a very scalable platform to grow our business on.

I couldn't be happier. We've since bought another 4plex and are in the process of closing on a third fourplex (Five total properties) for a total of 16 units.

Agreed. Spreadsheets are fine for a lot of things, but don't scale well when all of the facets are taking into account: financials, leases, repairs, communication. Actually spreadsheet aren't good for communication at all. But a web-based service built for property management has this and many other time savers, not to mention organizational tools.

First management difficulty is at 5 and next change is at 20.  At 5 houses, you can no longer manage from memory and need to start your system at least with spreadsheets and improved record keeping.  At 20 houses, you will always have at least 1 vacancy, so management takes enough time that you need to go full-time or hire some help.  Also, systems need another boost. 

In other words, I had to stop being cheap about spending money on my business to grow.

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