1st property, Should I hire Management Company or self manage?

Question

Hello Everyone,

I'm looking to purchase my first deal (2-4 unit multifamily) by the end of this year. My question is, Do I self manage or do I hire a property manager? I plan on living in one of the units to start out, but I don't really know the "legality" of everything and definitely want to  do things the "correct" way. Being in-experienced tells me to hire the property manager, but the size of the property tells me I could use this as a huge learning tool. Opinions?

Thomas S. · Answer

Step one, before you even consider buying is to learn the legalities of the business. It is your responsibility as a landlord to know all your state landlord tennat laws whether you manage yourself or hire a PM. Never invest in any business without first studying and learning all the laws. You must learn the laws that govern your business now. Investing and then coming on here asking for help without having first studied the law is not the proper way to operate a business.

I strongly advise all new investors to self manage if they buy local. You can move up to a PM when your business grows but if you do not begin with self managing you will never be able to properly manage a PM. They do need to be managed, you know that right.

Account Closed · Answer

Hey Brandon, congratulations on your first deal! @Brandon Sturgill brings up some good points, and often it does make sense to self-manage your first. It's very important to do your research first so you don't cross any legal boundaries and so that you are able to secure qualified tenants. Please feel free to reach out directly if you have any questions about managing and/or tenant placement, I am more than happy to help you out and give you a few tips!

Abdul Shishi · Answer

You need to get something before deciding. One look at your neighbors might have you running to a management company.  If your tenants are high wage earners(which is highly unlikely) you might try running it yourself.

Henri Meli · Answer

What's more valuable to you? What are you looking to achieve long term? Either way, you need to have good enough understanding of the laws of the type of business to run a compliant business.

Good Luck !!!

Doug Utberg · Answer

The way I think about it is the value of your time vs. the value of learning.

• Hiring a property management company (theoretically) saves you time.
• Self-managing facilitates learning and (hopefully) automating your processes.

I don't think that one is necessarily more valuable than the other - it's more a question of what's most valuable to you.

Brandon Sturgill · Answer

@Samuel Liapis the 10% is arbitrary...just made it up for the sake of responding. Fees vary widely based on asset class, number of units, location ,etc.. "typical" property management fees are in the range of 10% of gross effective income (scheduled rents)...but everything is negotiable. Most firms will have a fee schedule...this is information you can ask for if you are shopping for a management company.

Nicole A. · Answer

PM fees are 10% of the leased rental income. So if rent is $900, then 10% of that....

You can likely learn your local rental laws by searching online and going to local REIA meetings. It is important that you know the laws before you run into any issues so that you can respond quickly and confidently. Also, it helps to know the laws and business so that you can more properly manage your manager.

Brandon Shiverdecker · Answer

@Brandon Sturgill Great tips and advice. Thank you sir

Samuel Liapis · Answer

@Brandon Sturgill the 10% fee, how is that calculated? Is it 10% of the profits? 10% of total rent collected? I am confused.

Brandon Sturgill · Answer

@Brandon Shiverdecker It's all a matter of preference, but it's likely something you'll need to learn...and since this is a small MF, it will be pretty straightforward. You're bound to make mistakes, but that's all part of the learning process. A couple of quick tips if you self-manage.

Never refer to yourself as the property owner (unless you really want to of course)...you have leverage in any myriad of situations, especially due to your tenant living next door to you. It's a lot easier to tell them to stop parking in an unassigned spot or hanging sheets over windows if you're the "property manager." It creates a degree of separation.

Set a 10% fee back...i.e. pay yourself what a manager would normally make.

And if you just can't cut it, call a management company.

Good luck

1st property, Should I hire Management Company or self manage?

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