Using a Property Management Starting Out: Does it make sense?

Question

Does it make sense using a property manager when you're just starting out with a first investment property (a single Duplex/Triplex/Quadplex)?

I currently am thinking about investing in my first real estate venture out of state from where I currently reside with a partner. The partner would be near the area where we would be investing, but would would prefer we get a third, small local partner for the purpose of managing tenants, move ins/out cleaning, small fixes, etc.  He thinks it would make more financial sense to do this versus having a property manager.

I'd like to get opinions on this - in my perspective, this is starting out, more of a learner property, and realistic about the cashflow we would receive on small property like this. In my mind, I am using this to educate myself for future properties. I also have more capital to invest than my potential partner, and would be more comfortable investing in a larger property (and thereby more sense to use a property manager, but that's a different story).

In my opinion, not using a property management leads to challenges finding a third partner that's trustworthy and fine taking a smaller stake in partnership.

Thanks!

Peter Topa · Answer

I appreciate the different point of views. I guess in my mind, it's more of a logistical & size challenge. I 100% believe I'd learn more, but I'm also more realistic about getting on base and taking my first steps vs. hitting a home run on cash flow on my first (and first out of state property). @Karl - I'm assuming you were hiring people to clean upon move out for you, and not flying back?  If I'm understanding correctly, you managed the applications and coordination of services yourself, but outsourced the work?

Drew Sygit · Answer

PROs: 1) You will learn more about how property management works, which will improve your chances of hiring a good PMC in the future.2) You will save PMC fees3) You'll know your properties better than any PMC

CONs:1) You may make costly PMC mistakes: tenant screening, legal, evictions, maintenance, being too nice, not being on top of things2) More time3) You may make emotional decisions insted of business decisions

Karl B. · Answer

I own a few multi-family properties in Pennsylvania and managed them from California and now from Missouri.

It's not hard to do and I quite enjoy keeping that 10+% in my pocket. Plus I feel I manage my properties (despite being out of state) much better than most any property manager could.

One benefit to you doing so is (aside from keeping more money and likely managing more effectively) is you'll learn much more about real estate, dealing with tenants and working with tradesmen) than if you simply hand the property off to a property manager.