What is the best management solution for 10-50 units??

Question

When we first started out, we employed resident managers on our properties.  We had a 25 and a 36 unit, and each had a resident manager that we issued a 1099 and paid a percent of gross revenue.  As we grew, we replaced the resident managers and began hiring leasing agents as employees and paying them a percent of gross.  Growing the business allowed us to scale up.

We have had much more success with leasing agents.  What is everyone out there doing to manage your properties and where have you found success?  What is the best solution for these smaller multi families?

Thanks everyone!

Gino

Eric Bilderback · Answer

My property was a 15 unit and I give the manager free rent.  He was and is doing a great job but for 15 units that is just not worth it.  So I bought the 6 plex next to it for him to manage it as well.  But I am an hour away and work full-time so I need him as much as he needs me.  I like the resident managers he knows if there is any drama etc. at the place.

Timoteo Guy · Answer

That's a great question, I am sure it deals with your personal preference or your budget. 25+ units hiring an agent and a Maintenance tech would be the best solution in my opinion. Why work so hard and buy a income generating property if you personally have to be a slave to it. Work the money wisely and have it pay for itself.

Mike Dymski · Answer

@Joel Owens well said.  I have not closed the book on my solution but I am starting to feel like my existing setup may be the best structure for my situation and this property.  We are primarily using multifamily vendors for turns and equipment...and maintenance is fairly affordable.  Working with these multifamily vendors is awesome...so much better than managing subs.  That did not happen on accident...I had to establish those vendors for the 3rd party PM.  So, what's left is the extra cost of vacancy due to not having someone on-site or a PM that specializes in multifamily and that cost is less than payroll and it's cooked into the financial estimates.  The PM is pretty coach-able as well.  There are a couple of exit strategies and this management solution may work fine for a hold after the value add.  As others have said, lots of options and its more about the people involved than the option.

Joel Owens · Answer

Those middle number units are tough. Too big to self manage and too small to afford a full time maintenance person on staff.

So you are kind of stuck in a hybrid situation unless you own multiple 40 units close by to total hundreds of units where you can spread that repair persons cost around.

Example if I have an older building needing constant small items fixed then there is not enough doors at 20,30 etc. to put 25,000 on the payroll for a full time tech person. Then you are either using a handyman piecemeal  while they work for other investors or using retail trades that charge double the cost and suck out the cash flow. The other option is you do it yourself for parts cost and your own time but you are buying yourself a job going over multiple times a week.

I wouldn't buy a property unless it had 80 to 100 units or more to bake in costs and be passive.

One investor I know owns a 74 unit, a 50 unit, and a 28 unit in the same county. He has a resident manager at each complex, a regional manager overseeing the resident managers. Additionally he has a PM company audit his business watching over the resident managers and regional manager. He has a full time repair person and then a part timer as well. He goes out to his properties maybe once every few years for a day and that's it. He keeps rents slightly below market and stays full with a waiting list. He is very wealthy so does not care about pushing yield to have more problems occur. I find older or more seasoned investors with a lot of wealth do not like (rocking the boat) to gain a few extra percent.

Gino Barbaro · Answer

We were employing resident managers when we first started.  Every situation is unique. Some managers want a free apartment plus a percent of the gross.  I do not like to give a free apartment, I would rather pay the percent.  Remember, if you give an apartment for free, you have to show that as income to the manager.  Usually, resident managers are 1099 employees because you are not "controlling" their employment.  Our manager had a side business, and he performed the duties whenever.  Just check with your accountant.

Jake was still managing the portfolio, while we were employing the resident managers.

Gino

Mike Dymski · Answer

How does your leasing agent model work for properties without a leasing office (i.e. work location, compensation, etc.)?  Scale may be allowing you to do some things that don't work in single property situations.

Mike Dymski · Answer

no, just 8% flat

Gino Barbaro · Answer

That's a fair rate, based on gross income. Do you have to pay for any payroll fees for the manager or just a flat fee

thanks

Gino

Mike Dymski · Answer

8% flat, no lease up fees in my market.  She's managing 34 units for me.  The largest PM in that town charges 7% for that number of units.  Incidentally, I will pay her more if this project is successful...a mini re-positioning.  PM is a distant 3rd in cost to vacancy and maintenance/rehab (and her ability or not to push rents up).

It's uncommon to have onsite PM in my market until 75-100 units (aside from D class).  50 units with onsite management and/or maintenance is marketed as a cost-save play.

What is the best management solution for 10-50 units??

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