One of my preferred phrases is "Let Painters, paint." Guided by this principle, I delegate most tasks to skilled professionals to ensure efficiency. I currently outsource to a full service property manager who excels at their job. However, their services come at a high price—10% of the gross monthly rent and an additional 100% of one month's rent as a leasing fee. Considering that my properties generate an average gross rent of $1800 per month, the combined leasing and management fees amount to approximately $330 out of the 1800$ a month rent.
With 30 properties, this results in an average of 2.5 new leases each month, costing $4500 in leasing fees and $5400 in management fees. The $10,000 a month price tag has me considering hiring an in-house property manager for around $4,000 to $5,000 per month. As my portfolio expands, I can gradually increase their salary, albeit at a slower pace than what it would cost to outsource the property management. My question is, when should I switch from outsourcing to employing an in-house property manager?
Real Estate Consultant · Chicago, IL · Member since 2018 · 5 posts · 5 votes
3y
Hey Wilson,
Speaking from experience, our private equity firm was originally using third party property managers to look after our 20+ units. We were thinking the same thing you were and decided to bring that part of the operation in house with a small team: a couple PM's, an accountant, and a small construction crew. There's obviously a lot of smaller tasks that needed to be handled (maintenance coordination, leasing coordination, administrative work), so for those jobs we outsourced to VAs.
After trying out a few different companies with the same lackluster results, our CEO wound up starting his own VA company that focuses on finding quality VAs, developing streamlined processes and systems, and properly training the VAs. 4 years later and we've since 20X'd our portfolio and greatly improved our bottom line, now owning and managing 400+ units. We still have a small team in-house, but we're never overwhelmed because of the help from our virtual assistants.
Let me know if you're interested in bringing your PM in-house and I'd be more than happy to let you know what steps we took for our firm.
One of my preferred phrases is "Let Painters, paint." Guided by this principle, I delegate most tasks to skilled professionals to ensure efficiency. I currently outsource to a full service property manager who excels at their job. However, their services come at a high price—10% of the gross monthly rent and an additional 100% of one month's rent as a leasing fee. Considering that my properties generate an average gross rent of $1800 per month, the combined leasing and management fees amount to approximately $330 out of the 1800$ a month rent.
With 30 properties, this results in an average of 2.5 new leases each month, costing $4500 in leasing fees and $5400 in management fees. The $10,000 a month price tag has me considering hiring an in-house property manager for around $4,000 to $5,000 per month. As my portfolio expands, I can gradually increase their salary, albeit at a slower pace than what it would cost to outsource the property management. My question is, when should I switch from outsourcing to employing an in-house property manager?
With 30 properties I would first see if you can get the PM to reduce the costs from 10% to 8% and reduce the full month down to say 1/2 month. Does not hurt to ask. remember if you are doing your own PM work and hire someone then you need to get insurance etc. This is a great question to ask and you are thinking about it in the proper way, the question is common as to at what size do i do it inhouse - which also has other headaches attached to it as well.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
3y
Having your own staff is a pain in any small business. Vacations, sick days, replacements, supervision, training, maternity leave, space and equipment and on and on. For every dollar in payroll add 30-50 cents to cover. A good PM is worth the money.
Real Estate Consultant · Chicago, IL · Member since 2018 · 5 posts · 5 votes
3y
Hey Wilson,
Speaking from experience, our private equity firm was originally using third party property managers to look after our 20+ units. We were thinking the same thing you were and decided to bring that part of the operation in house with a small team: a couple PM's, an accountant, and a small construction crew. There's obviously a lot of smaller tasks that needed to be handled (maintenance coordination, leasing coordination, administrative work), so for those jobs we outsourced to VAs.
After trying out a few different companies with the same lackluster results, our CEO wound up starting his own VA company that focuses on finding quality VAs, developing streamlined processes and systems, and properly training the VAs. 4 years later and we've since 20X'd our portfolio and greatly improved our bottom line, now owning and managing 400+ units. We still have a small team in-house, but we're never overwhelmed because of the help from our virtual assistants.
Let me know if you're interested in bringing your PM in-house and I'd be more than happy to let you know what steps we took for our firm.
Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
3y
Aloha,
Depending on age and condition of your current properties, I doubt it would be beneficial to handle it all in-house. A broad "rule of thumb" is you need one person per 50 units. The problem is, when you only have one person, they will need a LOT of talent and experience.
Accounting can be done externally, but you need to be sure their system is rock solid. Your interaction with them must be solid and timely as well, with regard to providing all receipts for payment, how rent payments will be handled, and a monthly review of your financials.
You can save a lot with in-house maintenance, IF the people responsible for performing it are knowledgeable and take a certain amount of pride in their work. You do not want to keep paying your employees to make the same repairs over and over, any more than you want to pay a PM for rework. You do also gain a great deal of control as to when/where your job priorities need to change due to new issues that arise. Of course, you can also fall into the trap of constantly "putting out fires", while not getting larger projects completed when short staffed. Permits are the big roadblock, depending on local laws. Skip that step and it could cost you later. The other factor is insurance, and implementing an actual Health and Safety Program for your employees. One serious injury can be devastating to your organization if you are not properly protected and/or following the regs.
The key to maximizing efficiency, aside from having solid, and well documented systems, is to be very timely with all responses...whether inquiries on available units; tenant maintenance requests; issuing late fee and violation notices; and responding to all voice mails and emails. When you delay, you just create additional contacts at a higher level of frustration, that take up more of your time.
Lastly, do not discount the knowledge that a competent PM brings to the table. Hopefully with 30 units you have a solid understanding of the myriad of crucial laws that directly affect you. Fines from EPA, Fair Housing, FCRA, OSHA and other agencies can run very high, even for first offenses. You may not be as current with new laws as a licensee that is required to take Continuing Education classes, however, so find a source for that information and stay on top of it. Also be sure your State allows non-owners to perform all of the duties you require. Usually they define "Real Estate Activities" as offering to rent or sell, negotiating rents or price, signing certain types of documents, and discussing certain aspects, which only the Owner or a duly licensed PM can perform. Practicing RE without a license carries it's own penalties...
