Why I'm quitting MTR Multifamily for Retail/Industrial

Question

I've been investing in multifamily for 2 years now. I'm up to 40 units. I operate my apartment buildings as mid-term rentals.

It's been a nightmare.

Returns are amazing but it's a full-time job.

Tenants expect hotel-level services. Here are some examples.

- I had a guest call me yesterday at 9 p.m. asking for additional towels.

- I had a nurse complain that the tenant was being loud at 3:00 in the afternoon (she works nights).

- I had a tenant call me about my couch not being comfortable enough. Threatened to leave if I didn't give them a new couch.

- I had two washing machines and an AC break down.

- I had a guest cancel a reservation because she did not know it was a 2nd-floor apartment and she couldn't walk upstairs

This all happened over the past 3 days.

After thinking long and hard, I decided I'd rather take a much smaller return with retail/industrial but with significantly less work.

I quit my job to manage these rental units and to be honest with you all, I liked my engineering job better.

My plan is to hire someone full-time to manage these units (since that will be significantly less than paying 20%-25% for PM company).

Even after paying an employee, I'm still netting $400/door. I'm working on creating the systems and processes so that I can manage this person effectively from anywhere in the world.

If this works well I may continue adding units but under that PM. I won't manage MTR/STR myself anymore.

Thank you for listening to me moan and complain 😂

John Warren · Answer

@Matthew Masoud I don't think your strategy is wrong.... I think you ran into the main issue with real estate. Management is the business. You need to continue building quite a bit further so you can hire a quality person. Then you need to grow more so that person can go on vacation. Then you need quality full time maintenance personal. Then... you get the idea.

I'm sure retail and industrial will have a whole different set of issues. If this was easy, everyone would be doing it.

Mark F. · Answer

I was about to go all in on MTR when my LTR tenants left. The more research I did,the more I realized it's still a hospitality business like STR. I served and bartended when I was younger, people suck and are stupid. Like you, I enjoy my job and I'm sticking to LTR management which I thoroughly enjoy. Thanks for the honest feedback. And $400/door sucks IMO for MTR. If I'm doing all that work, it needs to be higher. I'm just about at that with my LTR.

Mark F. · Answer

That's better but I'd still want a bit more IMO. Yes I manage my own, only 3 units now but going to 5 by the end of the year.

Matthew Masoud · Answer

That was my exact thought. I have experience to fire off any questions

John Warren · Answer

@Kevin Morgan that is awesome man. I agree that keeping your team busy is often times a good reason to keep growing too. Once you find that person to help you with the management, I would love to hear more about how this goes.

Kevin Morgan · Answer

Yes, I agree.  One of the reasons I keep buying buildings is that the guys that renovate for me also handle all the maintenance.  Without that, I would need a fairly reliable maintenance resource (or employee).

I gained 30 pounds without a property manager.  Now that I have one - I have the time to lose the 30 pounds (I hope)!   Eventually I hope to off-load some of the communication to my PM - but that will take some time.  For now, I want that person on-site and on-top of the buildings and the apartments - and I can handle the communication from anywhere in the world.

Basically, the real estate play-book is do most things yourself until you have scale to hire or delegate...

Kevin Morgan · Answer

Can I see your MTR portfolio (Airbnb listings, etc.)?  What is your market rent multiple in your market?  I have a similar sized MTR portfolio in Chicago suburbs.  Although I have the same issues as you, I never considered abandoning the strategy as the cash flow can't be replaced.  I get 2X market rent.  Cash Flow after debt service is closer to $1000 per door.

P.S. I've found an in-house Property Manager and it has changed my life.  However, the person is relatively new so I am still fielding all the communication BUT I can delegate much of the response to the PM.  We also have our own laundry and cleaning staff.

Adrian Vann · Answer

Sounds like you've grown into a good problem - scale. I'm very much an MTR newbie, but as a principle the more scale you have the more you need support and systems.  This happens in any organization. Keep us posted.

Matthew Masoud · Answer

Well, to clarify $400/door is after I hire and pay a property manager full-time.

Do you manage your own LTR?

AJ Stanis · Answer

Huh? AMA doesn't have to be positive.

Why I'm quitting MTR Multifamily for Retail/Industrial

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