Property Managment - When is it good to use them?

Question

I've heard a couple points of view on this topic and understandably a lot of factors depend on the investor and their style and how hands on or involved they want to be in the process.

However I did want to get more insight and opinions to see at what point does adding a property management team to your business make sense.

For example, is their a general number of houses/units at which you would then start looking for property managers? What are some things one should take into consideration when comparing whether managing the properties yourself or to delegate them to someone else?

Your insight and thoughts on this are greatly appreciated!

Craig Bellot · Answer

If your long-term goal is to invest in more properties it is worth it to invest in a solid property manager.

Your time as an investor is infinitely better spent analyzing markets and deals.

You want to move up the 80/20 leverage curve from technician to investor/entrepreneur.

In Bridgeport, CT the investment is about 10% of rents collected.  This frees you up from taking resident phone calls, coordinating maintenance, leasing vacancies, accounting P&L's, conducting inspections and making property payments to focus on higher leverage activities.

https://www.idonimanagement.com/self-manage-vs-hire-property-manager/

Ed Barone · Answer

Keoni,

I think that if you prefer to be hands-off and you want to focus on growth, then a good property manager can be the right way to go.  Just be sure to have everything in writing just like you would with a lease.

The number of units would not be the driving factor as you can always hire your own staff to manage the property.

Having the right software is important in either case.  If you are using a property manager ask to see sample reports and ask for referrals.  Also, be sure to ask how long funds will be held so that you can budget accordingly.

Best of luck.

Keoni Padilla · Answer

@Tom Shallcross Thank you for sharing that very valid points. Calculating in those numbers from the start make very good sense!

Tom Shallcross · Answer

Welcome to BP @Keoni Padilla.  A lot of variables go into this decision.

There is nothing wrong with self-management, but every hour you spend on management is another hour you don't spend growing the portfolio.  You need to make the own call if you have enough hours in the day to juggle management while growing to the number of doors you've set out to own.

If you are truly in scaling mode and really looking to build a portfolio, I would sync up with a reputable PM company sooner rather than later.  If your plan is to grow, you'll eventually need a third-party property management and have your property cash flow with their fee in there anyways, so it should hit acceptable numbers accounting for PM from day one regardless.

Keoni Padilla · Answer

@Ed Barone Thank you Ed. That's really good advice for working with a PM especially and using good software.

Property Managment - When is it good to use them?

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