PM Discount for multiple properties?

Question

Good day, and Happy New Year to you all!

My wife and I own 48 units. We are 4-5 years away from "retirement" which for us means doing alot of traveling. We've toyed with the idea of selling, and have even setup a website to sell our units and created a post in the marketplace here:

http://www.biggerpockets.com/forums/517/topics/165...

We have also toyed with a "no exit" exit strategy where we either keep all or most of our units and hand off to a PM or put together our own "psuedo" management team. (i.e. we still do the books, notices, etc. but have trusted boots on the ground). My thought was that we might be able to get a decent discount from a PM for handing over 48 units. Does anyone have any opinions on this? We've worked really hard to get mostly blue and white collar renters, 95% or higher occupancy, and 2-3 pieces of communication per week on average from renters. It really is a low hassle factor portfolio and if I knew we could outsource management for 5%, for example vs. the area's average of 8-10% it would go a long way toward helping us to decide which exit plan to pursue.

Thanks all,

Brandon M. · Answer

@Kenneth LaVoie - for the 3am clogged toilet calls, have you considered employing a 24/7 hotline for all tenants to call with maintenance requests? You can have a number set up for all tenants to call, that way you don't field the calls directly so they don't have the ability to ask about other things (trust me, makes for a nice buffer!). You will then receive an email with the issue and you can handle it from there.

someone like Night Tenders is a good option, you might want to speak to them to see what they charge. (I do not work for them and will not receive anything for their mention, just a suggestion of helpful advice)

Kenneth LaVoie · Answer

The prospect of having a part time employee is what we were thinking of originally. Having at least one "trusted set of eyes, ears and boots" would enable us to "self manage" without having to worry too much about the mythical 3 a.m. clogged toilet. Of course, traveling in different time zones, that could mean just about ANY time. But we have someone now that we use for 70% of our maintenance and repairs who "owns the living sh*t" out of his job and if he's still around ... and our buildings are still around .. well we'll probably go that route. We want to be sure we have some time with whoever our person is.

This is all great info, great thoughts. Thank you as usual.

Elizabeth Colegrove · Answer

Our goal is to get to your position in 15 years. As we hope to be on a boat sailing around the year I have started to think about our options. Honestly if I were you I would hink hard about having a part time employee. I think it will be cheaper or the same and you would get a better product. No matter who you hire, you will have to manage them. You would probably be easier managing someone who is full time focus on your property than splitting there time.

45units *1,000 (rent assumption)= 45,000 a month *5%- $2,250 that a good salary for part time work.

Just a thought. Also in "most" states if you hire them as as employee they don't have to be certified.

Brandon M. · Answer

@Kenneth LaVoie - as a property manager down here in FL I would definitely be willing to negotiate on my fee if I was walking into a deal with 48 units. I do that all the time with other real estate agents who don't want to be in the property management business, or with a tired landlord who is tired of managing their own properties. Not having to build up the business to 48 units is definitely worth something. Maybe some sort of pay structure where the percentage builds up to a standard 8-10% fee over time (or the flat $99/month that I charge regardless of the rent amount), since it is sometimes time consuming to manage a unit depending on the needs. 5% for the first year, 6% the second year, etc.

That being said, if you are in that position you might be better served just bringing on a part time employee and/or handyman to handle the day to day stuff for you. Someone to field all calls from your tenants, making sure rent is paid on time, and coordinating any repairs. With 48 units you likely don't need someone full time, especially if you are going to be doing all the bookkeeping yourself. It would be even more helpful if that person you found was handy and could do some of the smaller repairs themselves. You could still be available to make any of the big decisions, but you could find someone trustworthy that you could allow to make any decisions themselves for costs under a certain amount ($100, $200, something like that). Anything over that amount would require your approval.

Beth L. · Answer

@Kenneth LaVoie

My real estate agent is also an investor. He told me that he negotiated with a PM to manage all his properties for 6% instead of 8-10%, and tenant placement charge half of rent instead of full month's rent. So I know that PMs are willing to negotiate for multiples.

Personally, I would keep the units and live off the income. That's my strategy anyway. And congrats on making it this far! You don't have much to go to meet your goal.

Mike Parks · Answer

@Kenneth LaVoie

Sounds like you have a solid portfolio, I dont have anywhere near that many and I manage most of mine now. I actually had my PM company lower their % from 10% to 8% as long as they could manage more of my properties.

I would shop it around and its probably pretty safe to say that with a "hassle" free portfolio like that, any PM company would be crazy not to work with you.

One thing you should think about though is how much is your time worth? If you and your wife plan on traveling, what would you do when the almighty call comes in and you need to do something to the property while you are vacationing in France?? Is your time with your family worth the 3-5% savings? I would say NO. While the PM firms may not do 5%, Im sure they would def be willing to work something out with you!!! Good luck and enjoy your retirement!!!