Just wanted to get some feed back on what some of the experienced landlords thoughts are when first starting out. As a beginner with no properties the whole process from analyzing, buying, renting and maintaining seems like a huge task with many variables/issues along the way.
In your opinion, is it a good idea to start with a property management company from rental property #1 or handle it yourself and pass them off down the road?
With no experience beyond BP what issues can arise from choosing either path?
Thanks for the help!
It depends on your risk level and if you want to deal with tenants.
When analyzing my properties, I always include property management fees (~10% of rent) as a monthly expense. I do that just in case I don't want to deal with tenants in the future. You can try to manage your first property and if you don't like it, just hire a PM company.
I'm managing my first property now and it's not terribly difficult.
I can tell you when I first started out I thought paying a management fee was a complete rip off. I did not see the value in anything that they offered. Then about 2 years later and owning over 20 SF homes I saw the error of my ways big time!! So much so that I actually created a management company here in Houston and now manage over 400 homes
The main thing that a management company brings to the table is systems and policy and procedures. This is the difference in my opinion of success and failure. The way I look at it is can you get in a plane after a few lessons and fly yourself to Hawaii? You could, you could make it or you could crash.. you would have to learn along the way things that are and are not important. Or you can plan your vacation to buy an airline ticket and have a professional fly you there.
Same rule with investing and management companies, you are paying for their experience and procedures to get you to your financial destination safe and sound.
Here are some good questions to ask a property manager, this is what I give people that are comparing my management company to others.
Questions to Ask prospective management companies
- What are your average days on market for vacant homes?
- What is your average rent amount for all properties managed?
- What is your average work order cost for the owner?
- What is your average make ready cost for the owner?
- Are all my invoices uploaded to my owner portal?
- How do you advertise your vacant units?
- Do I receive video of my pre and post make ready?
- Do you have a setup fee?
- Do you upcharge on maintenance?
- When do you make owner payments? How often?
- Are you a Certified Property Manager?
- Are you a member of NARPM?
What is your Guarantee
Since you are just starting out and have no experience, I would recommend getting a PM. If you are investing in your city then you can always let them go later when you get a feel of how things work. If everything goes well and all they are doing is collecting a check for you, then you can do that yourself, but be sure you are comfortable screening future tenants. If they keep calling you to update you on the status of your property for repairs and other crap then I would probably keep them to reduce the headaches you will get. If you are investing out of state I would keep them for as long as you have the property. In other words if you are investing close by in a A class neighborhood and house then you can let them go after you get a feel of being a landlord. If you are investing in a C class or below neighborhood and house or out of state keep the PM.
To find out about an area, get some deals and a good team member go to IREM.org search for ARM certified property managers. Call 5 ask them what parts of the city they like/dislike and why. Ask them what they see expenses running per category per unit. What do they see them selling for per unit, what is the market occupancy rate. What are the market rents? Ask them if they know anything coming up for sale. Great way to pick up some good info and possibly a deal.
You can also search NARPM.org for the RMP (Residential Management Professional) and MPM (Master Property Manager) certified.
I am a first time rental owner and went with the management company right off the bat. I think I had enough knowledge to have dome the job by myself, but I lacked the time to get the details about the laws and the finer details that professional tenants would be well versed on. I could have rolled the dice and gotten easy to deal with tenants, but I wasn't going to risk it on my first rental.
We are now 5 months into rental ownership and I have no regrets about bringing a management company on to handle the details. Even though it has been smooth sailing with these tenants, the rent has been paid on time and they are keeping it in great shape (the city inspection provided a great excuse to check it out personally). I think a big part of that has to do with the tenant screening of by the management company. I didn't want anything to do with that for fear of discrimination accusations etc.
Everyone has a very different opinion . I had originally planned on hiring a manager. After looking for a manager and being very disappointed over the services provided or lack of them for the large fee. I decided to give it a try.
3 years later we self manage property in 3 different states 4 different cities across the county and do very well! I have created very strict practice and methods to facilitate the success. While it certainly had it's sress moments, financially it has been beyond worth it.
No matter what you decide, remember that you will have to manage the property manager. So there will be costs even if you hire someone.
No one care as much as you do about your property! For us reducing the middle man simplified life!
Let me know if I can help!
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