how helpful are property managers, really?
Real Estate Investor · Renton, WA · Member since 2008 · 16 posts · 0 votes
I'm new here and really like this site. All this talk about property managers makes me wonder. How many of you used property managers? I've heard their rates are usually 5-10%. I handle one SFR right now, but am looking into multi-families. How much of the burden to property managers really take off the owner?
Thanks,
Todd
Honestly Tyler a big part of it is a market anamoly right now that I'm taking advantage of with REOs in the singles but it's basically 4 things.
1. The multi market hasn't been hit in the subprime meltdown the way the single was making for some ridiculous ops in the single market that really aren't in the multi market.
2. I don't have the issues of one tenant being mad at another tenant with singles. If they're mad at the neighbor they don't call me, they call the cops.
3. No utilities issues (easier book keeping).
4. Apartment dwellers seem to have an attitude that they're housing is temporary. House dwellers seem to have longer term in mind.
I have nothing against buying multi's and will do so again in the future. Were I to do it over though, I think I would get "out of the rat race" on singles before going to multi's. I think.....keeping my ear to the ground for more good multi deals though. For whatever reason it's been easier to raise funding on those even if the numbers aren't as good as the per unit returns on singles.
Tim
Thanks for the quick response i appreciate it.
Once again, you're comparing apples and oranges. I do both the management and maintenance, with the majority of the 16 hours being on maintenance and rehab. Management takes very little effort and very little time, which is why I said that it is the most overpaid job on the planet.
You're not "feeling it" because you're a newbie in the rental business and you clearly don't understand what management entails.
That's big talk for someone just starting out in the multi-family business. But then again, talk is cheap!
Mike
i didn't use property manager, i just consulted some advice and sell my property myself
Conversation depends on both parties actually listening (reading in this case) to what the other party is saying. Since you keep misstating what I wrote that means you are either not reading it, not comprehending it or intentionally misrepresenting it.
It does not matter which because any of the three render intelligent conversation completely impossible.
Let us call a truce, ok? You spend your 16 hours a week doing everything you do with your "a lot more than 40" units and I will spend my 2 hours a week dealing with my 200. k?
By the way, Tim, I don't need a "crash course" in property management. Been there, done that, bought the t-shirt and then learned there is a much better way.
Gary,
My compliments on someone finally putting Mike in his place. I get up every morning and read this forum. I have thought for quit some time that this guy is a negative influence on this forum. At times he makes some good points but he strikes me as someone who is fairly successful in this business but gets off on discouraging others from being or attempting to be successful.
As for the property management issue. I am getting ready to purchase my first multi-unit and I will definitely use a PM. My time is worth a lot more than what I would pay them and I think people tend to forget that aspect of things. Some call it the small business owner mentality. If you own your own business and are working your butt off there everyday......whats the point? I'm in this to work less not more.
Just a couple of thoughts and observations from a newbie. (that was for Mike.....thats the first thing he is going to say)
I do not discourage others from being or attempting to be successful. What I try to do is add a little reality to the forum. All the cheerleading and positive mental attitude is fine, but that won't make you money in the real world. The facts and numbers are what matters in the real world. All the motivational nonsense in the world won't make you a penny if the numbers are wrong.
The truth is that the vast majority of newbies fail in this business (and most other businesses). In my opinion, understanding the REALITY of the business is far more important than being "positive" or promoting false (but happy) information.
But I'm sure you're right, it's a lot more fun to pretend that the big issue in real estate is how to count the huge piles of money that fall from the sky rather than to discuss the real issues.
But, one common trait that belongs to all of the truly successful is to know their strengths, weaknesses and limitations; know when to get help and how to leverage the efforts of employees and outside contractors.
It was not until late 2007 that I no longer held a full-time W-2 job.
Now, I still work about the same amount of hours as before but they are not in a contiguous block of time. If I need to stop and take a few minutes or hours or days to deal with something, I can just do it.
But you are exactly right about the small company mentality. Some are never able to make the conceptual leap from small to anything else and without that leap the concrete steps needed to go there are impossible.
People who manage their own properties do it because it works for them, it is within their comfort zone and they don't need the benefits any other method might provide. Those of us who use managers do it for the exact same reasons.
Some of the best, most informative topics, come from a healthy debate like this one.
(side note)
As someone relatively young (who has yet to purchase property), I am highly appreciative of Mike's presence here and him sharing his experience. I've started many threads, hoping that he'd respond and I've never felt like he is trying to dissuade me from purchasing investment property. I also read his book and came away extremely informed.
His approach is extremely objective and calculated -which, in my estimation, is the the most prudent approach.
(back to the topic)
Many PM's in the area that I've studied also invest/sell -is this typical of a PM company?
I've seen this conflict in action, first hand. As such, I recommend anyone considering management should make sure that the company they work with does not own any properties of similar type or in a similar locale.
Also, for those who do want to manage their own properties there is no better resource than Leigh Robinson's book entitled Landlording. It shows you step by step how to do it right, what to avoid and how to stay ahead of most tenant nightmare stories you've probably heard. You can get it new for $20 at amazon and it is worth hundreds of times that.
-Posted by Mike
I can't possibly understand how managing only 40 units could be a full time job. I have a lot more units than that and do essentially ALL the management AND maintenance in about 16 hours per week. The VAST majority of the 16 hours is spent on maintenance and rehabbing, not management.
Hey Mike,
your one super guy doing all this in 16hrs. When I manage I'm talking about maintnance, collecting rents, dealing with vendors, doing 1 year leases and having to do them again every year, marketing, etc... I also do evictions... do you do those as well? I spend time in court, I drive by properties, I'm turning over units. Like I said it depends what your situation is, for me its a full-time job! but I do a hell of a good job...
If anyone wants the link just send me a PM. :roll:
Ed, yes, I do those things too - sort of. We only do year leases with our nice SFHs and nice duplexes. With all apartments and low income housing, we only do month-to-month. In either case, we don't re-do leases every month or every year. They just revert to a month to month when they expire.
Yes, I do evictions, but they don't take long here in Ohio. It's rare for them to last longer than 15 minutes. I also do the setouts, if the tenant doesn't get their junk out. The only things I don't do are work on really high roofs; some gas work; and most HVAC (although I'm trying to do away with as many furnaces as possible).
In your original post, I thought that you were only managing the rentals, which is why I couldn't understand how that could be a full time job.
Mike
Thank you for your service Gene and I have to say, for a Marine I'm surprised you don't see what Mike is up to. I did not go through boot camp so I don't know. You do. Take a second look at his posts and see if you don't see what I see.
Tim
I don't know what you see in those posts because, like my former girlfriend, you want us to figure it out. However, I will tell you what I see.
I see someone who cannot understand why anyone would do anything differently than the way he chose to do it. Then on top of that, he can't understand why someone he views as an upstart like me, doesn't see the total and complete wisdom of his ways and do it using the way he is convinced is superior.
Hey, as I said, if could've figured it out, she wouldn't have been mad and now be an ex-girlfriend. :wink:
Let me spell it out for you. What Tim and Wheatie and I and several others try to do is keep thing REAL. Each of us has our own idea of what is REAL, but each of us knows b.s. when we see it. When someone makes claims that are blatantly false, we're going to challenge them every time. The new investors on this site deserve nothing less.
Take for example, this statement: "...good property management is worth more than their weight in gold they will increase your bottom line NOI not decrease it. Good ones cost you absolutely nothing."
That is BLATANTLY FALSE! Management is an EXPENSE, regardless of who is doing it. Whether a management company does it or the owner does it, it is an expense. Does spending money on a management company make sense if the owner can't or doesn't want to do the management personally? Yes. Does spending money on a management company make sense if your property is 1,000 miles away? Absolutely. Does spending money on a management company make sense if you are a $500 per hour corporate attorney? Certainly!
However, does any of that change the fact that management is an EXPENSE? NO, IT DOES NOT!
In addition, you are a brand new newbie when it comes to multis and paid management. You think that you've found some magic bullet when you don't have enough experience to even make a reasonable assessment. The best that can happen with paid management is that the manager does everything right. In that case, you've spent your management money well. As many others have posted from their personal experience, managers often don't work out well even though the owner has done proper due diligence in picking a manager. Josh has a good article about what happened to him personally (recommended reading, IMO).
To summarize, I am certainly not against anyone doing things differently than I do. There are MANY ways to invest and many ways to make money. However, what I do object to is someone trying to pass blatantly false information as fact. I (we) will challenge that every time. The newbies on this forum deserve nothing less!
Mike
It seems to me that all the arguing going on here between self employment and running a business.
Obviously, People run successful businesses and obviously, people are successful as one man self employed businesses. Are either a sham? Is one easier than the other? I think those are the questions each person needs to ask themselves.
The answers are neither are a sham, both can and do work everyday. Is one easier than the other? The truthful and only answer is, it depends on the leader(s).
mike_mn is absolutely correct. It is simply a difference between being self employed and building a business that could continue without you if you wanted or needed it to do so.
There is absolutely nothing wrong with either business model.
This is just semantics. Of course the property manager cost them something. Whether you hire a horrible property manager or the best one on the planet (or even do the management yourself), it does cost you something! Will hiring a great property manager allow you to make more money than hiring a terrible property manager - yes. Property management is an expense, regardless of who does the management or how well they do it.
Mike