No, You Don't Need a Property Manager if You House-Hack

11 Replies

I was thinking about this the other day, and I got a question from a user about using a property manager to manage my house-hacked duplex.

It's my opinion that it would be quite silly to use a property manager as a house-hacker. Here's why:

First, most of the difficulty in managing a property comes from running it like a household. Landscaping, minor repairs, shoveling snow and fixing all the other little problems that come up as being a homeowner account for the vast majority of expenses and time commitments of house-hacking. Managing the tenants just isn't a huge added time commitment or expense on top of maintaining the entire property.

Second, unless you are a real pro (in which case, you are probably beyond needing to house-hack), it will be pretty darn difficult to hide that you are the owner of the property as you'll show an obvious interest in the maintenance and correct treatment of your home. Once the tenants realize that you are the decision maker, you will be contacted regardless.You will be disappointed if your goal in hiring a property manager is to avoid making decisions regarding the tenants.

Third, the economics of being your own property manager are incredibly in your favor as a house-hacker. Oh, the lawn needs some weeding? No problem, just do that after work. Oh, there's snow on the ground? No problem, just do it when you wake up. Oh, there's a leak under the tenant's sink? No problem, just call the plumber. Those economics are terrible for a property manager who will have to spend time commuting to your property, calling the right people to do the work, or do it him/herself, and will bill you for the entire operation. These economics are even more obvious in things like collecting rent (which can be done online at $0 transaction cost nowadays), showing the place, and making sure the tenants are treating the place right.

Anyways, I just want to throw this out there that if you are going to bother to house-hack and don't want to do the perhaps 5 hours of work per year that go along with managing the property yourself, you've probably missed the point..

You really don't need a property manager if you are house-hacking.

Hi Scott,

Sounds good, but... what is "house-hacking"?

Thanks!

@Carol Venolia House hacking simply means that you will live in the property you invest in. It can be if you buy a duplex you will live in one side while renting out the other, or living in a house while you are flipping it.

Originally posted by @James Bynum :

@Carol Venolia House hacking simply means that you will live in the property you invest in. It can be if you buy a duplex you will live in one side while renting out the other, or living in a house while you are flipping it.

 Thanks for explaining, James!

@Scott Trench   You are correct but how would you like to evict your neighbor?  I would definitely still treat it like a business and make sure to follow appropriate procedures for finding tenants.  I would prefer to have the property in the name of a business or trust and you are merely acting as the PM as far as the tenants are concerned. 

I have several rentals and the tenants know me as the maintenance guy and my wife as the brutal PM.  I think the less they know the better. 

Originally posted by @Scott Trench :

I was thinking about this the other day, and I got a question from a user about using a property manager to manage my house-hacked duplex.

I responded to your other thread, and let me chime in on this one. Seeing how you only have one other unit, while I will have 7 other units, its a little different for me. I live in a 4 plex I bought last year and am buying the 4 plex next door right now. 

I mentioned in your other thread that I work odd hours and have odd days off and a lot of overtime. So the last thing I want after working the 12am - 10am shift, while I am supposed to be sleeping during the day, is to have to run around and collect rents, show units, get repairs done, etc. I was traveling out of town for nearly 2 months last summer. Imagine trying to self manage that many units with those kind of conditions. The places I work are very rural and many have poor cell service. So it could be hours away from where i live and I still wouldn't be able to get a call. I don't work some 9 to 5, Monday to Friday office job. If I did, I might have thought aboutmanaginy myself.

 Also I bought my properties and did all the analysis based on them using a pm, and they still cash flow well. Also I knew from the beginning that my end goal was to grow very large, and with me managing, I would be limited in terms of size. I started with the end goal in mind and set up systems from the very beginning because believe me, it will be harder to move to property management in the future after you get used to the returns with you doing all the work.

Finally, I must say that there is a good chance you will be a bad landlord. A lot of people just aren't good at it. In fact that is how I found two of my deals, a burned out landlord who wasn't very good at it.

It's all about what you are looking to accomplish. If you do your own property management you have picked up another JOB: trading Time for Dollars. If you have the time and capability it isn't really difficult and can generate great revenue for little effort. On the other hand, if you don't have the time or desire, you can trade your Dollars for Time. You invest that money into the management so that you have time to do other things: find the next deal, fish, hang out with family, whatever.

Every person is different and should look at it from the angle of what your current needs are. I ALWAYS analyze as if I hire a PM because life changes, but as a buddy used to say, "Do you."

@Scott Trench Thanks for the post. You mentioned collecting rent possibly for $0 online. Could you list some of these sites or are you simply referring to online bank transfers (which might be a fee)?

The reason I followed this point was to put out the same question Shaquetta has.  I've been researching different management softwares, and my biggest criteria is the ability to have my tenants pay online without a fee.... and without giving them my bank account information and worry about receipts.  So, anyone who has a way to do online rent collection for free or close to it, please let me know.

In response to the other items brought up, it is something I struggle with all the time.... pay someone to get it done, or just do it myself so it gets done quickly and correctly the first time.  I've discovered that it comes down to two things.  The value of your time, and how that compares to other things in your life.  Here's an example with an explanation:  Garage door spring breaks.  Quote to repair - $215.  Do it myself - $100 material, probably 3+ hours of my time, and it would put me into rush hour getting home... miss out on an evening with my family.  So, time-value is less than $30/hour since I have to take time to go buy the parts.  Is the evening away from my family and the stress of figuring everything out worth $30/hour:  Not for me right now.  It was several years ago, but not right now.

Management is the same thing.  I'd guess that with each unit I have, I put in about 24 hours/year average... and that's because I do most of the maintenance.  Management cost to me would be about $1200/year.  It probably would be realistic to round that up to $1800 if you include the little maintenance items that I take care of.  So, that comes to $75/hour time value.  At that rate, with my stage in life, I cannot afford to pay someone else.  That time-value of $75/hour is what I'm using to build my portfolio faster than if I just kept my day job.  If I were making more that $75/hour at my day job, I would hire the  management.  There's no reason to have the stress of management if I can make the same money just going to work.

Those are my thoughts on self management. 

I use Dwolla.com to collect rent

@Rocky V. one of the great advantages to house hack is that you are not bound by the fair housing laws.. as an owner occupant in a 1 to 4 unit .. you have the right to choose exactly who you want for any reason you want.. so a PM will not have the same latitude..

this is what I see as one of the major benefits to house hack you can really hone in on that perfect tenant and hopefully alleviate any eviction issues up front.

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