In the past my tenants knew us as the landlords and owners. They'd call us if they had problems and issues. In the future we are going to take the advise of others and stay anonymous as much as we can.
Do you guys who go around to your properties just act like hired help? I was planning on assuming the role of a property manager. This way when I do my drive by and property walks to pick up garbage cans and some touch up tenants won't think I'm some stalker. Also they won't know that I own the place. I'd drive up in a utility truck or work van.
How do you guys who do it stay anonymous?
Your average profit per unit might be higher than mine, I don't know whether it really is not but for the moment let's assume it is.
So what?
It is possible, (hint hint) I have enough units to make up for that difference.
I do know this with absolute certainty, since you do everything yourself if you get sick, injured or just fed up you still have to do it for it to get done.
No, I am not talking about this hands-off autopilot dribble you often hear. But, since I am not the one doing the repairs, rehabs, clean outs, painting, plumbing, marketing, showings, evictions and everything else on the list all by myself, I know my income is much more stable than yours in a whole host of scenarios.
I am an investor first, you are your own (only?) employee first.
Different business models and your way is not the best way for everyone or every situation.
Taz,
I am not saying that my model is the only model or even the best model for a particular person. For example, if you're doing long distance residential rentals, I certainly would not advocate being an absentee property manager.
On the other hand, I am continually confronted with this ridiculous idea that hiring out management or maintenance is necessary so that the investor will have time to find deals. Furthermore, the idea that landlords make more money using a property manager than not using a property manager is equally ridiculous. Obviously, if a person has a job that prevents their ability to do these things, then they don't have a choice.
Will did provide a good list of things a property manager does and that is why I asked if you had ever managed properties personally. This idea that property management takes a lot of time is absurd and the idea that it takes a super-human effort is beyond belief to me.
Let's look at Will's list:
Since I do all my own maintenance (and get paid for it), no time is spent arranging repairs or maintenance.
Wow.........Where are all the property managers on this board to respond to this "Property management is easy and overpaid" nonsense?
I don't even know where to begin..... :lol:
So from the time you leave your house on the 5th of every month, drive to 2 houses, post notices, and get back home takes you "a few minutes?"
I'd have to agree with the others that said this was a lifestyle choice. I have absolutely zero interest in taking 40 calls a day. I'm willing to pay that money out if I know it means I can go skiing when the mood strikes me.
But that's me.
Jeff
I am with you Jeff!
I propose a new plan.......Lets hire Mike to manage our portfolios, we can pay him $200 an hour (So it should only cost us about $100 each a month in total) and you and I go out and hit the slopes!!!!!!!! :mrgreen:
MIke always wants to paint a picture that managing properties is easy and takes very little time. He took each of the jobs I posted and downgraded each of them stating that each takes very little time. Let me say this. I have taken several (and I mean over 20) calls from my property managers complaining to me that many investors call and keep them on the phone for much too long. Furthermore, the calls rarely take less than a minute and Mike's attempt to simplify this is obsurd.
I will go along with Taz's follow up post in that what works for Mike, does not work for EVERTONE. Then Mike states he never said his is the best way or the only way, but his posts say otherwise.
Bottom line, if you intend on having many rental units and add to them on a frequent basis, you can do very well by hiring property managers. Not only that, there are hundreds of thousands of cities across the Nation that do not have cash flow properties and so that investor must look out of the area. In those cases in particular, it is very relevant, adequate, and necessary to have a PM.
I do not see your argument here Mike. Not one person in this thread has spilled out any guru crap you refer to. Just because there are gurus who preach that you can job out everything and make boat loads of cash with little effort does not mean that our opinions of hiring a PM is the same thing. It is not.
I think everyone should manager their own properties for a year to gain respect for what a PM deals with. Things come up and you will be thinking your PM is crap, but if you know what they are dealing with you will be more understanding and thankful for their professional service.
Maybe Mike has a very good plan and is excellent with time management. Whats that saying? "If you fail to plan, you plan to fail" "Give me 6 hours to cut down a tree, and I will spend 4 hours sharpening the AX" ???
The best device I ever bought was a PDA phone.
Mike,
I've read your book. It is good and entertaining. How can you handle 40 calls a day of complaining people? That would put me in a bad mood all day. How is your mental health, and I am actually asking. Does it ever get to you?
To everyone else,
How does a PM company manage their conflict of interest in placing tennants? Especially if they also manage their own properties. It would seem you would get the "sloppy seconds" to those who have either more properties w/ the company, or those properties of the PM company owner.
Most PM companies I see charge a portion of 1st months rent to place a tennant (around 75% for the one I am looking at). What would you think of finding your own tennant, screening them, and then sending them to the PM co to sign the lease, take care of deposits, and then having the PM co manage the property from that point on? May be a good middle ground.
If I had several properties this would be the reason I'd prefer to have a PM. I wouldn't want this to be a full time job as I have other businesses I run and time is money as they say. I'd rather sacrifice 8%-10% and not have to worry about my time or headaches that might come with dealing with tenants on a regular basis.
Security would be another reason if a situation came up where my husband wasn't able to take care of it and it fell to me. A PM would be nice to have in that case.
Hi Tony,
I don't receive 40 calls a day from complaining tenants. I receive 40 calls a day in total, nearly all of which are from people looking for rentals. On a typical day, I might get 1 call from a tenant that has a question; has something that needs to be fixed; has some other issue; etc.
I do occassionally get pissed off at a tenant if they are acting badly, but that is infrequent. The rental property business is mostly just boring and routine (interspersed with a few moments of excitement).
Mike
In my business model there's a 'tipping point' where hiring a PM will be advantageous. Right now it's a gradual shift and I find myself hiring out more and more maintenance/repair chores (if I never change another wax ring on a reeking toilet it'll be too soon!).
Another point briefly touched upon was the 'psychic toll' that tenants exact: constantly trying to get over, not pay, make excuses, lie, steal, threaten, defraud, intentionally damage, and so on. That gets repetitively and increasingly tiresome.
On the other hand there are those wonderful months where my only job is driving the rent to the bank.
I find this thread very interesting. As you can tell by my name, I'm in one of those overpriced areas I$400k condos w/rents +/- $1700 average- you do the math) that requires me into out of town properties, and therefore, weather I like it or not, for me, PM is the only way to make REI possible.
Not to say that I wouldn't take the opportunity to DIY for the experience if I could, but that's not the reality.
Mike I just wanted to point out that for you self management is feasible. Would it still be doable if you had 100+ properties? Somehow I doubt it.
Beyond a certain point it becomes unrealistic.
I can't say how much I've enjoyed the banter about the 50% rule and PM vs No PM. Certainly two schools of thought, which shouldn't be considered as right or wrong in general, but as either end of a spectrum where each RE investor must chose their own way, based upon their owns skills, abilities and desires.
And Mike, this isn't critical of you. I really do take my hat off to you. But, to do what you do, the way you do it, takes a lot of grit, sacrifice and determination. You have to have command of so many trades and skills and knowledge to make it work efficiently that many starting out just don't have.
So, here's my two cents, having walked the No PM line for a small number of rentals (12 max) while working a FT job.
I can, and have replaced windows, layed carpet, hung doors, painted, patched roofs, done minor electrical and plumbing work, gone to court, chose the right and wrong tenants, etc. etc. As owner/landlord, taken pride in the work I did. But, there are many others who can do it better, faster, and economically because they only do one thing, day after day. It's called specialization. Can any single person really claim be the skilled and efficient jack-of-all-trades they would need to be? I've bought too many distressed properties from people who thought they could, too.
Mike talks about no contractors. How? at best, I minimized contractors. When the branch took down the power line to one of my rentals, and the riser from the meter was damaged, I had no choice other than a licensed electrician. When I failed with my 100 foot rented sewer auger (one of my top 3 joys of landlording), I admitted stinky defeat and turned to Roto-Rooter. I learned after my first adventures in roof repair and carpet laying, that, I'll get another to do those things. I can't accept the "no contractors" claim, for even a small number of rentals.
Mike is discounting his own worth. He chooses to work a job, for free, without benefits, in order to claim he makes "more money per rental." It's not about money per rental. It's about lifestyle and being a provider, if not for yourself, then for your family. If Mike were to place a realistic value on his time, give himself a salary with benefits, and consider that as an expense like any other in his 50% rule, he's making a lot less than he claims. He's not considering activities that he could be doing instead to earn income and benefits. It wouldn't take much of a paying job with benefits like health insurance to offset a tremendous expense he faces as a self employed. When you consider Mike, as a individual investor, provider and earner, and not just in terms of "income per rental," which model would then provide Mike the highest overall earnings and quality of life?
Mikes day and quality of life is tenants, tenants, repairs, cleanouts, tenants, and more repairs. I visited his website a couple times. Read his blog, buy his book. Look past the activities and evaluate the lifestyle for yourself. Picture yourself in his shoes. He's put it out there for everyone to read.
And, just a couple last points to ponder:
What if Henry Ford had decided to be happy building every car himself?
I don't remember the author who wrote, "He who hires someone smarter than himself, proves that's not the case."
Mike, I congratulate you. I certainly couldn't duplicate your success, but I wouldn’t want to try, either. And there are relatively few individuals out there today, who would and could.
Ralph what a GREAT way to put it. He has choose his rode and it is not hiring a manager and fixing those items.
I myself own numerous amt of properties and I learned how to manage them efficiently. I to have had to go to court and evict, but that comes with the territory.
But, as Ralph as said I realize this early in the game that I wanted to work on my business not in it. So, when I go out of town I do not even get the phone calls because I have advocates to pave the way and make my life easier, they are called plumbers, electricians and carpenters and HVAC guys. I also look at it has giving these guys a job as a small business man. By doing this they have allowed me to TRULY grow my business.
I would not even try and wire a house, what happens if it catches on fire. There is a law suit, because we are so caught up in saving a penny.
If you have to micro manage your company like that then I commend you, but being hands off and learning how to DELEGATE work shows a very intuitive person.
Mike I to take my hat off to you, but I would say enjoy a little more a let others help along the way.
SUCCESS BREEDS SUCCESS
Mike, you’re so right. I don’t get it. I’ve been there and done that, to a lesser degree than you, and that’s just not my thing anymore than a 9-5 is to you. I love what I do for a living and know that there are many who work for a living, and not because it’s what they want to do. We’re both fortunate in that regard. And, I truly do respect you and your accomplishments, and I am glad you’re here. Biggerpockets would be a lesser place without your presence. We’re just as different as democrat and republican.
I’m not going to continue the point by point, I said what I did, and meant what I said just as you, and am willing to let each reader draw their own conclusions.
Wow, this is really a good thread guys. Thanks! My $0.02. I manage all my own properties...
Most of PM work is repetitious. A huge portion of time is spent coordinating. When it's a one-man show there's no coordination and I've found it's much more efficient. It's sometimes even cheaper for me to fly around the country to rentals and manage maintenance myself when necessary than to pay someone else. I use these tax-deductible trips to see new rentals, buy/sell, show, manage and maintain.
I am responsible for the management activities of 919 rental units. I have one half-time helper for the office who does no maintenance. If you're efficient, it's amazing the kind of scale you can create. I hate to plug a biz-ness-ie book, but Tim Ferris' "Four Hour Workweek" is a good taste.
Most of the "hire it out to a PM" crowd, I'm afraid, is working off landlord legend and gossip, not real experience. You can't take experiences with your very first rental and say "that's how it is". No, you learn, get more efficient, and figure it out.
My real cost (salary included) is less than 2 percent per rental. If you pay 10 percent for PM, then my properties outperform yours by 8 percent in PROFIT. Now multiply that advantage by 919...
Clearly there's a line between doing this as a profession and doing it as a hobby/part-time.
My 2 cents on the topic is this, I'll probably never hire a property manager, just for the sheer fact that I can manage my tenants.
With regards to maintenance there are something things i can do and there some things I can't. Can I wire a house, hell NO, so guess what I'll call different electricians and get the best quote.
Excellent topic. I think it show's there's more than one right way to do things.
as to which is more profitable, that's hard to narrow down, because you have the weigh the opportunity cost self management versus the time you might spend growing your business. I think both models work. However, I also thing you need to be an extremely versatile individual and have a strong background in maintenance and/or construction to do it. For those who aren't as hands on, PM is the only way to make things work.
Mike, you're a talented individual, but the rest of us have to make due with the tools we are given.
Just my 2 cents...