What is everyone's obsession with hiring PMs!?!
Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes
What is everyone's obsession with hiring PMs!?!
Most Popular Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesNo. What we can agree on is if you can't afford a PM, you shouldn't buy the property. The PM is critical if you plan on owning a number of deals. What the PM does, a good one, is allow you to be a RREI...not a property babysitter. Your time is more valuable than anything. You can always recover lost money, but you can never get your time back...and in REI, time is truly money.
84 Replies
- Investor · Des Moines, IA · Member since 2015 · 380 posts · 201 votes9y
As others have said, delegation is crucial to growth. It also depends on what else you have going on in your life. If you work 20 hours a week and have 3 units, then absolutely, give it a shot yourself. If you're working 50 hours a week at a full-time job and you're trying to make it in RE as a side business, hire a PM so you can use your limited hours focusing on finding additional deals and not dealing with tenants.
I hired a PM at about 6 units. My reason for doing so, was that I spent most of my free time on my main business that I didn't have time to show rentals, vet tenants, etc. What ended up happening is that I would wait until Tenant 1 moved out, spend a week cleaning up the unit, put it up for lease, show it when I had time, and if I was lucky I'd only have a month of vacancy. With a PM, nearly every property is re-leased before the 1st tenant is out. This alone has paid for the cost of the PM. I have 40 units now and it was the best choice I ever made.
- I think property managers are like other service providers (real estate agents, contractors, etc) in that it is much easier to find a bad one versus a good one. But if you can find a good one, they can really help move your investing forward.
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes9y
I think there are some people who want to invest in RE who just don't have the type of personality to manage their own rentals. For myself, I'll have few enough rentals for some years that I will have time to manage them myself, and plan to do so. At some point (hopefully) I won't and will then hire a PM (or get my kids involved).
- Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes9y
You'll be better off spending your energy learning how to hire the right PM instead of trying to PM it yourself. If that requires you learning how to PM initially and then getting the right PM, then do so. If it requires leaning on your network to find a good, reputable PM... even better. But the quicker you find a good PM the better. I don't know anything about the eviction process and I don't really care to. Will you do a better job than them? Very possibly because you care more. Is it worth that extra 5% in efficiency? Not to me.
My time is better spent focusing on finding new deals. Finding deals will make me hundreds and thousands of dollars an hour. We pay our full-time, onsite PMs about $30-35k a year. That's not what I want to be making.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes9y
PM makes maybe 10 an hour. Some people like to be hands on as owners and be control freaks. They think grinding out every little savings is what will make them successful. The people I see with tens of millions or more with money find the best people they can and structure systems to realize more free time. Also there are people that are so much better than the owners at certain things.
I know an investor that has done residential for 30 years in his late 60's. Net worth around 3 million. He had a heart attack the other day. Every time I see his office it is like a bomb went off in it. He micro manages everything and puts too much stress on himself.
Transacting commercial deals I can hit returns of 1,000 an hour sometimes. So my investing criteria is that the investment has to go on it's own. If it requires me to be there to make it perform for cash flow then it is a job. In that case it is costing me money and not making me any because I am picking up NOI but working for it as an owner/operator. If a property throws off 30k NOI but I have to be involved and be there multiple times a week then it's a job. I already have a job paying sometimes 1,000 an hour so nothing comes close to that return for my time. If someone is trying to quit a 40k job a year and is accumulating local units to do themselves that is a different situation.
To scale and have multiple revenue streams the investment has to have structure and little involvement from you the owner to perform. I find with PM's it is often the investors fault. They buy a property to self manage and do not account for PM fees. Later they no longer want to self manage and then go for the cheapest PM possible as they overpaid for the property to start with. That is when the nightmare begins as the PM does the least possible for a low fee. Another problem I see is investors using 8% for PM fee when buying in crap hole areas where a specialized PM there goes for 12 to 14%. Those PM's have to offer HIGH TOUCH services to keep the tenants paying and happy being almost their therapist dealing with their life issues. Some of those low income tenants have a limited education and budgeting skills so need much more hand holding.
- Real Estate Broker · Temecula, CA · Member since 2014 · 994 posts · 783 votes9y
Property management is definitely something someone can do on their own, but they've got ot learn the laws and follow the rules to protect themselves. Finding a good property manager (ME- haha) is huge in saving money in the long run. I just dealt with an owner who had been self-managing for years. The homes had no working smoke detectors (Huge liability in CAlifornia), he was under valuing the rent by over $300 on 2 of the properties, and the lease was a 1/2 page long with no rules for the tenant to follow. Of course, he ended up calling us then things went south with a tenant and his lease held no value to him.
If someone is going to learn the rules, great. But is not, Hire someone GOOD to do it for you!
That's my 2 cents!! Bam You asked for it.
- Investor · Greenville, SC · Member since 2016 · 19 posts · 8 votes9yI think not hiring a PM might be based on the following: 1) How far you live from all your properties. 2) If you have a very reliable handyman nearby your properties who can be a "point person" to asses issues when necessary. 3) If you don't mind doing the advertising, interviewing and showing your properties when you have potential tenants. I have had 10 rentals until recently and I did all the PM work for 12 years. It gave me a great perspective of what was going on with my tenants, my houses and especially the neighborhood!
- Real Estate Broker · Apopka, FL · Member since 2017 · 492 posts · 528 votes9yI've gotten a lot out of reading through varying responses on this thread. I'm a business owner in a different field and getting my finances in order to begin investing alongside my business. I'm prepared to pull the investment trigger when my money is in line with that, but learning along the way while I get that side in order. One question comes to mind reading the "hire a PM to scale easily" vs the "PM yourself with few units", and maybe it's from my service business background, but it seems there is a middle ground that hasn't been mentioned. Have any of you guys with larger portfolios (in local areas, not remotely) considered bringing on staff and/or contracting with specific trades to do the PM duties, thus having more control but not necessarily more personal time input once set up? It seems that doing it all yourself to learn the process would be beneficial with the first few units. Once time becomes the burden, couldn't you contract directly with a handyman, plumber, electrician, etc to handle those tasks? Hire an assistant to screen tenants, show properties, and delegate maintenance calls to above mentioned trades... basically handle it all early on and then build into employing those who manage your properties? I completely understand that it's not worth the hours to physically do all of the work yourself taking time from investing, for what you'd pay a PM. But that PM fee times 20 or 50 or 100 properties eventually adds up to quite a bit I'd imagine. Sure it's not worth it for the investor to do all of those tasks, but is hiring them all out to a "turn key" PM the only other option? Seems managing a "property management" team (without taking on properties owned by others) would keep things consistent and allow for minor tweaks without jumping ship from one "complete" PM to another....sort of handling all aspects "in house" but not solo. Does that make sense?
- Austin, TX · Member since 2017 · 21 posts · 18 votes9y
Everyone has a unique combination of skills and circumstances. There are some people who may be better investors than landlords, and a good PM can be a valuable partner. I agree that it is best to manage local properties yourself in the beginning if you have the time. However, it is good to know your own limitations. You probably need a PM if you don't like to say "no" or set boundaries face to face. You may find it less stressful to deliver a "no" indirectly through a PM. My point is that it comes down to a personal decision that is based on your own situation.
- Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes9yViola Enfield so true! I love saying NO!!! Hahaha
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes9y
Originally posted by @Andrew Acuna:
Yeah I understand how PMs work I'm simply saying suggesting hiring one to someone with 1
Unit or even 10 seems silly. I think there are things you can learn to build a great foundation for managing your own units. I know at some point you have to, but around these forums it seems to be the answer when ANYONE is having a very fixable issue. And I'm sorry guys but poorly training your tenant is a fixable issue. Not easy, but fixable and a good lesson for a new investor to learn.I agree, Andrew. Instead of providing helpful solutions to what may be a one-off landlord problem, there are those that will always chime in to say you should've or should now hire a PM. Gee, thanks. Do you honestly think you will never have to solve a problem once you have one of those? Whatever happened to creative thinking on your feet? A bush fix? Jury-rigging? Landlording's not fun anymore.
Search 'pm horror stories' with one hand while your other pumps up and promotes getting one. LOL
- Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes9ySteve Vaughan you get me!!!!! That is ALL I was trying to say. I get the need for them (I guarantee I will have them) I just don't like it being the knee jerk reaction.
As an investor and a broker I have been on both sides. As an investor, I have always managed all of my own properties. That is typically 20+ rentals and 5-7 flips at a time. Nobody is going to take care of my property the way that I do as it is just not personal to a PM. Would it devastate me financially to get that $1800 bill for replacing a hot water heater ? No but it would bug the crap out of me knowing I could buy one for $450 and pay a handyman $150 to put it in. I realize I have an advantage over those that self manage as I have a crew that works on my flips to do repairs but it wasn't always this way
As a broker, I have managed a few properties over the years for other. This drove me crazy as I felt like I should treat other people's property like my own(don't know how to do it any other way). I hate spending other people's money. If I knew the owner was tight on money, I would go fix it myself. A PM would go broke trying to do this full time. Again, just my personality
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes9y
I agree with @Greg H that no PM will be as motivated to care for my properties cost efficiently (or rent them as quickly) as I am.
Someone wrote upthread about PM making $10 an hour. I have a PM for an out of town property who makes $210 per month off it. I'd estimate he spends no more than 3 hours a month working on it. Then, when he has to find a new tenant he collects an extra $675-$850 for the time he spends on that. I don't see this coming anywhere close to $10 per hour.
- Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes9y
Here's how look at it ...
It depends what you want: a business or a job?
Self-managing is a job. If you want to take a vacation, be out sick for an extended period, or even just move on, you'll need to "hire" and train a replacement.
In terms of "The Cashflow Quadrant" (E - S - B - I), you're in the bottom-left corner: you're self-employed.
You would need to move to the top-right corner and become a business owner: the business needs to run even when you're out sick, on vacation, "on family leave", etc.
If you're new to the concept, "The Cashflow Quadrant" looks like this:
E | B
-----
S | I"E" is you're an employee in someone else's business.
"S" is where you are when you self-manage: self-employed. Anyone who self-manages is in the "S" corner.
"B" is a business owner who runs the business and is not run by it; the business should run without you, otherwise you're still self-employed.
"I" is an investor - you have only your money at stake, not your time or efforts.
PMs are key members of your team when you run a business which doesn't run you.
So, really, the question is: do you want a business or a self-employed job?
- Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes9yI think it 100% depends on your own situation. From what iv noticed, the big time players who own hundreds of doors typically own their own PM company. It makes more sense for them to keep that cost "in house" then to put source it. It seems like other have relied heavily on Outside PM companies and it has worked for them. As for myself, I have been an agent for 8 years and have been dealing with tenants and tenant screening ever since I started so for me it's something I'm good at, have systems in place to minimize the time it takes from my day, and is something I couldn't imagine paying someone else to do for me at this stage of my investing "career". Location has a lot to do with it as well. Our units are in B+ areas so our tenants have credit in the high 700s, have over $10-20k in savings, and call us if we don't cash their check in a timely matter to make sure we got it in the rare event they aren't set up to auto pay electronically each month. There will certainly be a threshold of units I can manage on my own, but like I said it's not only something I'm good at, something I consider "easy", but I enjoy it to a certain extent. To each their own.
- Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes9yTo me the whole point of REI is passive income, having my money work for me. If I manage my own rentals I just bought a job, not an asset.
- Real Estate Broker · Atlanta, GA · Member since 2016 · 14 posts · 1 vote9y
Logically, if you fall into any of these fields, get a property manager:
- Located far from your rental
- Aren't familiar with the laws in your state
- Don't have a way to properly fill work orders
I prefer going with PM's because they alleviate the stress of dealing with the property itself, so that I have more time to focus on other things (like getting more properties!)
I can see why people would go the other way. If you bought the house down the street and rent it out to a friend of a friend, you could easily save 10%.
- FL · Member since 2016 · 912 posts · 107 votes9y
Because most people's goal as a landlord is passive income, which does not mean waking up at midnight to replace a leaking water heater.
PM's are here because 99% of the people that invest don't want to be part of the investment. This is fine if they seriously vet their PM up front and know exactly how everything works. A bad PM is worse than a bad tenant. A good PM is a godsend for people that want to be as hands off as possible.
- 9yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
@David Dachtera nailed it. Combine that with what many have said regarding their "personal situation", and you have your answer. If you personally want a 2nd job (or only job) as a PM, then don't hire one. If you want to have your REI set up as a business, then hire a PM.
The saying, "time is money" has been around forever. It applies here exponentially. This isn't simply subtracting REI time when you are acting as a PM, this is also "losing" the compounding effect of your time when your PM "job" takes time away from your REI "business".
You can always get your lost money back, you can never get your lost time back...so don't lose it.
- Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes9yPatrick Philip if you're waking up in the middle of the night to replace water heaters you're doing it wrong. I feel like that's the extreme people go to. "I don't manage because I don't want to fix toilets". Me neither, which is why I don't, I call someone to fix water heaters or toilets or anything.
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes9y
@David Dachtera. I agree regarding the differences between Businesses and Self Employed Jobs. However, wouldn't you agree that starting almost any business will be very labor intensive for the owner at the beginning? Also, remember the common recommendation to spend time learning about your business from the ground up.
- Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes9y
The common comparison is that it's like "pushing a train". It takes vast amount of energy to overcome the inertia. Do the math: 100 car train, each car 100,000 pounds gross weight each. One things are rolling, it takes relatively little to keep that momentum on flat straightaways.
Similarly, pulling the pieces of a business together is a similar effort. Initially, you're screening PMs, GCs, subs, maintenance people, bankers / lenders, attorneys, accountants, tenants, etc. (D'ya notice how long that list is before the word "tenants" appears? Didn't even mention acquiring property!) Once it's up and running, if you've done well building it, your hands are free to build the next business.
That's why the education I'm connected to starts with business education: you can't run a business you've never built.
Self managers are willing to trade their precious time for nearly worthless dollars, just not in someone else's employ.
I like to say this because I know it increases the 911 calls for heart attacks: I can always get more money; time, not so much.
- 9yMike CumbieBusiness MemberREALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
Hi @Andrew Acuna,
I understand your initial question and I agree that for some the first answer is "Hire a PM" which is a useless answer when placed in the "Landlord forums and rental property" forum. because the forum is designed to ask questions relating to the act of being a landlord. Anyone going in there and posting that answer is wrong, period. It is designed for even PM's to go in and ask questions of other PM's about how to deal with a problem tenant or a specific situation.
That being said if the question is posed in an "Investing" forum (or even general investing) then it is a perfectly acceptable answer because as stated if you are investing you are not "Land lording" and spending your time incorrectly as an investor.
Just my 2 cents on the initial question posed.
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