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!?!
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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
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes9y
When people scale PM companies they do not make that much money. When a business is first scaled you have to generate more revenue to create the same pay to yourself.
For instance if someone has a marketing agency and makes 400k a year running themselves with just a few people then the business starts ramping up more and more. The owner has to decide to stay where they are to keep a small and intimate business or start scaling.
Initially as they start scaling the cost of business goes up and the sharing of revenue with employees happens. During this time the owner is making less than they were before with all the additional costs or close to the same but doing a lot more work. The payoff comes when the systems and additional revenue are in place then the business sale multiple on the back end becomes much higher and then income starts increasing more than before as a small operation. The owner if done right eventually makes more income then the small operation they had before.
The business owner has to decide if they want to grow the business like that or simply stay how they have been. We all only have so much time on this planet so it is a personal choice how we spend it. Me personally I do not care what the return is I do not want to spend my precious time talking to deadbeat tenants and working manual labor on a property to fix stuff.
The experience is way overrated............ : ) Some investors look at PM as a game, personal challenge, something they enjoy doing. I am 1,000 percent the opposite direction. I love the art of the deal,transacting, and not the management side of things. I will let others who enjoy that and are passionate about it step in for those tasks.
- Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes9yDavid Dachtera excellent illustration with the train. So true! Mike Cumbie thanks for answering the question directly- maybe this thread should have been titled "the landlord forum is meant to be helpful, remember!?!"
- 9yNicole A.Pro MemberRental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
I definitely understand what you mean, @Andrew Acuna. Some people do not give advice, but simply say something rough like "Get a PM if you can't handle it." When it is said in that tone, yes, it's useless. There are some instances where that was truly the advice to give though, such as a person saying they have no time, are terribly stressed, don't know what to do, etc.
While there are a lot of repeating questions/problems on this site, sometimes people forget to fully read a thread and see the unique problem.
I just recently moved my properties over to a PM. Why? After several years of managing it myself, it was truly starting to wear on me. I found myself missing out on more fun occasions than I'd like to admit because I needed to be at my properties handling some issue or showing it when vacant.
I found that I had become conditioned by the sound of my phone (even though I helped alleviate it by having quiet hours on my phone from 7:30pm - 08:00am). 95% of the time when a tenant contacted me, it meant something was broken, there was an argument, or there was an excuse about late rent.
My husband has been gently pushing me to get a PM for a while. We work at the same place for our "9-5" jobs and his coworker told me about the PM he uses. Every time I had a story about at tenant, he told me how easy his life was. I decided to go for it. So far, so good....and this may be considered TMI, but it's interesting that ever since I've not had to deal with tenants directly, that my umm....spice for life with my husband, if you will, has increased lately. That is priceless. lol
As much as I did also enjoy managing on my own, meeting people, learning tough lessons, and learning local laws, I think I've met my threshold on how much is healthy for me.
- Rental Property Investor · Havelock, NC · Member since 2017 · 74 posts · 19 votes9y
A point of perspective that I see as a newbie reading this forum is that, All agree that you need PM at some point in your investing career. The timing and preference is the biggest difference. Timing being how much you have personally and willingness to use your time to the units.
My personal view is that a PM is not the end all solution for everything but having experience being a landlord through mentorship or personal experience is important. Not all have a luxury of time but we all have a chance for education. I believe education is the most important part to this piece. If we are not willing to educate ourselves then it makes it harder to educate others and appropriately mange them . Another is do you have criteria for hiring a PM? That is something I learned recently. That a lack of criteria is like throwing darts at a barn and hoping something good comes out of it. It make it hard to find a property and makes it harder to evaluate it properly.
- Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes9y
I might put it this way:
If you're going to self-manage, understand what the job entails ... gee, that education thing is inescapable, isn't it?
I was recently involved in a thread where the OP was almost radical in her dedication to her short-term $savings at the expense of long term gain, and yet was bemoaning having had a mentally unstable tenant turn vicious on her.
If you "face the beast" you must expect to be battered mercilessly at some point.
- People want to feel validated in their decision for paying extra for a PM. Criticizing others for their failure to do the same provides them self-justification for their confirmation bias. This is a common behavior pattern to justify many debatable decisions people make in life.
- Jericho, NY · Member since 2016 · 143 posts · 49 votes9y
Andrew I see your point of view, but I have always been of the mentality that you let the professionals do their jobs and you focus on what you know and what makes you money.
- 9yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
@david Dachtera you are on a roll. What you just described is a variation of what I refer to as a perfect system. It must be self sustaining, and repeatable. This allows you to duplicate (actually compound if done correctly) your resources...both time and money.
- 9yJames MasottiPro MemberRental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
Originally posted by @Andrew Acuna:
I've been on BP for a bit and I've noticed something. I love the landlord forums, but any time someone poses and issue there inevitably is someone(s) who bring up hiring a PM. Can we just agree that a PM is not a fix all and can in many cases make things worse with a high monthly fee? I don't really see the allure here. My point is this- just because there's an issue (as there always will be) does not mean someone is not fit to landlord.
Haven't read through all of the comments yet, but in the market where I invest, Wilmington, Delaware, there is actually a city ordinance that if you do not live in New Castle County, you're required to have a registered and licensed property manager with the city.
Even if I wanted to do my own PM, I legally can't. Does this stop people? No. But I'd rather have a good relationship with the city so that things get done when I call rather than lost in some pile on some one's desk.
As my business partner and I scale, we are talking about purchasing an office building in the city, so that if one of us ever leaves our full-time jobs we'll be able to take over the property management and have an official office presence in the city to satisfy the requirement.
- Rental Property Investor · Havelock, NC · Member since 2017 · 74 posts · 19 votes9y
Yes, Mindset is the most powerful tool we have at our disposal but also our greatest enemy. Education helps expand that mindset and allow for growth into new areas.
- Medway, MA · Member since 2017 · 37 posts · 25 votes9y
If you like to change light bulbs and listen to tenants whining, then you don't need a PM ;-)
Great responses, it is case by case . depend on renters too.
Originally posted by @Robert Motch:
I agree with @Joe Villeneuve.
Real estate investing requires a certain set of service providers (RE agent, PM, lawyer, accountant, bookkeeper, contractor, sub contractors, handyman, etc). There are good and bad options for all service providers and All service providers require oversight and management.
For the most part with each of these services, you have the choice of whether or not to outsource the job or do it yourself. Depending on your strengths and experience, you may choose to do some of these services yourself but like most things in life, you are trading your time for cost of having someone else do it for you.
I think it really depends on your strengths, how you want to spend your time and much you want to scale your business.
More scale=More outsourcing.
- 9yJeff CopelandBusiness MemberReal Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
@Michael Noto: Great observation that "Good PMs manage properties in good areas ...good PMs do not deal with bad areas for the most part. Why? They don't have to. Want to increase your chances of having a good PM, buy in a good area." I turn down new PM business all the time for that reason.
I also turn down people who call me and say they have a tenant who isn't paying and won't leave and they want me to take over...too late for a PM, now they need an attorney! (I've actually had clients come back to me in that scenario after getting through the eviction process themselves and have me take over their property with a clean start. One comes to mind that just had his second one year lease renewal with no issues.)
With regards to the PM or Not to PM debate raging elsewhere in this thread, as both an investor and a property manager, I get both sides and there are some great points being made for both.
I'll share my comment below from another forum:
I tell my property owners all the time - you can absolutely do this yourself. But the learning curve is steep and I'm years ahead of you...I have systems in place to deal with this stuff that will take you years to develop yourself. It's a question of how you want to spend your time. Most of them absolutely see the value and have much more productive ways to spend their time (like buying more properties!).
And buy and hold investing becomes more scalable when you have a property manager. Say you could manage 10 of your own rentals by yourself. That's great...you don't need a property manager.
But what if you want to scale up and own 30, or 100 rental properties?
Who is making more money and building more wealth: The investor self-managing her max of 10 rentals and saving 10% on the management fees...or the investor who owns 25 units and pays a property manager 10%?
Copeland Morgan LLC4.770 Reviews - Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes9y
Advice on hiring a PM: make sure they actually own property themselves. People who own property already will know which vendors are best in the area.
I was talking with an investor the other day about realtors, and she put it quite eloquently: "If you are working with a realtor who doesn't own a house, what you do have to tell me about buying one?" It still kills me how many realtors don't own anything . . . after 20 years in the business.
My view is that if I needed a PM, then I shouldn't want to be a landlord. I'm working towards retiring early, and managing my properties will be my retirement gig. Not all of us are focused on the next deal, or the next project. Some, like me are just looking for a stable, reliable source of income. No way I'm giving 8-10% of that income to someone who would just cost me even more money than that by calling a repairman for every little thing. I'm perfectly capable of resolving 95% of issues my self, at a cost of just my time, which I will have plenty of.
- Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes9y
I think it's worth revisiting the comment that good PM's are in good neighborhoods. If you are buying income properties in rough areas, it can be very difficult to find PM's willing to work or are honest about the tenant issues. One of my client's went through three different PM's before he hired his own full-time employee to handle tenant issues.
- Investor · Portland, OR · Member since 2017 · 52 posts · 18 votes9y
Hello BP
Would someone please post a great PM checklist? Or maybe send a link to a great site for PM info? I am considering acting as PM for a friend who moved out of state. He owns a 900 sq. ft. single family property on the other side of town. I've been managing my own 4 properties and feel pretty comfortable doing it but looking to scale soon and would like to be better informed before I move forward. I've had good to mostly great tenants for 13 years. Help me take that next step??
I am really enjoying this thread. To me the last paragraph of @Joel Owens post really sums it up .. If you don't enjoy it don't do it...
Although all I can think of when I read the posts about not wasting my time doing 10 dollar an hour tasks is.. A local investor that built 200 units, couple small hotels, and has thousands of acres of land. They self managed everything. Did all repairs... I still see him shoveling his own sidewalks with a smile on his face. Driving a 20 yr old rusted truck. Gotta be close to 80, Worth probably 20mil? Or the guy that was scraping the floor before I set the tile in a bathroom last Saturday. He was smiling all day and couldn't wait to get to kwik trip for the 1 dollar chicken sandwichs for lunch..He is only worth about 7mil.
- Highlands, NJ · Member since 2016 · 52 posts · 9 votes9y
Andrew, what doe you mean by training your tenant, I am pretty sure I know what you mean but I would like for you to just explain it more clearly if you have a minute, thanks!
- Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes9yStephen Wiater sure, tenants will typically (not always) try to get away with as much as they can. Training them simply means you control the conversation and interaction not them. An example, a tenant calls and says, "can you paint my apt a different color, I don't like it". You tell them no and don't explain yourself. What you're doing is showing them that you're in charge not them. This also applies to sticking to late fees and deadlines. In not they will know they can walk all over you and do whatever they want.
- Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes9y
I have a property manager for 3 doors, and I think it was the worst mistake. They are making more money from me than I'm making from the property. The portfolio manager is stupidly incompetent and doesn't use good judgment at all! I work full time and don't really have time to babysit the property, but after my one-year contract is up, I'm moving away from a property manager.
I've decided that I can do my own hallway cleaning. The guy next door wants to mow the lawn and keep trash out of the yard and move trash cans. I can do minor repairs if they can wait until Saturday or Sunday.
Only think I'm afraid of is searching for tenants (where does one find them?), doing all the Section 8 paperwork, and emergency repairs. Other than doing those things, my PM is TOTALLY USELESS! They don't enforce late rents, they don't forward me new leases, they have horrible workmanship for the money, they are not responsive.
- Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes9y
Andrew: I think Paul has an excellent point. There are phases in any business venture
1. A Dream & An Idea
2. Beginning : You are the CEO and the Janitor
3. Some Help: Even when you can barely afford it
4. Growth and huge ambition: Getting your teeth knocked in
5. If you don't give up then the next phase is going back to the drawing board and scaling back and redoing your plans
6. Then Success.
If you look at any business everyone goes in that cycle at some point or another. Most never even get off the 1st rung which is the dream stage.
I think hiring a PM is a decision most folk have to make when your number of properties goes beyond 12 to 14. That does not mean you don't need a handyman.
Eventually if you scale up beyond 20 to 25 properties either you will hire in house folks on payroll or some sort of a hybrid commission including pay basis or you will end up having to hire a PM.
So I think it is dictated by your ambition, time and financial factors. It's always better to learn the basics yourself and then start handing over gradually as the business needs grow be it in house staff or a PM on the outside as a subcontractor.
Your point that just because there is an issue does not mean that someone is an unfit landlord does make sense. Issue will keep coming up and we as investors have to solve them but some people are better adapted to certain functions in a business so that should be kept in mind.
- Lake Jackson, TX · Member since 2013 · 119 posts · 34 votes9y
Pm are a must if you are trying to grow. When you hit the 300k plus of gross income then you hire someone full time to do it in-house at least that's what I plan on doing
- Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes9yThanks everyone for all the thoughtful posts! It was fun to be trending for a while!
One should also keep in mind that many investors actually fear their tenants. They hide behind a LLC and if in contact with tenants lie about being the owner. They are incapable of taking responsibility for decisions and fear having to use the landlords most valuable tool....the word "NO". Obviously for those that believe they need to hide and live in fear of taking responsible for decisions a PM is the only option.
There are so many bad landlords out there that the obvious response to questions is in fact "hire a PM". The situation with a landlord having a tenant that regularly pays late is a perfect example. The cause is a incompetent landlord that does not have the back bone to do the job. Makes scenes to advise them right from the get go to hire a PM.
There are also many landlords that keep bad tenants because they have no interest in doing the job that is necessary. They make the lame excuse that managing the tenants properly will result in expensive vacancy costs. Having a PM avoids those costs and they can actually have good tenants instead of being a lazy landlord with bad tenants.
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