self manage vs property management company
Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
self manage vs property management company
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Rental Property Investor · Richmond, VA · Member since 2017 · 295 posts · 229 votes
9y@Mark Vandzura I used to work for a property management company and I can say I saw with multiple properties and vendors that the property owner's best interest wasn't always the forethought of the property managers. There were multiple occasions where a property manager would go with a vendor that was friend/someone who took the PM out to lunch occasionally/etc, even though the prices were higher or the work was lower quality than the competitors. It's not the PM's money and they don't make more money by saving you money, so I definitely suggest self manage as long as you can! Unless you somehow can find a trusted PM (but good luck with that!).
62 Replies
- Real Estate Broker · Seattle, WA · Member since 2016 · 16 posts · 2 votes9yI think the primary concern with this course, Mark, aside from the fact that you would need to be more hands-on with this employee than you would likely be with a prop mgmt company, is that many states require property managers to have a real estate broker's license in order to perform many of the functions that are central to managing your property (interviewing/placing tenants, collecting rent, etc). From a quick glance, it looks like New Jersey is one such state. If this is where your properties are located, then I think it will be a tricky endeavor to navigate this process with a solid legal footing.
- Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes9y
Why do you need a property manager if you're doing it by yourself?
I have a client who is managing almost 50 doors by himself (no MF) and he has a bookkeeper on payroll plus a handyman on call (1099). PM is pretty expensive and unless you're out of state - it's better DIY.
Why?
- Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes9y
Originally posted by @Peter VanWesep:
I think the primary concern with this course, Mark, aside from the fact that you would need to be more hands-on with this employee than you would likely be with a prop mgmt company, is that many states require property managers to have a real estate broker's license in order to perform many of the functions that are central to managing your property (interviewing/placing tenants, collecting rent, etc). From a quick glance, it looks like New Jersey is one such state. If this is where your properties are located, then I think it will be a tricky endeavor to navigate this process with a solid legal footing.
Not nessesarily.
F you manage your own properties, you can hire non licensed employee. If you hire a contractor (1099), then there must be a real estate licensee. If you operate under LLC, it's another problem - you and your LLC are not the same and you have to have licensed real estate professional to manage.
Plenty of people don't know that and still manage their own properties by themselves.
- Investor · Fort Collins, CO · Member since 2017 · 169 posts · 119 votes9y
@Mark Vandzura this question is always asked. It really depends on what you are looking for, but from your description, you still want some control and don't want to pay 10% plus finders fees. I think you answered your own question on the first front, not to go with a traditional PM. As for hiring someone, you can hire an assistant you help you with things, I don't think most states have an issue with that, but check to be sure. Where you get into trouble as others have noted, is when you hire someone to just manage your whole property, and usually, those types of people do need to be licensed.
With the tech that's out there though, continuing to manage your properties on your own should be doable, and honestly, if you start using the right tools, you should be able to keep your 10% and easily manage your properties on your own.
Good luck and let us know how it goes or if there's anything else we can help you with!
- Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes9y
Thanks so much everyone for you're insight.
So, let me give you a little more of my thought process.
I had heard that a PM needed to have a real estate license as @Peter VanWesep mentioned, but I also was under the impression as was noted by @Irina Belkofer that if I hired W2 employee then that person would not need to be licensed. What I had never heard before was that if I had an LLC the PM would need to be licensed. Thanks for that info, Irina. Thats why I'm coming to the BP community for wisdom. I'm wondering, do the property managers of apartment buildings then need to have a real estate license also?
I was thinking more on the same line as @Paul Ronto, and hire a "personal assistant". But I'm not sure of the legalities of that because most of the tasks that I would require of that assistant would be real estate related. Anyone have any thoughts on that?
I know that I could easily continue to self manage. I do use an online service (Rentec Direct) for record keeping and accepting ACH payments, and that has helped a lot. But my main goal right now is to grow my portfolio..So every minute that I'm not learning, reading, networking, anylyzing deals, etc... that is just slowing down my growth process. My aspirations are to be a more passive investor and as I grow my company , the need for assisstance become more paramount.
I enthusiastically welcome any more info on the subject. Thanks in advance BP Members.
Wishing everyone loads of success,
Mark
- Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes9y
@Mark Vandzura everything I'm saying about licensing is correct in state of Ohio. Each state is different and it's better to check out on your state site about licensing.
The main thing that when you're managing properties, you have to be very familiar with Fair Housing, ADA etc
This is a huge thing about discriminating and all of the licensees must take mandatory continued education on the laws, fair housing etc. If you have an apartment building and the person who manages it would do marketing, for example, and put some wording which might be discriminatory - you're in trouble.
The words might sound pretty innocent for you, for example:"nice apartment for a family", "walking distance to the shopping", "close to the church of XYZ". That's it - you are discriminating! If you (or your manager) don't know the laws, doesn't mean you don't have to comply with them.
- Real Estate Investor · Haughton, LA · Member since 2017 · 16 posts · 3 votes9y
If you are wanting to get away from answering the phone and doing the repairs that you can handle yourself. Absolutely get a manager. From my experience not all property managers are created equal. Get a good one. All repairs will be subcontracted out. Higher expense but it can still make sense and money. Jim
- Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes9y
Thanks @Jim Celmer, I appreciate your input.
I can't believe that there is nobody out there that has already done what I'm trying to do. There must be someone in this expansive BP community that has hired a personal assistant to handle their day to day property management tasks.
I know you're out there. Come on in and share you're knowledge and experiences.
Let's all grow together :)
Wishing everyone loads of success
Mark.
- 9yRobert GilstrapPro MemberResidential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
@Mark Vandzura the answer to your question lies in what value you place on your time. If you think hiring an assistant is going to be cheaper or more effective than hiring a professional manager you need to step back and really think that through. Clearly I'm biased but a professionals knowledge, expertise, processes, systems, documents, connections, software, etc. will always run circles around what you can do on your own.
The problem is either you don't value your time or you don't see the value in the professionals services.
A good property manager will save you far more money than you will ever pay them. The problem is just finding a good one.
Regarding having to be licensed; I disagree with @Irina Belkofer that you need a licensed person just because the properties are owned in an LLC. I know of no state that requires a principal owner to be licensed or to hire licensed staff to manage their own property regardless of the entity structure. Not saying it isn't possible but I would research that very closely.
- Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes9y
Originally posted by @Robert Gilstrap
Regarding having to be licensed; I disagree with @Irina Belkofer that you need a licensed person just because the properties are owned in an LLC. I know of no state that requires a principal owner to be licensed or to hire licensed staff to manage their own property regardless of the entity structure. Not saying it isn't possible but I would research that very closely.Generally, anyone could do it without license FOR FREE. When you're get paid - you need a license if it's not your property.
LLC is not you, it's a separate entity. In my case, for tax purposes, it's disregarded entity, because I'm solely own it. However, if I bill the management (to myself or my LLC) I have to be a licensed agent/broker.
Preventing a question why: because of taxes. Rent is on schedule E, brokerage on sch.C and they have different taxable basis.
Managing properties more than four does require the knowledge of the Fair Housing laws. That's why real estate licensees are not exempt from anything like people who manage their own rentals up to 4 units.
- 9ySimon W.Business MemberReal Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 657 votes
When you are the principal and you formed a LLC. The properties are under the LLC, but you paid yourself you do not need to be licensed. You are considered an employee for the LLC. Therefore you are not a contractor (1099).
@Mark Vandzura - as for the PM. You can hire a PM that does not need to be licensed. PM do not need to be licensed. Again, salary, not based on Commission.
The whole license is this. The owner of a Prop. Mgmt firm needs to be an active Broker Licensed. Typically, property owners hire Brokers Firm to manage the properties.
- Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes9y
Thanks for your thoughts @Robert Gilstrap,
I'm sure that for a novice landlord a PM company is worth thier weight in gold. I do put a high value on my time, but I am the type of person that learns by doing. I've been managing my own properties for about 8 years and in that time have developed my own systems, processes, connections, etc. What I'd like to do now is hire someone else to handle the load so that I can scale my business.
I know of several owners of apartment complexes that have full time W2 Property managers, But I haven't met any owners of SFR's and duplexes that go that route. It seems to me that managing 20 SFR's would be very similar to managing a 20 unit apartment complex. And I still find it hard to believe that nobody has tried this.
I tend to agree with @Simon W. that a PM employee that receives a salary and not commissions should not need a license.
Thanks again to everyone who has shared their thoughts. I'd still love to hears the opinions of anyone else in the community. Maybe someone who owns an apartment complex could weigh in.
Wishing everyone loads of success
Mark
- Beloit, OH · Member since 2016 · 49 posts · 13 votes9y
We have a triplex and a SFR, while living out of state a family member helps us. We typed up a SOP for both properties and just exchange texts every few days and get updates as needed.
We looked into management companies but found the same result as you. 10% plus 1st months rent and other fees. Plus our properties are out in the sticks and most companies are 30mins away.
We figured there's about 4 hours of real work each month, ( checking on the properties, making sure the grasses service came tht week, dumpster was emptied and checking/calling on any service work i.e.)
I would be interested in hearing what is involved with these 16 doors, you mentioned you are DIY, but are you doing a lot of maintenance/ service yourself? Or do u just answer a txt and then call your plumber?
I believe in larger cities, where you find most 20plus units the city makes you have an onsite maintance person or PM, check with local laws on that tho.
To me 20units under one or two roofs is completely different than single homes. Example: I believe the triplex is easyer to mange than the SFR simple bc we can control more and all our protential issues are together. With your units being so close to each other I'm sure that helps.
- Investor / Vendor · San Diego, CA · Member since 2016 · 1k+ posts · 949 votes9y
The key question here is, what is your goal?
If you're trying to scale by using property management due to your time being a very finite resource, then it's a valid choice. Know what you're getting yourself into though. You can find countless horror stories not just on BP but all over the internet with property management because you are giving up the most important thing: control.
These are some good questions to ask when you are looking for a good experienced PM. I found these helpful when I was looking for my PM since I'm forced to use one investing OOS:
https://www.landlordology.com/questions-to-ask-a-p...
Recommendation if you are going down the PM route:
1) Find someone solid with a lot of testimonials from happy customers
2) If you can't find one, train your own
3) Absolutely do not get a bad PM, they can totally break your business, driving away good tenants, steal your money, etc.
One more thing, make sure your PM uses good software - it will save you a huge amount of hassle if they use good software.
- Property Manager · CT · Member since 2014 · 687 posts · 329 votes9y
@Mark Vandzura as you progress as an investor you will begin to include a management fee in your analysis of expenses before purchasing. I'm guessing you did not include a management fee in your analysis of your current properties. It's going to be hard to justify the investment now :)
If your long term goal is to invest in more properties it is certainly worth it to invest in a solid property manager.
Your time as an investor is infinitely better spent analyzing markets and deals. You want to move up the 80/20 leverage curve from technician to investor/entrepreneur.
In Bridgeport, CT and New Jersey the investment is about 10% of rents collected which frees you from taking resident phone calls, coordinating maintenance, leasing vacancies, accounting P&L's, conducting inspections and making property payments.
Owners often times suffer from "death by 100 cuts" when having to handle all of these small items, missing opportunities to achieve bigger goals.
- Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes9y
Thanks for your reply. It certainly helps that my units are located within a close proximity, which is why I was comparing them to a small apartment complex. As I've grown, I have learned and developed systems and processes. Since I don't have an extremely large portfolio yet, I am thinking of a part time assistant/property manager to serve as the primary point of contact for tenants, prospective tenants, venders & contractors.. Some of the tasks I would like that person to do are as follows:
1. Answer and respond to all phone calls, texts & emails (e.g., tenant complaints, maintenance requests, vacancy inquiries, etc.) in a timely and courteous fashion.
2. I do use an online property management software (Rentec Direct) which is great for ACH payments and bookeeping, but I still need someone to keep it updated (e.g. post rents received, input vender/contractor invoices, input taxes & insurance, keep track of late payments, etc.)
3. Call and setup contractors to do small maintenance tasks.
4. Gather estimates for capital expenditures.
6 Show vacant houses to prospective tenants.
7. Review and process applications
8.Collect security deposits and review leases with tenants. ( I dont like to just hand tenants a lease to sign without going over it in detail so that there is no confusion as to what is expected of them down the line)
9.Inspect units semi-annually
10.File for evictions immediately when rent is more than 5 days overdue.
11. Set up & remove For Rent signs.
12. Take pictures of units, design flyers and bring flyers of vacant properties to local businesses to attract more and better tenants.
I'm now looking for multi family buildings with 5+ units which would grow my portfolio exponentially and further create the need for a full time Property manager.
I appreciate your thoughts and the wisdom gathered form all those who have responded.
Wishing everyone loads of success,
Mark
- Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes9y
Thanks @Ray Lai,
I love your recommendations, especially #2 :)
- Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes9y
Thanks for replying @Craig Bellot,
Love the chart.
You are correct :) When I purchased my first few properties, I did not think of property management as being an expense to analyze.
Fortunately I do beleive that my portfolio cashflows well enough to hire a Property Management Company. I have only found a few local PM companies and after reviewing their management agreemenst it seems as though I could better serve my rental company with a direct employee and less expense.
By no means am I saying that I am correct in this assumption, ( which is why I posted this discussion). I sincerely welcome all feedback form the BP community from novice to well seasoned investors.
Thank you all for your willingness to help.
Wishing everyone loads of success,
Mark
- Property Manager · CT · Member since 2014 · 687 posts · 329 votes9y
Ok. @Mark Vandzura what exactly about their agreements scare you off?
- Boston, MA · Member since 2017 · 209 posts · 126 votes9y
If you have multiple properties you are in a great position to answer your own question. Before you bring on an assistant to be a jack of all trades, maybe it makes sense to pay a PM for one or two of your properties and see how it goes.
Yes it does "cost" more than what you are currently paying. But I don't believe that it would cost less than hiring solid full time help. I personally would go the PM route, just make sure to find a good one. I say this as an investor and a property manager though.
- 9yPeter TverdovBusiness MemberDeveloper · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
In NJ, if you are showing property or collecting rent you ABSOLUTELY need to be licensed. I know this because I started my property management company 2 years ago and directly called the NJ Dpt of Real Estate and Banking. Don't be cute, not in this state. Hire someone who has a license. 10% plus first month rent is standard. That's why I chuckle when owners argue with my prices (I charge 8-10% of first month rent and that's it. I am cheap as hell compared to everyone else and better than them to boot).
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
I'd like to think you could knock down the price some...
You have 10 doors and I'm assuming with tenants. Get them to waive them collecting the first mo because you already have tenants. They'd probably counter and say they charge x amount for renewal, counter that by saying you have so many doors (you might have to start low and build up to the fact you have 10 doors). Then for the monthly, you could probably get it down to 8%...
If you had 1k mo rent x 10, that's 800 mo. 800 mo really isn't all that much for a part time employee, even if you doubled it at 2k x 10, that's 1600 mo. That's about 47 hrs week at NJ Min wage, not sure about the job market but not sure how realistic that is to expect min wage employee with that kind of task.. - Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes9y
Happy weekend BP members,
So I'm not the type of person that's afraid to admit when I am wrong, and I'm begininng to feel that way. In answer to @Craig Bellot, ... there is nothing about their agreements that scare me off. It's just that at first glance it seems like a lot of money to pay out of my profit and I was thinking that I could be more in control by hiring in house.
I'm not sure I am understanding @Jarrod Kohl. Are you saying that it would be more expensive to hire an in house PM or more expensive to hire a PM company?
And as for @Peter VanWesep, I love your attitude, If Iknew of a property management company that was as confident as you (cheaper than everyone else and BETTER THAN THEM TO BOOT) I'd probably hire them tomorrow.
After reading @Matt K.'s reply, I began to quickly do some math. If I have a portfolio that generates 17000 in gross rent monthly, (17000 x 8% is 1360) That comes out to 16320 annually.
I have a full time job and manage my rentals, so I would estimate that it should take less than twenty hours a week for a part time assisstant. At 16320 annually that's about 15.70 an hour. So I'm wondering... does the employees at a property management company that would be taking care of my properties make more that that? I don't know. And could I train a 15 dollar an hour assisstant to manage my rentals? I don't know. Would it be legal? I don't know.
I think I'm leaning towards Jarrod's idea of trying out a PM co. for a few properties to see how it works out.
Any other thoughts are always welcome and appreciated :)
Thank you everyone
Wishing everyone loads of success,
Mark
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
Don't w2 employee require employer to pay about 10% of the wages in taxes... Vaguely remember reading articles using that # as a rough estimate. Not that it changes it much but something to think about plus the admin costs/burden. Plus you'd still have to manage a employee vs doing almost nothing with a prop mgmt company (in theory, assuming the prop mgmt and you are good fit).
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes9y
Hey Mark. You are running into a very common challenge and question that many investors face as they scale. If you do not receive the answers here that you are looking for, I'd recommend searching BP for posts on your topic and then reach out directly to certain individuals. You can also network at local REIA meetings for other investors with similar portfolios. Listen to podcasts and reach out to guests who have done what you are asking about. They are out there, you just have to find them and it will be worth the effort as it will make or break your investing as you scale. I'm on my third 3rd party manager and still facing challenges, although this one is the best so far. Good luck with your decision.
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