self manage vs property management company

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self manage vs property management company

Mark Vandzura
Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes

Hey BP members, 

Does anyone have any advice on hiring a property manager? I currently manage 16 doors myself, all within a 10 minute drive from each other. (I do everything). I looked into a few property management companies but they want 10% of the gross rent plus other fees to renew leases and file evictions, etc. On top of that, the realtor wants the first months rent when they find me a new tenant. Nothing against property managers for sure, if thats what people are paying, then God bless you :)

But I was thinking of hiring a part time employee (property manager). I could pay them a salary or hourly wage and I am thinking that would be less expensive and give me more control? 

If anyone has ever done this, I'd love to hear your thoughts and how you went about it.

Here's what I'm thinking: If I hire an employee I can determine the job description. I'd like them to handle everything such as handling all phone calls, maintenance requests, posting and showing vacant properties, signing leases, filing evictions, etc,etc,etc...They could even work flexable hours.

I'd love to get some feedback from the BP community.

Wishing everyone loads of success,

Mark

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Amy H.
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!).

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  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Good luck to you also @Mike Dymski, 

    Thats great advice. I have been listening to a magnitude of podcasts, but I have yet to find time to get out to a Reia meeting (I'm working on it). I did a little research on past forums but then thought I would just post the question myself in hopes that the answers would come to me. The BP followers have been fantastic in thier responses and I  look forward to more, and I will certainly continue to research other past disscussions on the topic. Thanks again Mike.

    Wishing everyone loads of success,

    Mark

    0Reply
  • Amy H.
    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!).

    3Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    You make a good point @Matt K.,  

    I know you're correct,  a 15 dollar an hour employee will definately cost me more than 15, but at the same time I should be able to write off their wages. I'm not sure if the write off  will offset the added expenses of paying the things like SS tax & workman comp, etc. for an employee but maybe someone else can answer that question. 

    And I'm certain that I would have to manage the manager( more so in the beginning for sure). 

    I was thinking (in my dream world) I would like my proposed employee to eventially become as self sufficiant as a PM company.

    0Reply
  • Simon W.Business Member
    Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 668 votes
    9y

    @Mark Vandzura - wages/salary will be under expenses which will reduce your net income. In return, taxable income will be reduced. I would suggest getting an outside accountant/CPA to give you a better understanding regarding your taxes.

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  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Hi @Amy H.,

    Thanks for weighing in. You make a good point. Thats another reason that I think I'd have more control if I hired an assisstant/PM.

    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Hey @Simon W.,

    Thanks for your input. So in your professional opinion, If I take into consideration that if I hired an employee, their salary reduces my net income thus reducing my taxable income, how much does a 15 dollar an hour employee really cost me?

    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Hey BP members, I'm still looking for more opinions/advice. Don't be shy...reply

    Wishing everyone loads of success,

    Mark

    0Reply
  • Jarrod Kohl
    Boston, MA · Member since 2017 · 209 posts · 126 votes
    9y

    @Mark Vandzura

    I was trying to say that it would be much more expensive to hire a person to manage than it would be to hire a management company.  Between training and the other things that would possibly be needed (like licensing) it would probably be much simpler to hire a management company.  

    The exception would be if you would need an assistant for other things as well and were thinking about hiring one anyway.  Perhaps this could put off using a PM for a few more properties or months.

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  • Jarrod Kohl
    Boston, MA · Member since 2017 · 209 posts · 126 votes
    9y
    Originally posted by @Amy H.:

    @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!).

     I think the key here is Trusted PM.  I have also worked for several companies and now I have started my own (so yes probably bias) thing is those relationships that you mention can also mean a better price.  One of the companies that I previously worked with could get plumbing and electric work done quicker, cheaper and better than a normal property owner could, since we gave them so much work that it was in their best interest to give us their best prices. It is hard to have that clout with a vendor without either a relationship or a promise of future volume work, both of which are easier to achieve as a PM company than an individual. 

    I would not say that all PM companies are good at this, and sometimes certainly they will use the same companies out of laziness or personal ties, but not often.  Hiring a property management company is not right for all investors, but as you start to want to become more hands off (or need too because of volume) a great property management company can become invaluable.  

    0Reply
  • John Petersen
    Conway, AR · Member since 2017 · 12 posts · 8 votes
    9y
    What is the total cost that you would pay to have an already established company manage at 10%. I would ask for a discount since you would be giving them multiple properties. I can't speak from personal experience, but to me I think it would be much more expensive for you to hire an employee than to give 10% or hopefully less to a management company. Also, maybe you can work something out if you locate the tenants. Shop around and let them know to give you their most competitive bid because you will be shopping.
    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Thanks @Jarrod Kohl for better explaining your point.  I have to agree that finding a great PM company ( or even a great  W2 employee for that matter) would become invaluable. My assumptions would be that an employee might cost more at first but after they were trained there would be a substantial savings and more control. (But of course these are only assumptions from someone who has never had a W2 employee ) 

    Thanks again for your responses Jarrod.

    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Hi @John Petersen, 

    You make a good point about quantity pricing. I did talk to a PM company a while ago that offered me a price break because of the amount of properties that I'd be bringing in and I've aquired a few more properties since then. 

    But at the same time, I wonder that if I try to cut their price, will they in turn be less attentive to my properties. 

    I'd really like to hear from someone out there who has or at least tried to hire their own PM, and their experiences (good or bad).

    Wishing everyone loads of success,

    Mark

    1Reply
  • Simon W.Business Member
    Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 668 votes
    9y

    @Mark Vandzura - I honestly do not know how to answer your question regarding how much $15 employee would really cost you. I do not know your level of cash flowing and income. So I will just give my 2 cents.

    My whole career is in Real Estate Accounting. Every company that I've worked for run their own property management and hire employees because this gives the Owner more control. You can hire and fire an employee if the employee/property manager isn't doing a good job.

    I also know how PM companies who do NOT own any properties and just strictly manages properties/income/expenses do for their clients. Not the best idea. They have Property managers that can do a great job or a horrible job. You can't fire them. PM companies will have hundreds of clients and truthfully, your properties might just get very little attention. You will start hassling the property managers and the accounting department. Your outside CPA will also hassle them. All in all, it's not a good combo. 

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  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    9y

    @Amy H. sums up one of my concerns- the modified kick-back scenario. 

    The other problem I have is the 8-10 percent. It rewards the poorly cared for property. You have a 4 unit building, completely renovated with high market rents and top shelf tenants. You did this- you built it... manager hardly has to lift a finger. $84,000 a year in rents

    PM: Me want 10%, me want $8,400. no rhyme no reason, me want!!!

    Slumkinski has an old 4 unit building one block over that he does not want major renovations done on. band aid and duct tape. Tenants- not so good. $48,000 a year in rents.

    PM: Me want 10%, me want $4,800. me want!!!

    I am subsidizing Slumkinski.

    It is the same problem I have with a realtor- I make my home beautiful and marketable. It is in a higher end market, just list and sell. Me want a cut, me listed on Zillow for you!

    I am curious with purplebricks and redefy gaining traction, and with everyone on here recognizing the ease at which properties can be "tele"managed whether we will see a flat-fee start-up in the property management arena.

    Ultimately @Mark Vandzura, If you are at the tipping point, I think you must decide whether you want to be an active landlord or an active property investor/acquirer. If it is the latter then you must find a trust worthy property PM company.

    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Thanks for your reply @Patrick M.,

    I am leaning towards being more of an active investor rather than an active landlord but I'm trying to get as many opinions as i can so that I can make the best choice between a PM company or a W2 PM on my payroll.

    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    9y

    Thanks again for your replies @Simon W.@Simon W.

    So are you saying that it's not a good combo because an outside PM company will most likely not work well with my accountant ?

    0Reply
  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    9y

    @Mark Vandzura, understood. My feeling is if you take on a W2 then you will still be actively managing your property and an employee- even though you may believe otherwise. Best to work on getting together a good team that includes a property manager so that you can dedicate yourself to acquiring.

    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    8y

    To @Peter VanWesep, @Irina Belkofer,@Paul Ronto,@Jim Celmer,@Robert Gilstrap,@Simon W.,@Geoffrey Schaeffer, @Ray Lai, @Craig Bellot, @Jarrod Kohl, @Peter Tverdov,@Matt K., @Mike Dymski, @Amy H., @John Petersen, @Patrick M.

    Hi all,

    I'd just like to say thank you for all of your great input and advice. It has been a pleasure gaining information and interacting with all of you. I'm always willing to listen to more advice but I thought I would update the forum on my progress. 

    I have talked to several PM companies. It seems that 10% is the going rate. The bigger real estate companies also have many other fees such as a one time $95 per unit set up fee, a $200 lease renewal fee   and others. They all want the first months rent to find a tenant to fill a vacancy.  A couple PM companies did offer to lower their fees and the percentage to 8% (without me even asking for a discount) due to the amount of properties I would be giving them. One Company (which I really like) offered to handle my properties for 6% with no additional fees and they only charge 1/2 of the first months rent for locating a tenant for a vacancy. I've contacted three references and they gave rave reviews. This is one option I'm seriously considering. But..... I just found another option. I've been in contact with a realtor that I knew 10 years ago(her son played baseball wtih my son). Over the last 10 years she left real estate and became a PM for and apartment complex and in the last few years she got back into real estate. She is very knowledgable in both fields and very interested in being my PM/assistant. She knows that I want to get out of the property manerger role and that I'm ardently looking for larger multifamily apartments. We havent worked out any details as of yet but I am looking forward to further discussions with her. This could be a win/win for both of us. Wish me luck BP friends, and thanks again for all your help. 

    Wishing everyone loads of success,

    Mark

    1Reply
  • Jarrod Kohl
    Boston, MA · Member since 2017 · 209 posts · 126 votes
    8y

    @Mark Vandzura

    Good luck! If you have any questions as you move forward please feel free to reach back out!

    Side note, for the "one time set up fee" I would see if the companies could combine that or make it much smaller.  Often it is because it costs money to set up bank accounts and other info, but if it is one company with multiple units, it seems a little high.

    0Reply
  • Alison Evans
    Rental Property Investor · Havre de Grace, MD · Member since 2018 · 15 posts · 11 votes
    7y

    @mark vandzura

    I am in this same pickle myself currently. I have always done my own property management but have recently grown and trying to scale. I need to become less of a landlord and it's more cost effective to hire a personal assistant. Did the assistant work out for you? I need to hire an assistant for property management, book keeping, and help with acquisitions. Think I'm asking for too much?

    0Reply
  • Mark Vandzura
    OP
    Rental Property Investor · Franklinville, NJ · Member since 2016 · 73 posts · 20 votes
    7y

    Hi @Alison Evans,

    I wish you the best! The realtor friend of mine didn’t work out. I’m now vetting a property management company that seems to be a good fit. I sent you a pm if you’d like to contact me to hear more about my situation. 

    1Reply
  • Matthew Irish-JonesBusiness Member
    Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Mark Vandzura  I do both, manage my own properties and manage for others.  The situation is always dictated by your personal preference and situation.

    I own a PM business so operating my own properties within that framework takes almost no extra time.  We have a lot of out of state and out of town clients on the PM side that 1) need to legally have a PM company 2) Makes more sense to outsource because they are not local.

    On the employee side... I think you will quickly find it is probably not cheaper.  Payroll tax, insurance, workmen's comp, injuries, laws governing your actions, mileage etc...

    If you don't want to pay a full time or part time employee and take on all of the headache's that come with employees, why not consider outsourcing all maintenance to one local contractor.  

    He will be insured, and will be a 1099 worker so you don't have to worry about him being "your" employee. 

    Then you can focus on rent collection and renting units.   Or... focus on outsourcing that specific function to another vendor once you have your maintenance covered. 

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  • Calvin Thomas
    Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes
    7y

    We manage all of our own properties directly in NJ/NY/CT/PA/IL. Each property is in it's own LLC and we've never had an issue in any state. Now, if you are managing someone else's property, then that could be an issue. We also have employees. As for renting the place out, we just contract with local realtors for listing on the MLS. Depending on state, we pay a half a month to a month's rent as a commission for the new tenant.

    All 600+ units are managed through an online support system or the tenants can call a 24/7 call center for emergencies and a page goes out to the team. Operations manager for that location gets the notification, reaches out to the tenant and either goes to investigate the issue or sends a repair man to the unit. As long as everything is organized, it's usually not a problem and you cut out the middle man. That is what property managers basically do themselves. Well, they also add their fees on top of a service call, pricing, etc. It's best to avoid if you can. They're a waste of money if you can handle it yourself.

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  • Matthew Irish-JonesBusiness Member
    Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Calvin Thomas you may not have had any issues but, not having a registered property manager in the county you are investing is illegal in some places.  City of Buffalo would be one of the places on that list. 

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  • Account Closed
    Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
    7y

    @Irina Belkofer is this a full time bookkeeper or part time? How many hours? Do you know how much they pay them? I’m considering hiring one, but no way I need a full timer yet

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