Managing your own properties

39 Replies

I have had a rental property for almost 5 years now.  I have been happy with my property management company for the most part.  However, I would like to start taking care of this on my own.  I feel like the knowledge and experience of the ins and outs of this property would be important for my future investments.  I am hoping that someone could recommend to me, some resources to read or watch that could help me with understanding the basics of managing a property and then some more detailed information.  I would like to find out how to perform credit and background checks first and foremost.  Additionally, I would like to find out what are the things I need to do to protect myself from a legal standpoint.

Any and all information would be greatly appreciated.

Thanks.

Read the book on rental property management by @brandon turner!

Great angle Andrew... 

I think the value in self-managing (maybe as valuable or more than the management fee you save) can be in learning about the process at the granular level.

Even if you find it is not for you (and go back to hiring it out) you will gain some insights about the process of getting a tenant or getting a unit turned around that could help you be an efficient owner or even scale up later. 

You might even gain detailed insights about your rental market (meeting potential tenants) and what components make a durable but desirable rental.

Nothing like on the job training. I think between BP resources, books, and some hustle you could make it work. Any edition of Leigh Robinson's Landlording, for example, has been a confidence boosting resource for decades (low cost or eve free at the library). 

Best of luck!

Why?  Are you an investor or a babysitter (for your property)?  

I would never manage my own properties.  Why?

List of priorities for use of my time:

1 - Family

2 - Analyzing properties for my next deal

3 - Making offers

4 - Family

5 - Negotiating

6 - Networking

7 - Expanding my Powerteam

8 - Finding more partners

9 - Finding more funding sources

10 - Did I mention "Family"

245 - Not spending $100/month by taking calls at all hours, and all Holidays

"Landlording" is a fun and informative book to read and to reference.

"The Property Management Toolkit" is a book I really enjoy.

I would lose at least $16k a year just by taking on a property management company. And that is before they start charging me for "work" and putting in their tenants.

I really love it. And the most time I put in is just repositioning the properties, it all falls into place once you get the hang of it. 

On 9 units I got 4 phone calls this year. I am going to pay someone $16k to answer 4 phone calls???

I placed 3 great tenants this year that I vetted. It really was not at all difficult...I'm going to pay someone $4900 (1 months rent for 3) for their tenants?

So I would be out $21k and I haven't even gotten into the incidentals they will charge.

We really enjoy it. It is another aspect of family time for us. Much is play and some is work, I am hopeful my boys will have a great working knowledge so if they want to take it over they can. Regardless I think it gives them knowledge of a business and I am ever pushing them to develop a work ethic ;) They are 10 and 7 so they have time.

@Andrew Bertram I'm with @Joe Villeneuve Why?? I too have 9 units. 2 different PM company's. Property's in 4 towns all 3000 plus miles away. I go to Thailand on vacation how would I mange them myself from there?? Oh yeah I just added a small self storage facility 3000 miles away. Again I outsourced the management. I couldn't have bought this if I didn't know how to find and manage people. If it's freedom and unlimited growth you want learn to manage the people that manage your business. By self managing you limit your growth to whatever size you can manage yourself. If you want to own your own job that's different. I never could see the difference between self managing and owning a Restraunt or motel or something like that. Also knowing how to vet, hire, and manage the PM's allows me the freedom to invest anyplace I want close or far away. I'll take my horizontal pay check any day of the week whether I'm spending time with my wife, we are in Thailand, or at home on the couch. If I want more money to spend I won't be afraid to increase my portfolio to get it. RR

Originally posted by @Ralph R. :

Andrew Bertram I'm with Joe Villeneuve Why?? I too have 9 units. 2 different PM company's. Property's in 4 towns all 3000 plus miles away. I go to Thailand on vacation how would I mange them myself from there?? Oh yeah I just added a small self storage facility 3000 miles away. Again I outsourced the management. I couldn't have bought this if I didn't know how to find and manage people. If it's freedom and unlimited growth you want learn to manage the people that manage your business. By self managing you limit your growth to whatever size you can manage yourself. If you want to own your own job that's different. I never could see the difference between self managing and owning a Restraunt or motel or something like that. Also knowing how to vet, hire, and manage the PM's allows me the freedom to invest anyplace I want close or far away. I'll take my horizontal pay check any day of the week whether I'm spending time with my wife, we are in Thailand, or at home on the couch. If I want more money to spend I won't be afraid to increase my portfolio to get it. RR

 @ Andrew Bertram  I thought you said, "I'm happy with my PM...".

Besides, if they are charging you like lawyers, for every move they make...or think of making, then find another PM.

@Ralph R. ...If I could vote for this post 10 times I would. To be successful, REI should NOT be spending Money and Time, or substituting for people. They should be Managing, time, people and money.

You can always get your money back...you can NEVER get your time back.

Originally posted by @Patrick M. :

"Landlording" is a fun and informative book to read and to reference.

"The Property Management Toolkit" is a book I really enjoy.

I would lose at least $16k a year just by taking on a property management company. And that is before they start charging me for "work" and putting in their tenants.

I really love it. And the most time I put in is just repositioning the properties, it all falls into place once you get the hang of it. 

On 9 units I got 4 phone calls this year. I am going to pay someone $16k to answer 4 phone calls???

I placed 3 great tenants this year that I vetted. It really was not at all difficult...I'm going to pay someone $4900 (1 months rent for 3) for their tenants?

So I would be out $21k and I haven't even gotten into the incidentals they will charge.

We really enjoy it. It is another aspect of family time for us. Much is play and some is work, I am hopeful my boys will have a great working knowledge so if they want to take it over they can. Regardless I think it gives them knowledge of a business and I am ever pushing them to develop a work ethic ;) They are 10 and 7 so they have time.

 What is the cost/value of the things you did?  You don't pay your PM just for what they "do", but also for what they will do if needed.  They are your insurance policy for your time.

You need to find a new PM if they are nickle and diming you.

You "really love it" because you haven't had to do anything big...yet.  Wait until you have to do an eviction (and you will), and you have to collect on their late payments, deal with the letters to your tenants, court filings, court time, etc...

...and as @Ralph R. pointed out, by doing your own PM, you are restricting your opportunities by limiting your geographical area to  distance from you.

 ...and, I have a hard time believing  you can't increase your income by more than $16k/month to cover that cost your PM costs.  Your PM is just part of the expense of owning rentals. 

@Joe Villeneuve absolutely!!  I can also put on a pretty good rant about how wealth is measured in time not money. RR

Originally posted by @Ralph R. :

@Joe Villeneuve absolutely!!  I can also put on a pretty good rant about how wealth is measured in time not money. RR

When I ask REI:

1 - "what is the maximum number of properties that you can handle yourself"...and, "is there a goal for the number of properties you want to have"?

2 - then I ask them, "if they analyzed the properties they have now to include the cost of a PM...even though they are currently self PM, and when they say "no"...I'm self managing".  Then I ask them the last question...

3 - What happens when you are at your Minimum Goal, and your analysis says you have to keep self PM?

@Joe Villeneuve exactly. And remember if the REI has to self manage to get cash flow he is managing for a reduced rate or even free. If the property won't flow right with a PM he paid too much or something. RR

I’m self managing my properties right now in order to put systems in place that will allow me to delegate all aspects of the property management. So I think of it as starting a PM business that I’m going to scale up. I’m reading Brandon’s book now and am self managing using tenantcloud. It’s not perfect but it allows you to collect rent for free and communicate with your tenants. It also allows you to have tenants submit maintenance requests with pictures and assign them out to your team. I do screening using Smartmove (35, paid by tebant). Unfortunately tenantcloud doesn’t yet have this built in. Smartmove does background check, credit check, and looks for evictions. I also have folks give me the info on their job, talk with their boss, and talk with personal references. My property could support PM but I fired the company I was using since they were doing a terrible job! That inspired me to build my own small team to manage and maybe one day I’ll take that system to scale and start managing other peoples properties with my team.

Good luck!

Systems and consistency are the name of the game.

@Andrew Bertram I see both sides of the coin, and definitely recommend self managing local properties. This especially holds true if your properties are in B neighborhoods or better. I self manage my four unit property in Lyons, IL and also a 9 unit apartment building in Berwyn that I bought through a partnership. The time required is not nearly great enough to justify the 5-10% that these companies want. 

I also own a 20 unit in South Bend, Indiana that I have property manage take care off. I definitely cannot self manage as it is in a C area, and the numbers work fine with management in place. I will tell you that management companies are incredibly inefficient in comparison to my management style, and maintenance calls end up costing a lot of money. With that being said, I don't have to spend any time on the place!

Originally posted by @Ian Walsh :

Systems and consistency are the name of the game.

  A simple statement, that speaks volumes...although if the system in place is a good one, your statement is redundant.

Here's some food for thought, that applies here in a number of ways.

"Saving money isn't the same thing as making money.  They are by no means equal, and the act of saving money can actually hurt you from making money"

@Joe Villeneuve I have removed 5 tenants. I have completely emptied one building which is over 150 year old and was full of no goods. We have renovated that building and will/ have repositioned it. 

I have had the benefit of doing this all within family and working with 3 generations. From designing the apartments to building them and sharing it with the kids.

We are going to Europe in 2 weeks. The tenants have my cell if needed. We are living in 2017.

If I owned properties thousands of miles away I of course would pay a property manager. But I do not.

Why would I pay a property manager $4k a phone call.

Again- I find it very fun and but for repositioning it is really smooth as butter.

If all you want to do is own properties and have someone else do all the work. Good for you. That is not what I want. We all want different things. I have no desire to go to ANY foreign country. I haven’t had a phone call in over a year. Emails once in a while. I do all my own PM’s, maintenance, repairs, reno’s. That’s what I want to do. As far as the 50% rule. I’m at 70-75% and I am debt free. No mortgages, truck payments, credit cards. I realize this style would never work for a lot of you and that’s ok. It’s what works for me and more importantly it’s what I want. I hope every one of you can say the same.

Originally posted by @Joe Villeneuve :
Originally posted by @Ian Walsh:

Systems and consistency are the name of the game.

  A simple statement, that speaks volumes...although if the system in place is a good one, your statement is redundant.

  

Being consistent with the systems would be a better way to phrase it.  We manage over 2000 properties and almost every success and failure comes back to the systems and implementation.  

@Andrew Bertram , I self-manage 140 units now and have managed up to 213 units in the past (I sold a bunch this year because I got an offer I couldn't refuse). In managing 140 units, I work about 15 hours a week. I only work Tues, Wed and Fri. Yes, I take calls on the other days but rarely does that mean any more than inputting a work order into Appfolio or scheduling a showing. 

I think a few of the folks above assume that managing one's own properties means that you are doing absolutely everything yourself including repairs and maintenance. I've been doing this since 2004 and have yet to paint a wall or pick up a hammer. I'm terrible at those things and have always hired it out. 

I think the decision to self-manage is personal. For me, I enjoy it plus it doesn't take much time. My goal is to eventually hire an employee (a mini-me) to take over once there are other things for me to do with my time. I'm a value investor though and am not  looking for deals in this crazy market (I'm not saying there aren't any, I'm just saying I'm not willing to pick through this particular haystack to find the needle). I'm with @Joe Villeneuve in that family time is most important to me. I see things a little differently than he does, as for me I would have to work a lot harder to make up the cost of a PM by finding deals in this market. Once the next downturn hits, I will absolutely be working hard to take advantage of the opportunity and may hire a PM to free me up. But for now, my time is better spent managing my investments (again, for me personally...I'm not saying that's true for everyone).

If you think you want to learn more about the inner workings of PM, go for it! It will certainly make you more adept at hiring PM's in the future. You will also develop a better BS detector when dealing with contractors, tenants, PM's, attorneys, inspectors, etc. 

As for resources, I would recommend the book Landlording. I also like the Mr. Landlord forums (aside from BP of course) as you get a lot of grumpy old school types on there who can give you very seasoned answers to any questions you may have.

One last bit of advice: the tenants you choose to do business with will make or break your life as a PM. If you take your time and screen carefully so you know exactly how your tenant are going to behave, your life will be much easier and more predictable. If you get sloppy with your screening, that's when you end up with lots of evictions, chasing late payments, taking nonsense phone calls, etc. I know because I've been there and have eating the crap that I've sowed many times! It always comes down to tenant selection every time.

Good luck!

Having been a landlord since 2005, I decided a few years back that I can do the landlording (fixing things and getting contractors to the house) stuff on my own. The verification process, I leave to a great local firm. They run the background checks and verify the people and "vet" them for us and they have been awesome. The privacy rules are a bit hokey for a one-off need every once in a while, and I am happy to allow them to have the 1st month's rent in return for their services. 

I found something that works for me. If I were you, I would start off slow and see what part you like, can tolerate and then see what is best for you and your business. I know lots of people who do both, nothing wrong with that, at all, but I am happy with what I have done with my 5 properties. 

I managed my local rentals myself for the most part. At one time, I had out of state rentals managed by my sister.

I was interviewing PM's some 20 years ago when I was putting in long hours as a programmer. The funny thing is, the PM turned around interviewing me.

We met on the property where I need the PM and he asked me if I had a landscaper. I said I did. He ask me if I had a plumber. I said yes, I used the same guy for 20 years, trusts me, and he comes by to my property, does the repair, and sends me the bill. Finally he ask how many calls I receive a year. I told him three or four at the most.

I also have in the lease tenants handles small repairs under $100.00.

So he wondered out loud why on earth would I need a PM. With 10 percent fees running nearly $2,000/year, he asks "you mean you pay me $500 for each phone call?" Then he goes on to say that a landscaper is more than to cut grass, they can keep an eye on your place. In fact when the property is vacant, this past winter, I had the landscaper shovel snow. Besides, if I have a plumber I trust, trust me to bill me, I basically have 99 percent of the issues covered.

I thanked him for the lecture and in the 20 years since, I saved about $20,000 in PM fees.

As to vetting tenants, there are service that offer credit checking. Around here, you can use brokers to do that for you as part of doing the rental.

Originally posted by @Joe Villeneuve :

Here's some food for thought, that applies here in a number of ways.

"Saving money isn't the same thing as making money.  They are by no means equal, and the act of saving money can actually hurt you from making money"

Quote of the day! I needed this to expand my mind into doing more! Thanks!! Gaby

Originally posted by @Jim S. :

If all you want to do is own properties and have someone else do all the work. Good for you. That is not what I want. We all want different things. I have no desire to go to ANY foreign country. I haven’t had a phone call in over a year. Emails once in a while. I do all my own PM’s, maintenance, repairs, reno’s. That’s what I want to do. As far as the 50% rule. I’m at 70-75% and I am debt free. No mortgages, truck payments, credit cards. I realize this style would never work for a lot of you and that’s ok. It’s what works for me and more importantly it’s what I want. I hope every one of you can say the same.

 This. It really depends on what you want, what abilities you have and what abilities you want to acquire. If your game plan is to obtain an unknown/infinite number of units, then you are going to likely want to/have to set systems in place to run these units, and that probably means professional management. If you want to own a dozen local units, and enjoy doing the work, there's absolutely no reason you can't manage them yourself. 

Personally, I think all starting REIs should self-manage, if only to understand what goes into managing a property. It is difficult to determine the effectiveness and efficiency of anything if you have no idea what it takes to make it work, what the true costs are (time, money, resources), what the advantages and disadvantages are. Most people who complain about their PM either don't understand the benefits they are getting, or are getting shafted because they don't know what they should be getting for the cost. 

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