Managing your own properties
Investor · Havre De Grace, MD · Member since 2015 · 31 posts · 3 votes
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.
"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.
I think everyone should do some self-managing at least enough to understand how to interview a PM and to analyze if they may not fit into your idea of a good PM.
If you don't know how to do Credit Checks, etc.... how are you really going to interview a PM to see if they are good for you?
@Ryan Pyle has it right. Once you understand how to manage your own property, you throw off the veil of illusion that somehow it's hugely time consuming or difficult.
I do want to qualify the above to say that some properties are time consuming and difficult, especially in War Zones or similar neighborhoods.
BUT if you did your due diligence correctly AND you have reliable contractors in an "A" or "B" neighborhood, I can't see why you are putting in more than 5 or 10 hours a week at the MOST!
BTW, my rent revenues approaches 7 figures on 8 multi-family "A" class properties. If I gave the PM to a management company, it would cost me $100s of thousands of dollars.
Why do that when I can put in 10 to 20 hours a week (which rarely happens and sometimes I don't do anything for months) and I take care of my properties and protect it as best as an owner can protect it. There is no better person to protect your properties from Liability than you.
Eventually, when I do need to leave the properties to a PM, it will be a PM that I created with my Quality of PMing.
By self managing as well, you can implement things like Automatic Rent Collection, Automatic Bill Pay, etc.
Anyway, is it worth PMing for a little while? YES. You learn a lot and you can figure out if the PM company you are going to hire is worth the money, depending on their services and quality of work.
Hey @Andrew Bertram. Interesting conversation.
I'm investing from a distance, so have no choice but to use a PM. I just make certain that I account for the expense when I am doing my initial analysis. My personal perspective is that PM is a good example of the difference between working "in" your business rather than "on" your business.
I agree with @Joe Villeneuve. For those of us that are looking to create a scalable business, managing your own properties would be a low paying task that takes me away from doing more important things like speaking with sellers and negotiating deals.
If, on the other hand, you have a couple of properties and no real desire to expand beyond that, then managing your own properties would be a good way to minimize expenses and maximize NOI.
Depends on your perspective and personal circumstances.
My wife and I self manage our (local) 31 units. Part of this is "family time", we see it as an important part of raising our 3 children to teach them about business, about swinging hammers and painting walls and landscaping, about marketing and accounting and legal and about being understanding but firm with tenant problems. This doesn't mean we do all the work as a family, we certainly sub out a lot of maintenance and repairs, but pick and choose things to get exposure in. We average about 3-5 contacts a month from our tenants, but the work scales significantly when we are trying to fill a vacancy.
Our business is buy, hold and operate. At some point we may shift to an externally managed portfolio, but we are realizing the benefits of self management at this point.
This has been a good discussion so I don't have anything profound to add about the PM vs no PM debate.
I would disagree that self-managing is a 'low paying job'. An ounce of prevention.... by placing awesome tenants (saving me an avg of $935 each) and doing my own big preventative maintenance stuff, for little time, saves me the average salary of a working double income family in my area.
A dollar saved for me is $1.35 earned, so if I wanted to 'work on my business' I better do it to the tune of $60,000 a year. I may as well get a job. No thanks.
I've gone over to assess and service wall heaters, water heaters, stoves, a/c, furnaces etc and saved $1200 in 5 minutes. Most of my issues are handled over the phone, not with the Maytag man. I had it corrected before you could write and lick and stick a check for that $300 breaker flip.
I don't do credit checks. Most of my people have 0 credit scores and are highly placeable professionals with zero debt. That means no payments. I scoop them up after they've being rejected by the big agencies that have their head so far up their fico score it's all they see. When needed, if I'm nervous, I ask them to bring me their credit report and ID. Has never been a problem. I do background and sex offender checks in less than 2 minutes each. I have the free state-provided sites bookmarked.
Great discussion!
Andrew,
I just bought my first investment property (duplex) and I'm getting ready to start the rehab process. I plan on self managing and will be looking to place tenants within the next 60 days. I know that I can manage my assets more than someone that will never care about my property/financial well-being as much as I do.
In the meantime, I have been reading Brandon's book "The book on managing rental properties". I bought a used copy of it which just might be the best $16.00 I have ever spent.
That book literally tells you ever single thing to do, step by step, in pretty much any situation. Has every form you could think of to evict, lease,....everything. He even mentions a lot of great tools to help put your business on more of an autopilot mode like the free google phone service.
But most importantly he tells you all the things not to do and why most landlords fail. And it all comes down to mindset, having systems, and treating your business like a business and not a half-hearted hobby.
In short, just get the book. Its worth 1000x whatever you pay for it.
Thanks Brandon for writing that book!
Hi Andrew!
Luckily, there are some awesome online resources available to assist independent landlords. Utilizing these can really help manage your property while keeping the property filled with qualified tenants.
Try to familiarize yourself with what is out there!
Good luck!
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.
"It’s what works for me and more importantly it’s what I want"
Exactly!! People like Joe and Ralph have not only determined what is best for them, but have decided that those of us who do things differently are unsuccessful, unprofessional, and not real investors. They cannot think outside the box they have built for themselves.
Not a bad idea. But I'd probably do the opposite. If something isn't broken, don't fix it.
Someone on this thread mentioned he would never manage his own properties. It is rare to find a good property manager though. Many larger landlords create their own property management companies so they can carefully watch over their investments.
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.
To be, or not to be: that is the question:
From a legal standpoint, make sure you've got a solid lease prepared specifically for your state and respective landlord/tenant laws. Your lease is the first thing anybody (the Judge) is going to look at for answers when it get's messy. I suggest you consult with a real estate attorney and come up with a lease that is very thorough.
When self managing, you've got to remember its a business and not a charity. You give an inch and tenants can take a mile and its hard to ever catch back up. Don't let personal feelings get in the way of your decisions if possible. This is why it's priceless to have a good property manager who insulates you from getting emotionally involved along with your partner/husband/wife/girlfriend/boyfriend/etc. An unbiased referee can help you sleep easier for a nominal fee which you should be negotiated depending on your property profile. One property shouldn't be a problem to manage on your own if you live within minutes.
~William Shakespeare, 1564 - 1616. To be, or not to be: that is the question: Whether 'tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles, And by opposing end them?
Hi @Andrew Bertram,
Take my thoughts on PM resources with a grain of salt, I am new at this. I have one SFH rented out so far, and have started my REI path with self managing as part of this first deal. Here are the resources I have delved into and found helpful. I will do my best to incorporate legal aspects since that was a big part of your inquiry.
1. NOLO has some good books on property management. My favorite is "Every Landlords Legal Guide". It's got great summaries of different areas of legality in owning and managing investment properties. I think it's also a good read for those who hire PMs as an FYI.
2. Your lease. I worked with a real estate attorney to review our lease, which I put a lot of work into. That work included reading NOLO and reaching out to local folks here who have properties. In asking about their experiences I got some great pointers to be sure to include based on their difficult situations. At the end of the day I highly recommend having an attorney review to be sure you are in compliance with state and local laws.
3. Asset protection and liability. My investment property is owned in the name of an LLC, with an attorney reviewed Operating Agreement in place. Be sure your documents are in good order, because if they are flawed they can be invalidated in court and you could lose your intended asset protection. Also, umbrella liability insurance policy coverage.
4. Tenant screening. I also use TransUnion Smartmove and recommend it. The report was thorough and easy to review. I also really liked that I never collect applicant birth dates or SSNs - they put those in directly to the site. That eases my risk of being accused of identity theft or something down the road. I was upfront with applicants that I would be reviewing criminal and eviction histories, that weeded some folks out at the front end. I also stuck to my requirement that the income be at least 3x the rent. It took a little longer (3weeks), but I found amazing tenants for the property.
I also introduced myself to the neighbors and gave them my contact info in case they ever had concerns, along with some nice potted plants. They seemed to appreciate the gesture. While that could increase my phone calls I would rather know early on if there was something fishy going on.
Best of luck to you on this next chapter!
@Ralph R. Great insights! How do you go about finding and vetting PMs for a new deal and how do you learn the business of managing properties to be able to oversee their work effectively from afar?