I currently own 5 houses (10 units total) and it is becoming more difficult to manage everything myself while also working a full time job. I have a few property management questions for everyone.
1. When did you know it was time to hire a property manager?
2. What type of services did the property manager provide?
3. What are the typical costs of their services.
Thanks for the help.
The simplest answer is that it depends. LOL. What I mean is that there really are alot of factors to consider, and different costs associated with each option.
To answer more specifically, I would need to know what exactly is bogging you down about managing your properties. Is it rent collection every month? Is it turnover? Are the repair requests and oversight time consuming? Or is it a combo of all of that?
Typically, you can estimate that a full service property manager will charge 10% of your rent roll.
A full service property manager will typically handle everything from tenant screening and rent collection to turnover and managing repairs.
The pros of this are obvious. This completely clears your plate of handling the day to day operations of your properties.
Beyond the most obvious con of lowering your cash flow by 10%, it also really depends on how much control you relinquish. Some property managers under price rental rates in favor of getting a quick tenant, leaving money on the table. Others may authorize repairs to more expensive contractors for ease of completion, whereas you may have shopped around for a cheaper rate.
If you are looking for a tool to just help you screen tenants and collect rent payments, you may want to consider any number of online automated systems like Zumper, which also gives you the opportunity to post listings for available properties.
If you are looking for someone to handle the turnover, you can expect to pay an average of 5-7% of the initial annual rental rate. This seems high compared to the 10% full service. However, the turnover expense is paid once. If the tenant renews year after year, you aren't paying that fee over and over.
I hope this helps! Best of Luck to you!
If it becomes more than you can manage well then it is time to hire a PM. I currently have 13, and 11 I handle myself. I think when I hit 20 it will be time to hire others.
I have 2 little kids, had a full-time W-2 job, managed all 36 doors by myself for a few years.
I quit my W-2 jobs when I had 36 doors.
Today, I take care of my 2 little kids, have 46 doors, still manage all 46 doors by myself without hiring property manager.
I enjoy my free time when nothing going on those 46 doors.
I agree that it depends on your goals and what the end result is of your investing plan.
One thing I think many people do not take into account is the leverage of their own time. You have to put a value on your time and mental stress of whether your doing something right or wrong.
Somethings are better handled if you leverage them out, I think real estate is best form of leverage, besides using a pilot to fly a plane for you :-)
- Questions to Ask prospective management companies:
1.How many properties do the owners actually own themselves?
2.What do you do to ensure that the tenant is responsible for security deposit disputes since that is the largest reason for landlord lawsuits?
3.How familiar are you with the newly changed laws that can affect you the owner if they are not used correctly?
4.How are your maintenance emergency calls handled?
5.Do you surcharge on your maintenance?
6.Can I use my own handyman?
7.How long have you been in business?
8.How many employees do you have?
9.How many property managers do you have?
a.~ How many properties does each manager have?
b.~ Are your property managers licensed?
c.~ What kind of training and qualifications do they have?
d.~ Are they knowledgeable of all current laws?
e.~ How do you protect me from being sued?
f.~ What is the average rent of the properties you manage?
10.If I call and want to speak to a higher up, will I be able to? And who is that?
11.What is your leasing process?
a.~Days on Market?
b.~ Approval Qualifications?
c.~ What happens if my property hasn’t leased in 60 days?
12.Where do you advertise my property?
13.Is the tenant responsible for maintenance?
14.What happens if the tenant breaks the lease?
15.If I am not happy with your services can I get out of the contract?
16.What is your tenant retention rate?
17.Am I allowed to walk the property?
18.Do you inspect the property when it is vacant and occupied?
19.Do I have to allow pets?
20.Is the tenant required to have insurance?
21.If the tenant is in violation of their lease how is this handled?
22.What about evictions? Cost? Time?
23.Do you discount my management fee if I have more than one property?
24.Do I need to have the utilities turned on or do you handle that?
25.Do you pay utility bills?
26.Do you pay the owners taxes, insurance, mortgage?
27.Are there any other fees that I will encounter that we haven’t discussed?
28.What are your average days on market for vacant homes?
29.What is your average rent amount for all properties managed?
30.What is your average work order cost for the owner?
31.What is your average make-ready cost for the owner?
32.Are all my invoices uploaded to my owner portal?
33.How do you advertise your vacant units?
34.Do I receive video of my pre and post make ready?
35.Do you have a setup fee? Or a start up fee?
36.Do you upcharge on maintenance?
37.When do you make owner payments? How often?
38.Are you a Certified Property Manager?
39.Are you a member of NARPM?
40.What is your Guarantee?
41.Do you provide move in and move out reports?
42.How many pictures do you take of the property prior to tenant moves in and after the tenant moves out?
43.Do you get weekly reports when the property is vacant what prospective tenants are saying about your home?
44.Do you provide monthly newsletters to your tenants?
45.Do you hold investor education classes to help me become a better investor?
46.Do you have boutique-style, single point portfolio based management services?
Forgive the side-track, but I am taking the opinion that you are deciding what level of pain you should feel before paying someone else to take care of the management side for you in exchange for some of your cashflow. I'm of the mindset of extending tech to minimize the workload of investors/ homegamer-PM's. Granted, I only have a few properties. But when rehabbing properties, I prioritize installing parts and modifications that allow for easy repair and the minimization of emergencies. For example, when swapping out pex for copper, I put a manifold in with a dedicated line of hot and cold to each faucet/shower/toilet/washer/etc. It might seem like overkill, but you'll see the benefit in a second. Then, I put in a second bathroom if there isn't already one. Yes, I know. More can break. But mind you that breakage is more a measure of durability and wear and tear than anything. So having 2 means there's a cut down on the workload a single washroom would endure.
And here's the real kicker, if a tenant calls saying something is wrong with xyz, I tell them to call me on facetime or google hangouts and SHOW ME. Once I see the problem, I have them go to the manifold and turn the valve off for the problem faucet/toilet/ shower/ etc. and with another washroom available, the problem is a problem- but not a get-out-of-bed emergency. Then, the next day, I call the plumber, electrician, etc that already has access to the unit (pre-vetted) and submit a work order. This works extremely well for both distance and near-by units.
Maybe a little bit of this anecdote might lower your current pain threshold you're experiencing and benefit your tenants, too.
Having property management company gives me some breathing room and take a lot of the stress off my shoulders. It's nice to have someone to run issues by. I took over 13 SFR when my husband became illâthink getting thrown in the deep end of the pool without a life preserver. I turned them over to PM after two years. By that time I pretty much knew what I was doing and felt confident that I could manage the PM and also afford to hire management.
Many less headaches but I am still an active participant in decisions. The company I use charges me 6%of gross rents because of the volume I gave them. I will have my first turnover November 1 and decided it was a good time to do a rehab. They are happy to do everything but I’ve decided to run the show myself and I’m sure to save a lot of money by using my own people that I have established relationships with.. I will have a better idea of the services of this company after the unit is up and rented.
I have a large multi-family that I have kept and can focus all my attention on now that the small properties are taken care of. Onsite managers protect me from some of the day to day drama but I make all monetary decisions and coordinate rehabs.
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