Is Property Management a Good Business?

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Is Property Management a Good Business?

Julie MarquezPro Member
Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes

Earlier I asked about how to become a property manager, and got some great responses and have been talking to people all about having a property management company.

Now I want to know the pros and cons and all the opinions about the risk and reward of having a property management company. I don't see a lot of people running to work in this side of real estate. Most people don't get their brokers license to manage other people's rental. What's the good, the bad, and the ugly of doing property management?

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Tracy StreichPro Member
Real Estate Broker · Tulsa- OKC Oklahoma · Member since 2017 · 868 posts · 801 votes
8y

Julie, 

I have been managing properties for others for about 8 years. We manage about 500 SFR doors. It is a great business. To really make it work you need to get your Brokers license and not work as an agent under another broker. It is always different from state to state but there are several ancillary business streams that can grow out of PM as you get larger. Start with the basics and get a good software in place. I mean real management software, not the stuff a self managed person would use. You will be accountable to other owners so it needs to have good reports and accounting built in. The down side is that many owners have unrealistic expectations. The tendency when you start is to always say "yes" bc you are building and want the business. Make sure the things you agree to are sustainable. An owner may ask for you to drive by inspect every 2-4 weeks. This might sound easy with 20-30 properties but will be impossible with 300-400. If you are not firm from the start with tenants and owners from the start they will both try to run you over. Lastly, NARPM, The National Association of Property Managers. If you manage single family or small apartments it is a must to get involved. The education and resources will save a lot of headaches.

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  • Julie MarquezPro Member
    OP
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    8y

    @Mike Dymski Ha, managing residents, contractors, and owners sounds exactly like my day job! (construction project manager)

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  • Julie MarquezPro Member
    OP
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    8y

    @Jay Hinrichs No one else has mentioned that PM is consistent income for a broker, not just fluctuating sales. That's one thing I like about this path. I already have seen from my experience our single family A homes are so easy to manage, while the C apartments are constant work almost daily.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Julie Marquez:

    @Jay Hinrichs No one else has mentioned that PM is consistent income for a broker, not just fluctuating sales. That's one thing I like about this path. I already have seen from my experience our single family A homes are so easy to manage, while the C apartments are constant work almost daily.

    in our neck of the woods B class and better is a cake walk.. compared to what other PM"s have to do in the rental dominated cities back east and in the mid west 

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  • Ryan Mullin
    Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    8y

    My wife and I have a brokerage and a management business with about 200 units in the inner city of Indianapolis.  We started in 2014 but both had plenty of experience in the industry prior.  Our core business has always flipping and that is how we grow our net worth..    But the PM is what sets us apart from a lot of the local competition and brings us buyers and sellers that most don't have access to.  The bulk of our RE experience was during the 2008 recession and our attitude has been shaped by that almost entirely.  When the retail flips and all attractive deals dry up you will see investors and brokers just disappear.  But property managers will thrive.  And yes the steady income is really really nice.  Its not always fun and it does have its challenges but for me its kinda priceless.   As we grow our portfolio of our own personal rentals we can actually take on deals that most would pass up because we don't have to pay that 10% (or it goes back into our pool of cash flow regardless).  When we have maintenance or vacancy its not nearly as big of a problem for us because we have built a pretty darn good cash flow machine and our big picture looks really solid and not over leveraged at all.  Again...  not always fun.    Im personally driving around the inner city doing things that NO ONE in my income bracket would normally ever do...  (like checking to see if a non paying tenant has vacated a property...  or delivering a window AC unit to a pissed off tenant who's central air went out :)     but I'm also driving for dollars and building my knowledge of local areas and demographics and staying in tune with the "streets".    When I first got my start in RE pretty much everyone said NOT to get into PM...   but Im glad I did.    If your asking where to find PM clients you are literally looking right at it.  Almost every single one of our PM clients came from Biggerpockets.    

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  • Julie MarquezPro Member
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    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    8y

    @Ryan Mullin Very cool story, thanks for sharing! I don't see many RE folks going down the PM route and it's true, it sets you apart! More like Jay said, I'd love A and B properties and not have to drive down inner city streets, but I do enjoy some of the hands on work. I like how you mentioned that the business is a huge asset to your own portfolio of rentals, that makes perfect sense to me and part of the reason why I see transitioning to PM for others.

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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    8y
    Originally posted by @Nathan Gesner:

    There are a thousand things to learn but here are a couple more key points:

    1. Be selective. It's enticing to grow your door count but it can eat away at your profit. Apartments take more effort than single-family and produce less income for you.

    A number of people have written that one of the advantages of large multis is the greater ease of property managment. It's interesting that you consider PM of SFH to be easier.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    8y

    @Eric James most property managers find single-family homes easier. An apartment can make a better return but it also includes more expenses and generally takes more work.

    SF tenant pays all utilities while MF Owner typically pays common-area, laundry or storage, sometimes shared meters

    SF handles lawn maintenance while MF the Owner handles it. Owner also cleans common areas and it's difficult to determine who is at fault when there is a mess or damage.

    SF tend to be more stable, stay longer. MF has a higher turn-over rate.

    SF are usually good neighbors and they have distance from their neighbors which reduces problems. MF gets a lot of complaints about noise, odors, smoking/pet violations, parking issues, someone not cleaning up after themselves in the laundry room, etc.

    There are benefits to each and it depends on whether you are looking at it from the view of cash-flow or work-load.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    8y

    I shouldn't have said "produce less income" for multi-family because they actually cash-flow better. I meant that they have more expenses to deal with.

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  • Julie MarquezPro Member
    OP
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    8y

    @Nathan Gesner I definitely agree about your assessment of SF vs. MF. Our MF is an ongoing work load while the SF are set and forget.

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  • Manna Sivia
    Member since 2019 · 2 posts · 0 votes
    7y

    hello Julie,

    i was reding your discussion. i had the same question. to start a strata / property management company.

    So just want to ask you.

    did you start this business? 

    you found it lucrative ? 

    if not then what was the reason to not to start?

    Reply will be appreciated.

    thanks.

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  • Julie MarquezPro Member
    OP
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    7y

    @Manna Sivia I management my own 20 units, and after much work with them, I don't think I want to start a property management company and look after other people's investments. I'm sure I could do well at it, it's just not the type of work I'm ready to do more of

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  • Daniel Alhadeff
    Professional · Seattle, WA · Member since 2013 · 54 posts · 14 votes
    7y

    Hi Julie,

    I’ve been thinking about starting one as well and I’ve also looked at purchasing existing property management companies. Looking to scale, and eventually sell. I work full-time in real estate development for a large outfit here in seattle. The plan is to continue to do this. My experience is in development and commercial property management - but more in the office / industrial side. I had managed two apartment buildings when I lived in LA. I currently also manage a small rental in Bellevue. I would like to build a new PM company, and scale it up and really create something big and eventually sell it. If this is something that you would like to chat about let me know. Happy to grab a cup of coffee sometime Thanks,

    Daniel Alhadeff

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