I own and manage 10 properties currently. They are all single family residences- 6 houses, and 4 condos. It is generally ok, and on average my tenants stay 2-3 years. 5 of the properties are within 10 minutes of where I live- and the other 5 are about a 1/2 hour away: 3 to the north, and 2 to the east, so they are bundled" somewhat, which helps.
I am contemplating hiring a 3rd party. I spoke to 3 companies (Detroit 'burbs) who all offered me similar cost structures: 8% off the top, 1st months rent if they list/show, and then the coordination of repairs is "free" (no management costs tacked on).
The 8% is the part I struggle with. That's a grand a month to basically collect rent. In total, my properties probably average 1-2 issues a month (12-20 repairs total, per year). My questions are: Is that price structure standard around the country, or are there others? I would gladly do $25-40/month/property ($250-400 total) for them to collect rent, and then notify me of repair requests. If I have them get bids and handle the repair, then charge me a fee. Or, if I take care of it, then they are simple passing on a message.
Am I dreaming?
That FREE to coordinate repairs means making a call to their preferred service provider. Read the fine print. They will likely charge you markup on materials and a hefty hourly rate and trip charge. NOTHING is free my dear!!
PMs won't care nearly as much about your property as you do, and things are likely to go lacking. They won't rush to get your unit filled because they are only losing 8% of the rent when vacant whereas you are losing the entire month of rent. They will still get their lease fee.
I say if you live close, are handy with repairs, work on minimizing your workload (set up electronic rent payments to keep from picking up rents, schedule maintenance to minimize repairs, etc).
@Ben Thorsen Have you considered hiring a part time person (i.e. personal assistant) to do this for you? Seems like you could provide him/her with instructions, phone numbers, etc on how to handle most of these issues.
I don't think there would be any licensing requirements if they are only coordinating repairs and aren't handling any of the money. You could have the tenants transfer the rent electronically (VIA Venmo or Zelle) to alleviate this issue.
I know several landlords that have more or less use the approach of "in house" property management.
You could hire someone to do things for you, like @Will Gaston suggests, but that brings up one of my favorite slogans:
"If you think it's expensive to hire a professional, try hiring an amateur."
Hiring somebody off the street sounds like a good way to save money but the truth is you will probably lose money in the end and there's a good chance you will experience a lot of headaches along the way. Can you imagine how much time it takes to train someone how to properly handle showings, tenant screenings, Fair Housing, etc.?
Property Managers can be expensive and you have to do a little work to find a good one. If you do find a good one, you may actually end up making more money even after paying their fees!
You can start by going to www.narpm.org and search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start.
1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.
2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.
3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!
4. Review their lease agreement and addendums. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.
5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance or problem tenants. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.
6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.
I hope this basic guide helps. If you have specific questions about property management, I'll be happy to help!
@Ben Thorsen , congrats on grossing $150,000 per year out of your tenants! If subtracting $12,000 each year so that you don't need to handle any phone calls/complaints from your tenants doesn't seem worth it, then you know what to do.
Arguably, 8% would be considered (too?) cheap in many parts of the midwest. Good luck...
Self-manage, PMs provide no value, they accept no-risk. I would suggest grooming one of your kids, nieces/nephews, cousins to help. Have them first start with something small like scheduling work. Then, move into marketing and working a sales funnel. My Sister-in-law is going to school for Actuary Science. I spent 2 years trying to explain how what our family does with our rental portfolio. She looked at it as its not her thing, or she has other "options" (she goes to an elite business school). Then she got an internship working on a marketing campaign for a major financial services firm. No we are not a multi-million dollar operation, but she actually understood what questions to ask, how to ask them, how to qualify a lead, etc. Only then did she realize what business concepts were being practiced in real-time. Basically use this as an educational tool for those close to you.
Also, when you self-manage you can control for personalities in your units that will be issues. PM's due to their detached position, and laws/regulation have to take anyone who is qualified.
@Mark Fries Sounds like you've have a nice system in place...I'm guessing that your sfr are mostly in very good condition and not near any combat zones?
@Mark Fries ... you're killing it.
@Christian Hutchinson ... I'm aware of the laws around this, and some strategies regarding it. I'm also in Detroit area (Oak county). Do you participate in any networking groups, etc.?
@Nathan G. - thanks for the input. I will keep it in mind if I move forward in my discussions with the potential PMs.
@Brent Coombs - sure, I wouldn't have to handle calls from tenants, but I'd still get a similar amount from the PM. That's how I understand it from a friend who uses PM on his 5 properties- he has zero interest in doing it, but he never has. I have done it from the onset, so I'm not "afraid"...
I've been managing the 10 properties for about 5 years. In that time, I have managed the turnovers, with help of course, and listed/shown the property and selected the tenant. It's worked out pretty well actually. In that time, I've hired a realtor exactly twice to list and show. Both of those times have ended up court, as the tenants have some distinct lower respect for me as the PM/owner than when I am dealing with them from the very beginning. In the other cases, when I list and show, it apparently establishes a higher level of respect. This gives me concern in using such services, but I'm not sure I want to keep managing the turnovers as I have been, and thus am looking into alternatives. I think a "personal assistant" is a good suggestion, and it has occurred to me before. I'll have to give it further thought.