When Should You Self Manage?

9 Replies

I hear many clients talk about when the best time is to self manage your properties.  Of course we all know its based on your lifestyle and location of your properties.  My question is assuming that you're buying where you live.  Lots of my investor clients say they self manage their first 4-10 properties then seek a management company.  Then I am also told to start your own management company when you exceed 150 properties.  Whats your thoughts and what have you personally done?

@Ted Kaasch personally I think if you start your own management company get a few clients, you can achieve Economies of scale and do things you wouldn’t be able to do when self managing, and you’ll be able to still save money since technically that’s still self managing and there tax write offs you can get from this.

There's really no right or wrong answer....  or really any formula for it other than what's most valuable for you. To me, I don't spend much time self managing my units (3) and I don't mind doing the paperwork/having the conversations when the contract isn't carried out. Maintenance calls etc, I'd rather be in charge of and make sure they're done w/ who and how I want them done... again doesn't take much of my time.

I went from a managed property, it was OK and if you place a high value on being sheltered from your tenant it could be worth it. It took less time to review the owners statement each mo then it does to collect rents on my own etc and the money (for the most part) just showed up in my account. Emergency or big ticket items did take I'd say equal effort in setting up but it was slightly easier as the PM did the calling/scheduling. 

If I got to the point where the units I have cost me more in time/money then a PM cost.... i'd make the switch. If I got up to 150 units, I'd probably keep doing whatever it is that allowed me to afford the 150 units and leave the PM to a established high performing PM company.

WIth that said, not all properties are the same and some take a lot more effort than others. A lot can be cut out by smart screening and good quality assets ....

It also depends on how much time you have to manage the properties yourself and how much knowledge you have on the landlord /tenant laws of your state.  DO you have a good lease? Are you able to negotiate terms strategically and treat the home and tenant as a business without getting emotionally involved?   what will you do with lease violations? Complaints, non payment of rent etc. 

If  you have the time and inclination , then managing yourself is perfectly fine.

We have some properties that we manage and others are PM’d. Always buy property that cash flows enough that you can hire a PM and still make a great return. If we buy a property we don’t want manage-over an hour away, or maybe a property we intend to re-position then those are ideal to PM. My wife and I are retired and we intend to stay that way; rentals are a great way to generate retirement income!

To me it is also in part based on what kind of work you want to do. Some people enjoy a variety of challenges in life and some want more passive income or to focus more on one aspect of investing.

I personally enjoy variety. So, I do BRRRR in a very hands-on way in all aspects. I could probably make more money faster doing things a little differently, but money is not the one and only goal.

Originally posted by @Ted Kaasch :

I hear many clients talk about when the best time is to self manage your properties.  Of course we all know its based on your lifestyle and location of your properties.  My question is assuming that you're buying where you live.  Lots of my investor clients say they self manage their first 4-10 properties then seek a management company.  Then I am also told to start your own management company when you exceed 150 properties.  Whats your thoughts and what have you personally done?

 Managing 10 or so rentals is no big deal time wise, but it all depends on the owner's personality. Owning real estate and being good at managing real estate are two totally different animals. Property management is a savage business man. Dealing with tenants is a battle everyday. If you are soft or easily agitated it's an incredibly difficult business to run.

As for going from managing your own properties to managing those of others that's also another totally different animal. So many more licensing requirements, auditing requirements and now instead of 1 person being upset with some of your decisions you are guaranteed to have at least one person upset with ALL of your decisions as no matter what you do it's going to make either the owner or the tenant upset in some way.

With my experience in real estate and life thus far, there is no wrong or right answer for situations as these. There is no definition or clear cut answer on what is the correct method of solving this question. The scenario on determining whether having a property manager early on in your investment career or never at all is totally up to you.  If the numbers make sense and you are happy with your decision, then you are right to your own unique situation. I personally enjoy having as much free time as possible, so I choose to have property management in place when I purchase a real estate investment. Don't get caught up with other peoples opinion. You will make the right choice. Make decisions based on the math, and you will do well. Something to keep in mind.

Best of luck Ted.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here