Never Landlorded, What makes you do it over paying a PM

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Never Landlorded, What makes you do it over paying a PM

William Huston
Trinity, FL · Member since 2016 · 209 posts · 57 votes

Hello All, 

I am going through growing phases in learning how to properly invest in real estate. For the last 12+ years i purchased properties and turned them into rentals as i switched duty stations in the military. Over the years i have never land lorded any of my own properties, but i did house hack for about 3 years of that. Currently i have 5 rentals and in 5 different states, so im forced to have 5 different PM's and 5 additional states i have to file taxes in. I am currently contemplating selling some of these properties since they are near peak in each area and would net me enough in equity profit to purchase new properties in my local area here in Florida and make more cash flow if i 1031 exchanged, which i have never done before. 

So, i am on the fence about doing the property managing myself, currently i am a Registered Nurse who works 3 days a week (Night Shift), so i have a good portion of the week im free to things and im pretty handy with things from learning over the years fixing my own primary residences, my last rental property i bought it was a fixer upper and did all the work myself outside of dry finishing. I did the painting, replaced the roof, hung the drywall, replaced the kitchen cabinets, layed new tile in all 3 bathrooms, put wood engineered flooring in house and replaced the water heater myself. So i have gained experience in many of the common repair areas in housing, so its been a thought to take over the management until i become larger. 

Reasoning im thinking of doing self landlording:

1) I have gained a lot of experience with home repairs over the years, im not a professional, but i feel like im pretty handy. 

2) I am currently paying nearly $900/month in PM fees on 5 properties, so i feel like that would be a huge savings if i did the management myself. 

3) $900/month could pay for another rental property....

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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
8y
@William Huston well Your giving away 11 grand a year of profit to them. That’s enough incentive for me to do it myself . Obviously that would require you to be faIrly local though . Pms offer a valuable service If they are good .i would say Landlording is a savage business If your timid big hearted or anxious/ nervous type then it will be hard for you to be a landlord and self manage . Being your in the military I’d bet you’d do well and have the fortitude and self discipline required in stressful situations .if you invest in a b class neighborhood it won’t be too bad . C and d class get really frustrating I won’t lie .
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  • William Huston
    OP
    Trinity, FL · Member since 2016 · 209 posts · 57 votes
    8y
    Originally posted by @Mike H.:

    I manage 2 sfh in Florida I've owned for 15 years. Now 1 condo near where we live in Brooklyn. So the two in Florida I've managed long distance for 10 years. I have a handyman, pest control, plumber, painter, carpet installer that I have developed relationships with. I call them and they call the tenants. I like managing them myself. The turnovers are painful and expensive. But it's worth not paying 2400 a year to a property manager plus all their extra fees. Good luck 

     How do you deal with finding tenants, showing the property off when it becomes vacant from long distance?

    0Reply
  • Michael Gansberg
    Investor · New York City, NY · Member since 2015 · 388 posts · 563 votes
    8y

    @William Huston - it depends what your goals are. It sounds like you might gain economies of scale if you consolidated, but if you put all your properties in a single geographic region, you face risk by being too concentrated. But there might be a happy medium.

    Back to the main question- self-manage or not? Self-management will gain you some money in exchange for your time in the near-term. Long-term, if your desire is to keep scaling up, at some point, you won’t be able to do it all on your own. So if your goal is to support yourself and create a nice retirement, self-landlording might be fine. If you wish to create wealth for the next generation or two, and have a totally slammin’ retirement where you can continue to invest in real estate, it probably isn’t the best path.

    1Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    8y
    @Ron Gallagher Agree 100%
    1Reply
  • Jason Ray Richardson
    Rental Property Investor · Brookhaven, MS · Member since 2017 · 186 posts · 108 votes
    8y

    Depends on a few things

    1) How close you are to the rentals. is it realistic for you to manage?

    2) Do you want to mess with it?

         Though I'd agree that some property managers aren't worth it, there are missed opportunity cost dealing with the rentals when you could be looking for the next deal.

    1Reply
  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    8y

    My wife manages the majority of our rentals and we use a PM for a few others. Screening tenants is the most important part of PM'ing; if you compromise there you are sunk. That and inspections is where this job is at. My wife does a better job than our PM, by the way.

    1Reply
  • Mike H.
    Rental Property Investor · Atlanta, GA · Member since 2017 · 127 posts · 75 votes
    8y

    Hi William, 

    I use Trulia to list the rental. Then talk to a few people, tell them to drive by and let me know if they want an appointment. Then talk on the phone and get to them. If I agree to take their application they go to cozy.co and do the 39$ application and I review it and either approve it or not. 

    I think I'm lucky because my properties are very close to campus and downtown so I always get many applicants. Believe it or not but I've only had about 2 months of vacancy total in 12 years 

    0Reply
  • Tom Kaser
    Investor · Denver, CO · Member since 2017 · 37 posts · 23 votes
    8y
    @Mark Fries Agree. Landlording ain’t that hard if you get good tenants. Quality properties attract them. And if you are fair that helps too.
    0Reply
  • Tom Kaser
    Investor · Denver, CO · Member since 2017 · 37 posts · 23 votes
    8y
    @Mark Fries Wow, 40 houses while working full time. That’s impressive. You must have a good system. Keep going!
    0Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    8y
    @Tom Kaser Thanks Tom. I dont have all the answers in the landlord game yet, I just get out there and push hard every day....always learning something new!!
    1Reply
  • Tairsa MathewsPro Member
    Orem, UT · Member since 2018 · 20 posts · 16 votes
    8y
    @William Huston I personally think it depends on your proximity. If you can be boots on the ground for all your properties that is very important and it will save you a good chunk of change on a PM. That being said, it is nice to have a PM in case there is ever any disputes that arrive with tenants. Having a PM can save you from having to always be the bad guy. We only have one rental property so far and we've self managed. There are aspects that I love and aspects that are difficult. I'd be happy to answer any questions you might have. 😃
    1Reply
  • Rachel Fazio
    Rental Property Investor · Little Rock, AR · Member since 2017 · 134 posts · 71 votes
    8y

    If you can sell the ones you have and consolidate into one region, it might be worth considering continuing to use a PM company. There are some that give a discount at 4, 6, or 10 units, etc. You may also get better service if you are a big fish in a small pond, so to speak. 

    0Reply
  • Account Closed
    Rental Property Investor · Monmouth County, NJ · Member since 2017 · 6 posts · 4 votes
    8y

    I agree with the comments. Do it yourself. Having a PM eats your rent profit. 

    0Reply
  • Marelyn Valdes
    Investor · Ocala, FL · Member since 2016 · 299 posts · 110 votes
    8y

    I used Asset Preservation, Inc, for my 1031 exchanges and they were easy to work with and very helpful. I handle my SFH's myself and you just have to remember it's a business and not start feeling sorry for tenants (once in a while, OK) or they will start taking advantage of you. I had SFH's in Houston and Tampa, while I am in Ocala, FL, and found long distance ownership was not for me (and my Houston PM seemed to always hire a repair and cleaning company at the same exact address as his office). Now everything I currently own is a short drive from my home.

    As for online auctions, I have purchased from Tranzon and just "won" a SFH through Hubzu. Tranzon was easy to work with and everything went smoothly. Hubzu - not very good customer service - buying a Fannie Mae home and Hubzu sent me an owner occupant affidavit after telling the CSR I was not planning on occupying the property. It took me 5 days and finally opening a case with Fannie Mae to straighten out the mess and get Hubzu to send an amendment to the sale contract. It's a great ROI (winning bid $40,000 and tax assessor has it at $98,000) that I should be able to rehab and flip easily.

    1031's let you exchange income property for income properties, not a home.  Be sure and check the requirements.  I was able to exchange rental homes for raw land (held for investment) and you can sell several and buy one or sell one and buy several.  Be sure and check the timelines for identifying exchange properties - I screwed up on one sale and didn't find a property to exchange within the 45 days and ended up paying a lot of tax on my profit.  On another, I bought a property and they held the sales proceeds from my sale and held ownership of the new exchange property until I did all the repairs and upgrades (6 months), then transferred the property into my name at the stepped up price (so when I sell I will only owe on the profit from the stepped up value).  They send checks from the escrow money to each contractor during the rehab, so it never goes into your account.

    0Reply
  • Stone Jin
    Rental Property Investor · Chandler AZ and Sylvania, OH · Member since 2009 · 708 posts · 561 votes
    8y

    We self manage.  The way I look at it is for the price I'm paying the PM, I can pay a high quality contractor to fix everything.  The money that I save on PM just about covers all my expenses across all my properties. Generally the tenant would text me with the issue and I would text my repair man/contractor and they would fix it and bill me.  I also get to buy higher quality material for MY houses.

     The other point is control.  I show the properties because I want to see who I'm renting to.  I always tell my tenants that the lease is just a legal contract, and when we sign it we begin a relationship and I want it to be a good one.  

    I have a PM for my out of town property because I don't have systems in place and it's a small town.  She does a great job and deserves the 13% flat fee she takes.   

    If you are going to buy local, try to self manage and if after a year it doesn't work out then find a PM.

    1Reply
  • M Marie M.
    Rental Property Investor · Washington, DC · Member since 2015 · 278 posts · 156 votes
    8y

    I live in DC. I self manage a tiny townhome in Baltimore, which is a hour (depending on various things and what time of day) away and sorta-kinda self-manage a SFH in Florida. Sorta-Kinda, because my 70+ year old parents keep an eye on it for me, and were more involved in the past. I'm working with and have better communication with the Florida tenants now. The rent is automatated, the tenants are willing to meet with tradesmen or fix problems themselves if I send materials or reimburse them.

    It really helps to have superstar tenants, or even just reasonably responsible tenants who are sane and who will work with you.

    0Reply
  • Ethan Lieber
    Specialist · San Francisco, CA · Member since 2017 · 34 posts · 8 votes
    8y

    @William Huston - Why not manage it yourself and use a service to take the tenant calls 24/7 and dispatch for maintenance emergencies at your directive? This option is only $30/month versus $900/month and you don't have to worry about missing a tenant call or interrupting your day/night.

    Let me know if you want a recommendation.

    0Reply
  • Obi I.
    Rental Property Investor · Baltimore, MD · Member since 2016 · 109 posts · 31 votes
    8y

    @Mark Fries what systems do you use to self-manage your portfolio?

    0Reply
  • Obi I.
    Rental Property Investor · Baltimore, MD · Member since 2016 · 109 posts · 31 votes
    8y

    @Ethan Lieber can you recommend what service to take tenant calls 24/7 and dispatch for maintenance emergencies at our directive?

    0Reply
  • Obi I.
    Rental Property Investor · Baltimore, MD · Member since 2016 · 109 posts · 31 votes
    8y

    @M Marie M. how do you find great tenants in Baltimore? What other systems do you use to self manage your Baltimore rental? Do  you have a team (handyman, pest control, plumber,  painter, carpet installer) that you use to handle turnovers? How do you deal with city issues (licenses, etc)?

    0Reply
  • M Marie M.
    Rental Property Investor · Washington, DC · Member since 2015 · 278 posts · 156 votes
    8y

    @Obi I. I simply lucked out with my current Baltimore tenant. I found my plumber and HVAC via Angie's List. I LOVE my HVAC people, Elmar Services. They are communicative, show up when they say they will (if not they call ahead) and have provided stellar service.  The plumbing company is alright. i think they are a little expensive for what I get. But they have been easy to work with. The carpet and painting was done with a contractor whom I will probably never use again. 

    I've only been a Baltimore landlord for a year, so I have no great wisdom to add there. I've had more time as a Florida landlord and there only one tenant family, so I haven't had any turnover experience. I have been (*knock on wood*) blessed. I have had to deal with city ordinance issues, when the city decided my tenant's were keeping too much junk on the property but I managed to get it fixed with many, many phone calls. Once I started collecting rent on-line and cutting my mother out of the loop (she was my PM of sorts & would report every little thing she saw wrong) I haven't heard much from my tenants. When they do have a problem they text me a picture, and we come to a solution together. When my mother was more involved they were crazy and unreliable, remove mom from the equation and they are sane.  They seem happy, so I'm happy.

    0Reply
  • Kenny Dahill
    Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
    8y

    @William Huston 5 properties in 5 states, kudos!  Obviously out of state properties make it harder to self-manage.  Emphasis on hard, not impossible!  What's most important is your tenant placement as well as the quality of tenants.  If you have a good tenants that don't need babysitting, self-managing is easy.  If you need to bang on the doors every month to collect rent, then hire a PM.

    Tenant placement is key!  Get that scope covered and you're golden.  You can even do all your own marketing, due diligence and lease coordination, you would just need somebody to host an open house to meet the tenants and then do their walk-thru inspections.  I would love to help you out on this task of finding an agent/manager for the tenant placement scope.

    0Reply
  • Obi I.
    Rental Property Investor · Baltimore, MD · Member since 2016 · 109 posts · 31 votes
    8y

    @M Marie M. thanks for sharing some of your experience as an investor in Baltimore. It's always helpful when you have great tenants. But when you have systems to manage your properties, it's even better. I'll look into your suggestions for the plumber and HVAC company. 

    0Reply
  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    8y

    I think there is no question here.

    You are handy, you have a lot of  free time, and main job is to respond on time.

    I would fire the PM, start self management immediately.

    0Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Obinna I. Hostednumbers.com
    1Reply
  • Jeremy A.
    Rental Property Investor · ME · Member since 2018 · 179 posts · 59 votes
    7y
    Originally posted by @William Huston:
    Originally posted by @Jim K.:

    @William Huston

    I'm telling you to have a long chat with a live-in flip specialist, a 1031 exchange specialist, your CPA, and your spouse about the tax ramifications of buying a rather expensively-located but unsightly, rundown single-family Florida house with 1031 exchange cash derived from selling all or some of your current rentals.

    If the chat goes well, with any luck, you will find a family in deep financial distress who have made silly personal finance decisions needing to sell their aforementioned not-so-nice single-family house as quickly as possible. You will stack glowing green stacks of US cheddar in front of them until it overwhelms their unprepared minds and they fall sobbing upon it, begging you to just take their house and leave them the Bliss of Franklin.

    You will then rent out that property for at least a year while you live somewhere else.

    Then you will get rid of your tenant in that property and move in your family, and then spend at least the next two years pimping it up to sell as your primary residence for a gain of less than or equal to $500,000.

    AND THEN YOU WILL GET PAID.

    I am not an expert on any part of this except perhaps a few aspects of handling the actual work of the live-in flip.

    That is interesting, recently i came across an investor at a local REIA that mentioned he didnt buy properties for cash flow or low price, but he was an equity investor. Mentioned that the 300-600k price range here in Florida has a lot of room to generate equity and that he found it very easy to get atleast 10-20% equity instantly out of the deal. He said he would buy like a 500k property for 400-450k that barely needed any work, then he would rent it out just expecting to brake even at least on cashflow, but preferred a little cashflow. Then he would hold the property for 2-3yrs and then refinance it back to the 80% loan value, but typically in 2-3yrs he could pull out the 150-200k that was payed down on the loan via the renters and pocket the money for living income or use to pay for another property. At the time i spoke to him, he said he was averaging around 230k/yr in equity paid down by the renters on his properties.

     drop give me 50...yes indeed. but equity is found in every price point. not just 500k range. 

    most popular price range in my area is $75-150k. 

    0Reply
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