I am under contract on a quadplex near a university that is 4 hour drive from me. After speaking with some property managers, I'm realizing they really know how to tack on the fees... 10% (expected) of all revenues, 1/2 months rent for first lease, $400-500 for new leases thereafter (which most will be), $200 for renewals, $500/unit cancellation fee, no late fees passed along to me owner, some have $50/unit vacant fee! It just seems like this may add up to be 15-20% of revenues.
This has me thinking how hard can it be to self manage? I will be down there for closing to do some basic work and then back down there once the contractor completes the rehab we are doing, at which point I could take pictures and list the property on postlets. I could create a FAQ sheet for potential tenants. I could compensate my agent to show the property. I have spoken with nearly a dozen handyman and contractors regarding the rehab and one I liked said he would be happy to do any repairs on the property (wasn't a good fit for the rehab).
I could have my handyman perform basic repairs, deal with any onsite issues and compensate him accordingly. I can collect/screen tenants via Cozy.co. I would still visit the property 2-3 times a year as my alma mater plays this team once a year and it's not THAT far. I could create/provide a move-in checklist, move-out inspection that handyman could deliver and perform the move-out inspection and perform need repairs as well. I could provide a move-in document that would have tenants e-mail me for non-emergencies and phone # for more urgent matters.
On top of it all, I figure I can always just hire a PM at if this isn't as easy as I think it is...
Am I crazy for trying to do this? PM fees seem like they will be adding up to $7500+ a year ($5,400 in % fee and another $2000 in new lease fees), which doesn't seem justifiable to me...
I self managed a property in Boston, while Im in DC for about 4 years. It was doable, but honest it was kind of a pain. DC to Boston has flights every hour out of 3 different airports for pretty cheap, so I was able to get there fairly easily, but I didnt have to go there unexpectedly about twice a year to deal with crap. In retrospect, I would have just hired a PM.
@Russell Brazil What things required you to go down there? What kind of gross cash flows was it throwing off? I think 10% of a single family that is rented for $1200 vs. a quad that rents for gross ~$4500 makes dealing with it worth it. I realize I have more units and more points of contact, but you get some economy of scale with all units being in the same place.
Mine was a 3 unit with gross rents of about $7k. One time the pipes froze and burst and I had to get up there to deal with all that crap.
@Russell Brazil thanks for your perspective!
@Dennis M. thanks. Me and my partner are going to give it a go. We have our agent who will do showing and we will compensate him for signed leases and I'm going to reach back out to two of the handyman I spoke with previously to let them I plan on using them regularly for odd repairs, etc.
I have been wrestling with this question myself. I own a property in OKC and currently live in Alaska. Ill be moving in three years to either Hawaii or Colorado - and I would love to find a way to manage them all without having to spend ~$900/mo between my 3 properties. The only advice I have gotten thus far is have a team in place to be boots on ground when you need them to be. If you can pay a realtor in the area to show your property for a couple hundred bucks if you've done your background checks, marketing, screening, etc. yourself, then all that lacks is the personal touch which you can overcome with a good team.
I haven't decided if I am comfortable enough to do this yet myself... but I am curious what other advice you get!
Hey Try it . Worse case scenario you gotta hire a pm . Find a good plumber a good attorney a good handyman in the same town as the property . It will make life easier for self management to have your team in place beforehand ready to use
We have decided to give it a go based on having a handyman and realtor in place. We will compensate our realtor $300/lease to show and handle lease signing and coordinate with handyman for any minor repairs and reach out to others when more specialized repairs are needed. Maybe it's a mistake, but hey as @Dennis M. and I said, I can always hire one later.
I'll try to remember to check back in a year and let you know if it was worth it!
All the best with this.
I think give it a go, worst case scenario you have Plan B
While we would all love our real esate business to be easy to manage the reality will be that managing your properties from long distance will always be exceptionally challenging and for the most part you will discover that it's just is not worth it.
Once you let this reality set in your focus should be on finding the right PM to work with that will not nickel and dime you to death.
I try to pick up several properties in one particular location or properties that are within driving distances of each other then If I can I will buy one property for no other purpose than to cover the expense of using a PM in the area.
I do not view PM's as a needed service, I see them as strategic partners and use them that way. When possible I even propose to do joint ventures with PM's. A practice of nickel-and-diming me to death will not have great benefit for them because it will generally not result in handing me the short end of the stick, but also reduce their share of the rental income. The more their PM income is, the higher regular income tax they will pay so it should make more sense to opt for greater passive income. I could be wrong but at least this make sense to me and seems to be producing good results for my bottom line. Put someone in a position where they are forced to look out for your interest as well as their own. The property management activities will not be a service to charge me for but an obligation of their joint venture agreement with me.
Yes. Very unwise. Hire a good PM. Or, you can setup a support number for the tenants to call you, but collecting rent can and will be a pain. If you have to have an eviction done, it's just going to be more of a hassle and waste of time / money.
Again, hire a good PM.
@Charles Kennedy I think you should give it a go self managing and see how hard it is. I have a 20 unit with a management company in South Bend, IN, and I am constantly surprised at how much less effective bad management companies can be. A four unit can never generate enough revenue to get a professional management company (neither can my 20 unit honestly), so you are stuck with what you are seeing.
I have a client who purchased a 3 unit in Berwyn last year, and she has been self managing from New York. She uses cozy to collect rents, and she used task rabbit to lease up the units. I think the biggest component is going to maintenance. You will need at least three decent/affordable maintenance people, especially since you can't drop by the property yourself to take care of things.
You should also do everything you can up front to "bullet proof" the property. Put in new toilets, new faucets, new P traps, etc. The less deferred maintenance, the better your experience will be.
@Charles Kennedy - I have a 7 unit property next to a university that I self manage and a 6 unit property I self manage from 4 hours away.
Here’s what you want to do to maximize your revenue, manage yourself, and limit hassles. Furnish all the bedrooms (Craigslist $100-300 per bed with preowned mattress, buy $10-20 mattress cover, $10 lamp, $50 dresser or nightstand) and provide the kitchens with basic supplies (Walmart $20 4 piece set, $10 silverware, maybe some pots or not, can buy 1 multipiece set and split it between your units)
Install Schlage Camelot electronic Door Code locks on the door ($100 Amazon-no lockouts) or a lockbox ($25) with backup keys
Post on Nextdoor and Craigslist looking for a “house Mom” / Cleaner who will clean units between guests for $20/turnover. (I found her by initially offering $40). Mine is a nearby young Grandma who watches the grand babies and likes to have disposable cash from visiting my property 2-3x a week for an hour. Has helped coordinate handyman, etc. You need trusted boots on ground. I used to rely on my long term 1 year lease tenants but recently they’ve been complaining they need repairs now but nobody’s ever home to let in the repair man.
To rent it yourself - Post on Zillow, Craiglist and Facebook Marketplace, Facebook Yardsale, Student Offcampus Housing Pages, Church/community pages, your furnished rental with great pictures and lots of keywords. (Furnished is also less wear and tear on your walls).
Post on Airbnb ASAP your furnished rentals and offer by the bedroom and by the apartment starting immediately while you are leasing up. Write up a house manual and have specific house rules that you can show the apartment during x times. You’ll get 1 day - 4 month bookings (you choose what to accept) that generate revenue so your cleaner can be there regularly to show the house to people. My min is $30/night for a room I’d rent for $700/mo. I make more renting each br separately in a 2br unit.
I offer my cleaner and/or my other unit tenants a commission bonus ($50) for showing the place to someone who signs a lease (docusigned directly with me from afar). I give them incentives to report things that need repairs.
So over the past 4 months during “lease up”, I’ve maintained 98% occupancy, paid $0 in PM/leasing fees, shown 0 units, signed 4 leases plus 1-4 month Airbnb. (Ive paid my cleaner about $500). I’ve gone from 80% Airbnb to 50% Airbnb to 25% Airbnb in my units as I sign tenants on “1 year” leases corresponding with the school leasing calendar (May 31). Some Airbnb bookings are 1-4 months. I reject all “hotel” bookings for 1-3 nights more than 2-3 weeks ahead because I always try to leave open for a longer weeklong stay or to rent the place to a signed tenant on an ongoing lease.
It depends how much your time is worth. I like answering texts from prospective tenants and talking with my cleaner. I like creating good marketing material and putting it online. I also have a 98%+ occupancy because I’m maximizing the usage of my building even if I don’t have 100% signed leases.
Your real estate agent despite his/her best intentions will probably renegotiate with you the $300 fee - what if he/she has to show it 10 times to get 1 lease? Will he/she turn down a lot of showing opportunities? Many renters who have messaged me off Zillow have said - Wow you’re the only person who got back to me. (With my autoreply reiterating beds, baths, rents, pet/smoking rules).
I must say everyone is providing valuable insight to the concept of self-management. I have struggled with the concept of self-management vs. PM with my own properties. I self-manage from a distance of a little less than an hour drive. However through BP I have been able to make connections with a local investors that make self-management a little easier. I've made contacts with handymen that have made it easier to deal with "minor" issues but tend to tackle the bigger issues myself.
One thing that is a struggle for me is that I did not make sure everything was perfect prior to renting my properties. Someone mentioned it earlier about having a "bulletproof" home. I could not agree more. I'm learning from my mistakes from when I started investing. Self-management is possible but to make it a lot smoother make sure everything is as perfect as it can be so you're not having to deal with replacing a toilet or old wiring when a tenant moves in.
The positive that has come from self-management is that I'm learning the business. There's a value there. I'm learning how management is supposed to work so when I eventually get a PM I will know who is honest.
Give self-management a shot after you build a team and have everything in place. Good luck. I'm following this thread because I'm curious to see how it works out for you.
Thanks everyone for your input - those who have encouraged and those who has discouraged alike. I think I am set on giving it a shot as me and my partner are very young and can spare the extra time and weekends.
@Natalie Schanne WOW! thanks for taking the time to write all of that. Since we are buying AFTER the school season has started we know vacancy will be a challenge until next school year and are hoping to get some leasing for spring semester, but have entertained the idea of AirBnB, but the following questions have stopped me from pursuing it:
- The purchasing/transportation/assembly of furniture
- Things will likely get ruined (sheets, dishes, furniture) will my cleaning lady/house mom really be willing to go out and buy these things and replace them? I guess I could compensate extra?
- The inability to turn over a unit if cleaner is not available on one day
- The insurance/liability aspect (all insurance companies asking if I will be doing STRs)
- When electronic deadbolts dying before guests show up etc
- Replacing damaged furniture during turnover (who do you compensate to handle that?)
However, you seem to have solid systems in place and are strongly making me consider it for a unit or two...
@Steve Boianelli thanks for the insight and reiterating @John Warren 's point. We will be replacing all the flooring with a vinyl plank which will help in that aspect and also replacing all the doors that have wood rot. Additionally, we plan to inspect the fixtures and such to try and limit the calls when tenants move in.
@Charles Kennedy - For Vinyl Plank, make SURE it's installed perfectly, so it's smooth "like a sheet." I've seen more than 1 install where there was a little gap and instead of re-laying it, they kept going, and it gapped irreparably shortly after install and will have to be 100% reinstalled to fix the gap. Vinyl plank properly installed needs 0 nails, hammering, glue, etc., and should have 1/4" of gap hidden under the wall trim on both sides.
I DO NOT ADVOCATE long term AIRBNB / STR unless you're in a luxury market / major city where you are a hotel equivalent. I use it as a short term revenue filler while I'm looking for long term tenants who are much lower maintenance. I'd rather take $600-700/mo fixed and hold a security deposit than get $900/mo from 10 different airbnb guests, have to clean 10 times, etc. Getting an overnight long term tenant isn't easy, but getting a guest staying for a week is. It just buys you time while your other marketing is working and provides you boots on ground for someone to show the property (if your cleaner shows) that's cheaper and more accessible than an agent.
I found all my furniture on craigslist. The best is during a moving sale. I've rented uhaul trucks for $100 total and picked up from 3-4 different houses. I also usually offer $20-40 more for delivery and out of 10 posts you message, you may get 1 willing to also deliver for your cash price offered. I bought a bedroom set (mattress, bedframe, dresser with mirror, 2nd dresser, 2 nightstands) for $300 cash, delivered. I don't assemble anything except putting a bed frame back together, especially not like IKEA, it comes 90%-100% already assembled. Dining room tables with chairs are $50-200. Couches are $50-300. I usually provide a cheap TV from Costco ($200-400). If you have WIFI boosters, you can have all the smart tvs tap into it without "cable."
If your sheets, dishes, furniture are ruined, you can bill your guest for them. (They can say no unless you have a airbnb security deposit). Your cleaning person can easily buy these things or you can amazon them to that address. A lady paid me $10 when her face cleaning product stained my towels.
If your cleaner isn't available, then you can't accept the next airbnb reservation, but in my model you had $0 income coming in anyway because you didn't yet have a long term lease on that space. I guess you could develop a second cleaner-helper-handyman as backup.
There is an insurance coverage issue that I don't worry about because I have umbrella policy, but you might. I'd talk to 3 insurance agents to ask and/or message people to find. Will you have a commercial policy with a 4 unit rental? Technically Airbnb says they'll handle your catastrophic damage. My take is I can buy it empty, have to have "vacant insurance," and have it sit empty for X long while I wait for 30+ day leases, or I can rent it regularly so it's occupied, guarded from vandals, and I'm making money while I wait for my leases, and I can work out all the post-rehab kinks with plumbing, electrical, etc.
My electronic lock is on a 9V battery. I change it every 4 years. It blinks that it's going bad for about a month before it ceases to work.
When you have a long term lease with tenants, you sign that they assume responsibility for furniture and if it's damaged you charge their security deposit for it. The next students would probably prefer a dining room table with a few nicks to no dining room table, and they can always request for it to be removed before starting their lease. (Is there a basement they can self store it?). I state my rooms are furnished and if they don't want the furniture they have to remove it themselves to my basement storage then reinstall it when they move out. 80-90% of people leasing my units for 1+ years have opted to use the existing furniture and mattresses.
Thanks John. The repairs are something I've already thought through - I plan to speak with each tenant at the beginning of their lease term and also provide them a PDF/work doc that outlines what to do when a repair is needed. Something like "all repair requests should be submitted via e-mail to (email) and your request will be addressed within 24 hours". "Any urgent repairs (i.e. water leak, broken A/C) can be addressed by calling (phone #). Please note any non-urgent matters that addressed via this method will be charged an additional $50."
In this way I will limit calls to disrupt my day and can simply check my e-mail and call one of a few handyman I've spoken with.
Screening criteria is a little bit more difficult since they are students. I will require parent co-signers, but I think I will do other basic things - "have you been evicted, how many people will be living in the house, are there any smokers, provide references" , etc. I would love to hear screening questions for tenants... @Natalie Schanne any advice here.
The leasing we have addressed with our realtor handling showings.
Thanks a million again. All great information.
In my experience inherited tenants can be the Achilles tendon in any rental situation. I would screen the hell out of the existing batch you are going to get with this fourplex. Anyone who is even slightly marginal will only get worse. With decent tenants you can likely manage from 4 hours away-and you have a partner to rely on too-if I read correctly. Life with a PM is expensive and they can be imperfect and unresponsive too adding to your management issues. All the best!
@Charles Kennedy I would not self-manage being that far away. Pay the small fee to a mgmt company and use your time more effectively finding new deals creating more cash flow for yourself.