When to hire property management?

Question

I am looking to purchase my first house. I often hear the advice that you should hire a property management company.

Is it possible to still make positive cash flow on a one to two unit home using a property manager?

What % of the rent can I expect to pay the manager/management company?

Do I hire one off the bat or wait till I have more property?

John Underwood · Answer

I have over a dozen that I self manage. I set up systems. I don't take calls I say I can't talk please text me. So if I get a maintenance request I just text my handyman and he takes care of it. They are required to put the rent directly into my account. They can use ACH, Zelle or a teller at my bank which gives them a receipt. I can look on line and see who has paid. They all have slightly different rent amounts and they put their property address on the bottom of the deposit slip which I can see online. Many of my tenants have been with me for years so everything is on autopilot. Why would I want to pay a PM 10% of my money for this?

If I do have a turnover I set up a couple of open house dates and have everyone show up at the same time. I don't set up an appointment for one person who might not show up.

Extremely easy to manage if you set up processes and train your tenant in the beginning that you are not chasing them for rent. They pay or you file and eviction on them.

If I do have a turnover I set up a couple of open house dates and have everyone show up at the same time. I don't set up an appointment for one person who might not show up.

Extremely easy to manage if you set up processes and train your tenant in the beginning that you are not chasing them for rent. They pay or you file and eviction on them.

Casey Powers · Answer

As a new investor, you don’t know, what you don’t know. One bad tenant will cost many years worth of PM fees. Some new landlords get lucky self managing, and some learn the hard (expensive) way that a good PM is MUCH cheaper than dealing with a bad tenant.

A good PM is also cheaper than a bad PM who lures you with low fees.

Bill B. · Answer

Cash flow per unit before and after Managment isn’t going to be affected by the number of units as the fees are per unit.  They’re idealing going to take a percent of rent (8% in Las Vegas) and maybe a placement fee ($300 given to a realtor in Las Vegas). I managed the first 5 myself just to know what should be involved, what to look for and so on. I have 13 now and only manage 2 that have been with me for 5+ years.

They’ve paid for themselves in my situation in reduced stress, raised rents and more importantly. Enforcing and collecting late fees. (They keep half.) in 15 years with 13 properties they had to start 2 evictions. One moved out before court date the other paid all the fees for being late and filing.

Craig Bellot · Answer

"If your long-term goal is to invest in more properties it is worth it to invest in a solid property manager.  Your time as an investor is infinitely better spent analyzing markets and deals. You want to move up the 80/20 leverage curve from technician to investor/entrepreneur.  In Bridgeport, CT and Texas the investment is about 10% of rents collected which frees you from taking resident phone calls, coordinating maintenance, leasing vacancies, accounting P&L's, conducting inspections and making property payments."

Clayton Cerer · Answer

Hi @Laura Kayes! I am wondering, Why the reason for initially hiring the PM for leasing?  Would this be to make sure your lease paperwork is sufficient?

Curious as I have just took ownership of a triplex and will be putting all new leases in come Feb. 1st...

Thanks!!

Will Gordon · Answer

You can definitely continue to self manage if your biggest issues are maintenance and collection rent.Most self managers use tools like cozy to keep their properties together and maintain a rent roll

There are also maintenance services like Latchel that can help you self manage those operations easily with smaller monthly fees than a property manager.

I would leverage technology first, you're in a beautiful new age!

Terrell Garren · Answer

Agree with @John Underwood.  If you have systems in place and class A/B properties, there is little need to pay someone else.  Also a great OJT.

18 SFHs, 1 LLC, 1 umbrella policy, 1 checking account, 1 spreadsheet, Cozy, Dropbox, mobile phone, trusted relationships with skilled trades.

Dick Stevens · Answer

With only a property or two you will never get proper representation when you have a vacancy.  The management company will bring prospective tenants to all their big customers first, as they are more important to please than you.  So you will loose a lot of money on vacancy.

Laura Kayes · Answer

Hi @Spencer Dillinger,

It really depends how hands on you are wanting to be. Typical management fees are 6-10% of the gross monthly income, as well as a fee for releasing the units (up to a month of the first month's rent). A good property manager can bring tremendous value, but a bad one can cause a financial disaster. This is the same for self-managing your properties.

If you decide to self manage, I'd highly suggest hiring an agent from a PM firm to initially lease the properties for you, and then you takeover after.

-LK

Jon Simpson · Answer

I see it is very hard to find a good property manager.  I have met owners of one.  They are great guys and talk a good talk. Just the managers that are in place just don't deliver.  I have managed my own, but really want to step back.

When to hire property management?

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