I’m about to close my first investment property. The current owner has an on-site manager to help him taking care the property. The manager is responsible for maintenance, lawn, cleaning and some other miscellaneous stuffs, except for collecting the rent, finding new tenants. The manager doesn’t get pay in exchange for a free room to stay. My question is: should I keep him or hire a professional property manager?
If I keep him, I still need to put my time to deal with current tenants and find new tenants. There are 2 vacant units. The income that I loss for letting him to stay there is about the same or a little bit less compared with the 10% commissions for a property management.
I’m currently leaving out of state. I have a full time jobs. I probably will not visit the property regularly.
Please let my know your opinion.
Thanks for reading.
@Trinh Lam get a real manager if your not going to do it yourself. I promise you that 25% of your income for letting him stay for free and barely do anything is NOT the same as 10% of your income for a professional property manager who does everything.
@Trinh Lam If you hire a real property manager they should deal with finding suitable tenants and getting the property leased. In fact, the way you pay them with a % of gross rents incentivizes them to get you top $ and keep it rented. That being said you will need to pay for Lawn maintenance and repairs when needed. I think that the live-in a property manager is probably more costly.
Hi @Trinh Lam , congrats on the first deal!
My first question: are you willing to self-manage this property?
If yes, then you should consider keeping that tenants role as an 'on-site manager'. It never hurts to have an extra set of eyes on the property. Also, what type of compensation does he get if it's not reduced rent? Make sure it's reasonable and good value.
If no, then hire a full-service property manager.
Some thoughts on how to self-manage with this tenant 'manager'.
Leasing: When needed you can hire realtors for leasing agents. They'll ask for either a flat rate or a percentage of 1st rent. Minimal effort: have the leasing agent do everything.Maximum effort: you coordinate all the rental listings, open houses, background checks and leases but hire the agent for 'showings' only.
Maintenance: Having a local contact is key, and sounds like you already have an option! Tasks can be separated into coordinating and performing maintenance. It can be done by the same person or separated. Having an onsite manager is ideal because it's only a 20' walk to quickly look at issues. That could say you a ton of money for simple 5-10 min fixes rather than paying a contractor a minimum 1hr trip plus travel fees ($75 min.).
Rent Collection: There are several methods to collecting rent these days. I would advise you avoid your manager from collecting, which he already doesn't do. Common options are tenants pay directly to your bank with Zelle, Venmo, PayPal or you use a rent collection software for landlords (i.e. Cozy, Burbz, TenantCloud). Some software is free and others have a monthly fee. PayPal will have a transaction fee I believe, or at least to withdraw.
In regards to the efforts it takes to self-manage, that's up to you. I was managing my 5 rentals, traveling weekly, working a ton of hours and was still comfortable managing them. Leasing was a challenge but once you have a system then it simplifies the process so much. The key for me was hosting open houses so I can bundle all the viewings in a 4 hour window. My rentals are all renovated so maintenance is less frequent and I would call them B level properties. If you're dealing with lower tier properties/tenants then know there will be more management required.
Best of luck!
Thanks for sharing your experience. I’m not planning to manage it by myself.
If you intend not to self-manage then you'll be hiring a property manager; typically PM's want to work with their handyman. Therefore you should expect to not keep him.
Also, you mentioned 10% management fees. Those are only monthly fees, typically 8-10%. Once you factor in leasing fees then you will be closer to 16-18% AGI. That excludes any additional fees for maintenance coordination, listing, etc. that they might charge.
I am still a little confused how you pay the current onsite manager but you will also need to factor his cost against the PM's handyman cost. That hourly rate is regional based but I would expect it to be around $45/hr. Calculate how many hours it takes to maintain your property.
Before you make your decision, make sure you know all the figures so you can make the best informed decision.
I have contacted a Property management company. They charge 10% for long term rental and 20% for vacation rental. 2 units of the fourplex is currently for vacation rental. I’m planning to do 3 units longterm and 1 short term.
The owner didn’t pay any fee for the on-site manager. He’s looking after the property, cleaning the small yard, checking in/out for short term tenants and fixing some minor problems.