I’ve been listening to a few podcasts on Land-lording during the early stages of investing in real estate. I’ve heard some investors say that they self managed until they had too many rentals to handle. But others have said they started with a PM. So my question is, at what point should you be looking into hiring a PM?
Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes
7y
@Tyrell D Bradshaw This is highly specific to the person. Some people want to manage all their properties because it saves money and gives them more control over the property and the tenants that reside in it. It is much easier to self-manage properties near your home where long-distance landlording requires good systems in place and a local team to help you out. Self-managing is more active where having a PM is much more passive and you are less involved in the day-to--day. It's all personal preference. How involved do you want to be and how much time do you want to spend on your properties? Some people love being a landlord, some people don't. It's all what works best for you and aligns with your goals.
Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes
7y
@Tyrell D Bradshaw This is highly specific to the person. Some people want to manage all their properties because it saves money and gives them more control over the property and the tenants that reside in it. It is much easier to self-manage properties near your home where long-distance landlording requires good systems in place and a local team to help you out. Self-managing is more active where having a PM is much more passive and you are less involved in the day-to--day. It's all personal preference. How involved do you want to be and how much time do you want to spend on your properties? Some people love being a landlord, some people don't. It's all what works best for you and aligns with your goals.
Investor · Milwaukee, WI · Member since 2019 · 35 posts · 24 votes
7y
@Tyrell Bradshaw I agree with Scott. I was always told that you should think about if your time is best spent managing or looking for that next deal. Either way, this is a situation that only you can answer.
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
7y
I’ve got 16 self managed doors. I love being a landlord. If I had to say right now I’d guess 30 doors is when I’ll hire someone. And I’ll probably self manage a hand full of them until I die. But who knows tomorrow is a day away!
Property Manager · Michigan Ctr, MI · Member since 2016 · 661 posts · 581 votes
7y
@Tyrell D Bradshaw there is nothing wrong with self-managing your properties. By self-managing you get to learn first-hand on the processes needed to 'effectively' manage a rental property and what challenges need to be addressed and you're also able to save some money in process, kind of. With that said however, I agree with @Scott Passman it is completely dependent on your comfort level. If you are comfortable managing your properties or are willing to learn along the way self-managing can be a great idea. One thing however is for certain at some point in your real estate investing path you will need management if you are going to continue to grow and with that comes a similar but still slightly different set of skills such as being able to delegate and vet the people that work for you... your property management company; essentially running it like a business which is eventually how you want to treat and run your investment properties.
Above I mentioned that you 'kind of' save some money by self-managing because a good property management company should come close to if not completely, pay for itself. There is considerable time in managing a rental property when you consider showings, background verifications, maintenance and evictions. A good property management company will be able to save you money in advertising, discounted pricing on vendors (i.e. mowing, plowing, etc.) and of-course, TIME. If you are continuing to look for deals in order to be able to grow, as @Sarah Sparks mentions, where is your time better spent? a related item that most overlook is that when it comes to investment properties property management companies are the 'hub' of where they 'live'; we have many owners sell and trade off market properties within our company something which we facilitate all the time with our current owners.
So, really it is up to you but, it may not be a bad idea to get familiar with all the processes on how to manage an investment property and along the way get comfortable vetting property management companies now to see which ones fit with what you are looking for you may find that the good ones will come very close to paying for themselves. I hope this helps.
Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
7y
I self manage the 30 units I have built up and it's a lot of work. If you don't plan on building a property management company and continuing to work on creating systems for you and your staff, I would strongly advise not to bother starting. Just hire PM that is very good at what they do. They are relatively cheap, maybe less than $700/yr for one unit.
Property Manager · Lancaster, PA · Member since 2016 · 72 posts · 75 votes
7y
It truly depends on your goals and what you want to get out of it. If you want to self manage at first to get hands on experience with tenants and doing property maintenance then that is great. If you are doing it because you are concerned about trying to save a couple dollars I think you are looking at it the wrong way. The time you'll save having a professional manage your properties is well worth the percentage they will charge. Not to mention the headaches and stress they will save you from as well. Again, as cliche and boring as this sounds, it depends on your goals.
@Tyrell D Bradshaw As others said it depends on the person and situation. I have out of town properties that need someone there and a family member helps if I can't sort it out remotely. I also have a place where I live that I use a PM for because with my job I don't want to get into a conflict of interest with the tenants who are students.
It also depends on the type of property. I've heard people on here who have cheap houses with higher turn over and more problems meaning it can require a lot more time to manage those.
Thank you everyone for your input! I’m currently planning on doing some part time PM for an investor. Hopefully that will give me a good taste of how property management works, my strengths and weaknesses. I think that will make future decisions easier
Rental Property Investor · Member since 2019 · 41 posts · 53 votes
7y
@Tyrell D Bradshaw - Good for you for jumping into some part time property management work! I'm sure getting a feel for the day to day will give you a good idea of where you land.
As others have said, it's a very personal decision and depends on the type of investor you want to be. Some love handling management tasks and dealing with tenants, while others prefer to be more hands-off. There's nothing wrong with either strategy! It depends on your situation and personality.
Self-managing gives you a much greater level of control over your rental properties. Dealing with tenants directly eliminates some of the back and forth there might be with a property manager, but it also eliminates the buffer a PM could provide. You save on management fees, but you also spend a lot more of your own time on management tasks.
Hiring a property manager means you lose some of your profits to management fees, but you save time. This is the reason some investors don't look at hiring a manager until they have a larger portfolio with more income. If you have less-than-stellar tenants, having a property manager be your first line of defense can help preserve your peace of mind. However, hiring a property manager means you're also giving up control over your rental properties. That's why it's so important to do your research and hire someone you trust will do a good job.
It also depends on the amount of time you have, what your cash flow looks like, and how comfortable you feel letting someone else take the reins. You're going to get a lot of experience in the next few months as you try it out for yourself. Keep us posted on what you decide!
Real Estate Broker · Temecula, CA · Member since 2014 · 992 posts · 782 votes
7y
You either want to learn the business or you pay for someone else to do it. Knowing the laws and dealing with tenants does take time and the liability issues are real and costly if you dont know what you are doing. It is way more than just handling the maintenance issues as they come up. It is dealing with tenant violations and being tough enough t o hold them to the lease, etc.
You're getting some good advice, so I'll try to bring something new to the table.
First, realize that not all PMs are created equal. Some are great; some are terrible.
I've always lived under the thought that even if you hire a good PM, you will still have to manage the manager to ensure there's accountability. How will you know if they are actively marketing your units unless you are looking online? How will you know they are following up on leads diligently unless you email them on a few of your listings? How will you know they are selecting good tenants unless you insert yourself into the approval process? How will you know if they are regularly inspecting your properties inside and out to ensure tenants are doing damage, dealing drugs, punching holes in walls, moving in unapproved pets/boyfriends/girlfriends, etc unless you stop by and/or they provide you pictures and video? How do you know they aren't overbidding repairs and giving their contractors kickbacks unless you audit their books?
In short...you can spend as much if not MORE time managing a PM than you would just DIY!
I recommend starting out managing your own, then if you get to the point where it's too much, start to hire help. You can easily train a smart upper class high school student or college student to do everyday tasks for you like posting ads, replying to emails/texts, etc. You can also automate a lot of tenant screening via a website and 3rd party tenant screening agencies. A relationship with a trusted handyman and contractors will keep eyes and ears inside your properties as repairs are made. And the cost will be cheap compared to a full service PM agency.
Also, what about conflict of interest? A PM has the following conflicts:
1) Encouraging turn over. PMs get paid more for finding new tenants than they do for keeping existing tenants. New leasing fees are very attractive (50% of 1 months' rent is common). Also, with each turn over you have to "freshen up" the unit, and that means the PMs get paid their contractor mark up. If the tenant just stays put, they only get their monthly % of the rent. Boo his.
2) Other clients. Your PM may have 10 other investors with properties in a similar price range. Where will you fall in their list of priorities? Will you have to pay a "bonus" to get top billing?
3) Low motivation to fill vacancies. If they're busy making money on some other side deal, what motivation is there to rent your properties? They aren't getting paid, true, but they aren't losing any money either. YOU are the only one who eats the cost of vacancy. 10% of the monthly rent is only $100 on a $1000/month rental. Big deal! If the PM is a licensed Broker (most have to be legally), what is there incentive to give your vacancy their best effort vs. focus on selling houses where the commission checks are $1000s or $10,000s.
In addition, PMs are looking to make money easy. Until you have X-units, you're just another small timer. Small timers take more work. A lot of the good PMs I know who don't have the problems mentioned above only want investors with 20+ units. Otherwise, it's not worth their time to set up an account for you, send you statements, call you to give updates, etc...if you've only got a handful of units.
Same deal with price point. If your units are $500-$1000 / month, are you going to get their A-list billing? Probably not. The guys with $1500 - $2000/ month rents will be their priority clients. Some PMs I know will not take any unit that rents for less than $1,000 / month. The $500 rental takes just as much of their time and energy as the $1,000 rental, but the PM gets paid twice as much for the $1,000/month house.
Okay, so now that every PM on this board thinks I hate them... I don't. There are good PMs out there. But all of the concerns I have raise are legitimate, and you need to think those thru before deciding to hire out. Interview at least 3 before signing anything.
Real Estate Agent · Rapid City, SD · Member since 2019 · 43 posts · 11 votes
7y
@Tyrell D Bradshaw there are lots of directions a person could go here! One thing I’m personally working on is hiring a property manager for my C level duplexes. In my area these tenants can be rough and having separation is nice. If it can cash flow to your expectations I would hire a property manager. It doesn’t have to be all or nothing either. Test, correct, repeat.
Investor · Member since 2017 · 239 posts · 149 votes
7y
@Tyrell D Bradshaw I would self manage in the beginning and switch to a PM after you feel like you’ve learned enough.
This way you’ll have a sense of how much things cost, the quality of your rental, local laws, and that will give you confidence to expand your portfolio and take on more.
Los Angeles, CA · Member since 2013 · 555 posts · 261 votes
7y
self manage until the opportunity cost is too great.
I have never been able to find an honest reputable efficient PM, and don't plan to keep searching.
The key is to keep your property in top shape, then you attract the best tenants and there's really nothing to do except collect rent electronically without getting up from my couch. That's the most ideal self managing situation.
Real Estate Broker · East TN Loudon/Lenoir City/Tellico Village · Member since 2014 · 363 posts · 222 votes
7y
@Tyrell D Bradshaw
Depends on your interest. I have 4 LTR in Huntsville AL and have them with an awesome PM for the past 5 years at 10%. I also have 5 STR that I manage myself in the Smokies. Plus with my daughter we PM STR for other investors! Whatever you decide be Happy!
Belfast, Northern Ireland · Member since 2018 · 128 posts · 56 votes
7y
@Tyrell D Bradshaw
I believe it’s person specific, some people love to control every single little detail about all of their properties and some may even enjoy this way but others feel that this type of work is better outsourced so that they can focus on other things.
Waipahu, HI · Member since 2018 · 121 posts · 81 votes
7y
I agree with @Scott Passman this is highly personal. Some people have no problem running the systems of a good property management system others become their tenants friends. A great book that has solid advice about property management is Land-lording on Autopilot by Mike Butler. He is a former detective turned real estate investor with over 70 SFRs. He describes the wrong way and the right way to manage your property, and it is everyone's favorite 4 LETTER F-WORD.......FREE. The systems he uses that is not the book. Check it out. Hope this helps.
Rental Property Investor · Minneapolis, MN · Member since 2015 · 30 posts · 19 votes
7y
This all depends on your personal goals. If you self manage, you are taking on a very demanding job. If you have the time (30-40 hours a week) and genuinely enjoy it, then go for it! Personally, I got into real estate to generate 'passive income'.
So, I started a property management company that oversees all my properties. I meet with my management and maintenance team about 1-2 times per week to make sure things are getting executed effectively. I have 34 units ( between 4 apartment buildings). I self managed for a few months and spent a good 30-40 hours busting my ***. Now, I spend about 2-5 hours per week managing my managers. I personally prefer the current set up. It's scalable and allows be to use my time for networking and putting together future deals.
Rental Property Investor · Orange County, CA · Member since 2018 · 16 posts · 4 votes
7y
Hi everyone,
I have a general question and was hoping to get your thoughts/feedback - Is it normal (for the lack of better words) to pay a property management company a finders fee (if you will) for helping in the process of finding properties for you which you'd pay when u close on one? I guess this is on top of an buyer's agent fee.
Thank you everyone for your input! I’m currently planning on doing some part time PM for an investor. Hopefully that will give me a good taste of how property management works, my strengths and weaknesses. I think that will make future decisions easier
-Ty’rell
Smart you are doing by doing some PM work before fully diving into it!
These parts of the business require a certain type of temperant and its best to get a taste of it.
After that, you will be closer to answering your own question of self-manage vs PMC.
Property Manager · Chicago, IL · Member since 2016 · 69 posts · 43 votes
7y
As many people have already stated it is really a personal preference, how much time do you have, where are you investing, and can the investments afford a PM. If you know you are going to use a PM make sure to add that into your calculations when looking for deals, this will make sure you are only looking at good deals where as if you plan to self manage you may be able to get by on a thinner profit line.
Brookfield, WI · Member since 2016 · 191 posts · 108 votes
7y
I have a question for you. Scenario: you have an nice, older renter, maybe with 1 minor still in the house, and a dog. They are great tenants, take care of the yard, the dog is rough on it, but ok, never complains, "fixes" minor things himself, say, a ripped screen, etc. However, 4 months in, he pays the rent late. What do you do? If your answer is ANYTHING but send a notice of late payment, advising of the late payment fee, AND a notice of impending eviction, then hire a PM. I found I don't have the personality to do so, and am a "problem solver" type, trying to find a resolution. My life got infinitely better when I hired a PM as a result.