General Landlording & Rental Properties

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Samantha M.
  • Landlord
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Property Management or Do It Yourself? What is your preference?

Samantha M.
  • Landlord
  • Dallas, TX
Posted Jul 21 2012, 07:38

Out of curiosity, how many of you opt to use a property management company, how many of you do it yourself? Whichever answer you select why did you choose it?

Another way to put it is Property Management worth saving you time for %10 rents?

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Dennis Tierney
  • Investor
  • Omaha, NE
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Dennis Tierney
  • Investor
  • Omaha, NE
Replied Jul 21 2012, 07:56

I am a multifamily owner/investor and always use 3 rd party professional management cos. I am not interested in having another job as I am full time employed and don't have the time/expertise to manage apartments. My reason for owning real estate is for diversification of assets and retirement income. When I have enough passive income I will retire. For me that means truly retiring and not just changing jobs to be a property manager. My management cos. charge 4.5-5% of gross income. It is worth it for me to be free to spend my time as I wish and not burdened by the real estate.

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Dale Osborn
  • Mobile Home Investor
  • Spanaway, WA
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Dale Osborn
  • Mobile Home Investor
  • Spanaway, WA
Replied Jul 21 2012, 09:07

There was just a thread on this topic a few days ago - you might want to reread all those posts and withdraw a repeat question.

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Mitch Kronowit
  • SFR Investor
  • Orange County, CA
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Mitch Kronowit
  • SFR Investor
  • Orange County, CA
Replied Jul 21 2012, 09:12

I do half and half. Half my properties, the ones that are in lower middle-class, blue-collar areas, I have professionally managed because they are located about an hour away and tend to require more attention (maintenance, tenant-issues, etc.). The others, which are upper-scale, middle-class, white-collar properties, I manage myself.

I'm still undecided which I prefer. Although the cost of hiring a manager (7-9% of collected rent) is a little steep, when something comes up and they handle it for me, I'm grateful I don't have to deal with the headache.

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Account Closed
  • Landlord
  • Seattle, WA
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Account Closed
  • Landlord
  • Seattle, WA
Replied Jul 21 2012, 09:16

I manage my own properties at this time. There are many factors involved, but in general my properties require little of my time.

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Joe Bertolino
  • Real Estate Agent
  • El Dorado Hills, CA
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Joe Bertolino
  • Real Estate Agent
  • El Dorado Hills, CA
Replied Jul 21 2012, 23:54

Self manage because I only have 12 units and it has been fairly easy to do averaging 4-5 hours a month. I save $700-1000 per month which I use to "snowball" my debt load and I actually enjoy it. I also don't feel like anybody will look after my investment like I do.

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Samantha M.
  • Landlord
  • Dallas, TX
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Samantha M.
  • Landlord
  • Dallas, TX
Replied Jul 22 2012, 06:27
Originally posted by Dale Osborn:
There was just a thread on this topic a few days ago - you might want to reread all those posts and withdraw a repeat question.

Dale would you mind providing a link for that particular thread? I went back more than 5 pages in the renters forum and did not see that thread. And 5 pages back was several years ago according to the post history.

thanks

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Steve Babiak
  • Real Estate Investor
  • Audubon, PA
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Steve Babiak
  • Real Estate Investor
  • Audubon, PA
Replied Jul 22 2012, 07:43
Originally posted by Samantha M.:
Originally posted by Dale Osborn:
There was just a thread on this topic a few days ago - you might want to reread all those posts and withdraw a repeat question.

Dale would you mind providing a link for that particular thread? I went back more than 5 pages in the renters forum and did not see that thread. And 5 pages back was several years ago according to the post history.

thanks

Since you originally posted in the wrong forum, it makes sense that your search would be in the same wrong forum. Try reading in this forum instead:

http://www.biggerpockets.com/forums/52-rental-property-questions-landlording-issues

BTW - the "Renters" forum is intended to accept questions from tenants ...

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Joel Owens
  • Real Estate Broker
  • Canton, GA
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Joel Owens
  • Real Estate Broker
  • Canton, GA
ModeratorReplied Jul 22 2012, 09:37

Depends on the type of tenant you are managing and location of the property as to what you are taking on.

Dealing with lower income type tenants can be a full time job in and of itself.Many have limited education and you are almost dealing with children on many levels.It can be very intense and time consuming.

If you already have a bunch of cash I would look for less yield and properties that have less headaches.

Commercial properties for example tend to have businesses with cash flows to pay the rent. They are not without problems just like any investment.

Managing or not managing is a function of time.If you make a few hundred k a year you are not in most cases going to self manage.You would take a pay cut taking time away to do those activities.Instead you build in management fees to your purchase price and modeling.

You still watch over the property manager but it is a phone call and watching the reports every few weeks as they come in.

You are letting the management do the time consuming work and the heavy lifting.

If however you do not have a job and this investment has to produce income for you then many self-manage or they purchased wrong and did not figure in the cost they self manage.

This is why many of my clients prefer triple net properties.They already have a lot of money and want little to no headaches and keep pace with inflation.

They like the extra 2 to 4% annual yield say with multifamily but when they look into all that is involved they say NO THANKS.

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Ed L.
  • Residential Real Estate Agent
  • Hattiesburg, MS
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Ed L.
  • Residential Real Estate Agent
  • Hattiesburg, MS
Replied Jul 22 2012, 10:05

My properties are localized and easy to self manage. If I were buying further than a hr away from home I would hire a PM.

Under a hr I don't mind driving picking up rent and checking on my properties once a month...

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James H.
  • Investor
  • Fort Worth, TX
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James H.
  • Investor
  • Fort Worth, TX
Replied Jul 22 2012, 11:25

Its a simple analysis:

Lets take my rental for example

Monthly rent = 550, estimated turn over once per 2 years:

Average PM fees for years = 550 + 55*24 = 1,870
(assuming one turn over each two years)

PM Hours to lease = 12
PM Hours to manage (Ave) = 1/month
PM total hours over 2 years = 36
Hours to manage PM over 2 years = 8?
Total time saved to use PM = 36-8 = 28

$/hour saved = 1870/28 = $66.70/hour

equivelant annual salary = 66.7*2080 = $138,914

Lets take a different typical rental for example

Monthly rent = 1,000, estimated turn over once per 2 years:

Average PM fees for years = 1,000 + 2,400 = 3,400
(assuming one turn over each two years)

PM Hours to lease = 12
PM Hours to manage (Ave) = 1/month
PM total hours over 2 years = 36
Hours to manage PM over 2 years = 8?
Total time saved to use PM = 36-8 = 28

$/hour saved = 3,400/28 = $121.40/hour

equivelant annual salary = 121.40*2080 = $252,571

A lot of investors balk at working for you money doing anything othher than analyzing and delegating, but I'd say the PM business is pretty lucrative. I don' t mind working part time for nearly $67/hour. I do my own maintenance, so my time is even more efficeintly used.

With scale, the time to manage the PM reduces per unit, but you are still paying a LOT of money to the PM in terms of hourly pay. BUT, there is only so much time in the day. I will self manage until I just can't stand it anymore because property management pays really well.

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Joel Owens
  • Real Estate Broker
  • Canton, GA
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Joel Owens
  • Real Estate Broker
  • Canton, GA
ModeratorReplied Jul 22 2012, 12:39

Brian,

A turn of once every 2 years I would say many,many rentals turn over much,much more than that.

If you are hitting that mark that is awesome but I would be curious from others if the tenants are staying 2 years before moving.

I would also like to hear average turn times for renting out a SFR versus and apartment complex.

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Mike L.
  • Dallas, TX
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Mike L.
  • Dallas, TX
Replied Jul 22 2012, 13:29

We self manage to keep the cost down, keep a closer eye on the properties and to provide better service.

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James H.
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James H.
  • Investor
  • Fort Worth, TX
Replied Jul 22 2012, 13:59
Originally posted by Joel Owens:
Brian,

A turn of once every 2 years I would say many,many rentals turn over much,much more than that.

If you are hitting that mark that is awesome but I would be curious from others if the tenants are staying 2 years before moving.

I would also like to hear average turn times for renting out a SFR versus and apartment complex.

Well, I think if you self manage you run a better chance of choosing longer term tenants. Plus, may months I spend less than 30 minutes to manage my SFR. Obviously results will vary, but I think mine is a generally good approach. While some tenants may turn quicker than 2 years, some may stay longer too.

I don't have any numbers to compare, but even in low income housing, I definitely think you would have a better chance for longer tenancy in a SFH vs an apartment.

But out of curiosity, I will do a each year turnover analysis and see how that works out:

Monthly rent = 550, estimated turn over once per year:

Average PM fees for years = 1100 + 55*24 = 2,420
(assuming one turn over each year)

PM Hours to lease = 24 (12 hours each turn)
PM Hours to manage (Ave) = 1/month
PM total hours over 2 years = 48
Hours to manage PM over 2 years = 12?
Total time saved to use PM = 48-12 = 36

$/hour saved = 2,420/36 = $67.20/hour

equivalent annual salary = 67.2*2080 = $139,822

In the above estimate I doubled the time for the Turnover and added 4 additional hours of owner-PM oversight assuming 12 rather than 8 hours a year would be expected for a unit that is turning every year rather than every two years.

If we assume the owner-PM oversight is the same the hourly salary is still

2420/40 = 60.5/hour = 125,840 equivalent annual salary.

I'd be happy with a part time job paying 75K equivalent annual salary, so, the PM would have to bring still more value to the table, or take less of a commission for leasing the house. First month's rent is standard in my parts along with 10 percent per month.

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Account Closed
  • Landlord
  • Seattle, WA
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Account Closed
  • Landlord
  • Seattle, WA
Replied Jul 22 2012, 21:19

Joel Owens I have averaged better than 2 years per tenant over the last 18 years. These are SFR properties. I now have a mixed use bldg and haven't had it long enough to claim any averages,

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Cheryl C.
  • Investor
  • Reston, VA
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Cheryl C.
  • Investor
  • Reston, VA
Replied Jul 23 2012, 08:42

I self manage. I have a little over 20 properties. I do not have another "job". I wouldn't mind turning it over to a PM, but my experience over the years has not been good. Properties that I could rent in a week or two have remained vacant for 2or 3 months. They don't screen for my type of tenant (lifer). I am also suspicious that repairs will be marked-up. I have handymen and all the trades that I have been using for years. I do have an assistant one day per week - but she handles some personal stuff as well. Most of my properties are within a ten minute drive of my house.

As to turnover; I average far better than every 2 yrs. I've had tenants in place as long as ten yrs. The ones that turnover after 2 or 3 yrs are rented by young couples who have been leaving to buy a home. I used to (and still do) try to avoid tenants who I believe will be buying soon, but some of my recent acquisitions (condo's in nice locales) draw young professionals. Fortunately these are "good" tenants.

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Nathan Emmert
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Nathan Emmert
  • Investor
  • San Ramon, CA
Replied Jul 23 2012, 08:55

I split it out and outsource a bit of the PM stuff. To me, it's silly to outsource the paperwork and phone calls. I do outsource things like vacancies though as it's more expensive and time consuming for me to drive the 2 hrs round trip to be showing units then it is to simply pay someone 1/2 a month's rent to fill it. At the same time, paying someone to collect the rent checks from my PO Box or to call a plumber for me just seems like a waste.

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Joel Owens
  • Real Estate Broker
  • Canton, GA
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Joel Owens
  • Real Estate Broker
  • Canton, GA
ModeratorReplied Jul 23 2012, 09:17

So I would think then that senior living apartments could be a great investment.

Once they are are there I have been told seniors strongly dislike moving and want to stay in one place for a long time.

That reduces turnover and costs.

If you have an apartment complex in a high crime area or have a bunch of one beds to 2 beds in a good area where families have to move up to a 2 bed or buy a home you have constant turnover.

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Tony Staunton
  • Dublin, Dublin
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Tony Staunton
  • Dublin, Dublin
Replied Aug 8 2012, 04:37

As a landlord I've been burned by PM companies in the past. Once I was told that I had missed three months rent after two years of paying my rent on time with no interruptions.

When I was in college myself and roommate were ripped off by a bad landlord.

I have friends who say good and bad things about PM companies so I decided to start to track my properties myself online.

[EDIT BY ADMIN]

Tony.

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Michelle Marty
  • Landlord
  • Dallas, TX
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Michelle Marty
  • Landlord
  • Dallas, TX
Replied Aug 8 2012, 11:41

I do it myself. Around here they charge 10% of gross rent which for me is 120 - 150 per property. I've only had a few repair issues and I was able to call a repair person and get those fixed ASAP. I had a PM company once and found that when they would bill me for repairs the costs would be a bit on the high side making me suspect they were skimming. If it's under 16 units I'd say do it yourself.

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Michael Lauther
  • Investor
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Michael Lauther
  • Investor
  • Hampton Bays, NY
Replied Aug 8 2012, 15:55

Since I invest using a self directed IRA i am required to have no direct control of managing property. I have a third party collect the rent and have a local handy man handle repairs and manage rehab projects. He is an experienced x landlord who has hit upon hard times and knows how to get the job done.
I would prefer a property manager but have noticed that they need to make more than the 10% fee. They tend to charge more on repairs and from what I can tell do not do a better job placing a quality tenant. That may have more to do with my market than the ability of the manager but it is the reality.

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Larry K.
  • Investor and Architect
  • Ramsey, NJ
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Larry K.
  • Investor and Architect
  • Ramsey, NJ
Replied Aug 8 2012, 17:08

I only have one 2-family. I am managing it myself. It does not seem to be too much time. Also I suppose I would have some trouble in trusting that the PM I hired would be totally professional for such a small property. Not sure if I want someone else between me and my tenants and the property.

Besides, if the tenant calls with an issue it just gives me a chance to check up on them.

But if anyone knows of a good PM for these types of properties in Northern NJ please let me know. I plan to grow, so in future hiring an PM might be the best way to go.

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Chris Calabrese
  • Residential Real Estate Agent
  • Mt. Pleasant, SC
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Chris Calabrese
  • Residential Real Estate Agent
  • Mt. Pleasant, SC
Replied Aug 8 2012, 19:52

I self-manage my 4 rentals, and would probably do so until I hit 50 properties or more. Even at that point, I would hire an individual to work directly for me in lieu of a PM. Then again, I also do my own book-keeping, lay floors in my flips and rent U-Hauls to move my own staging furniture, so I'm probably not the average investor. I do real estate because I love it. I also believe that if you want something done right, do it yourself.

After 4 years, I haven't found managing tenants to be that time-consuming, and like a few others in this thread, I sort of like the "game" - reading people, trying to squeeze every penny out of each property, etc.