To Hire or Not to Hire? That is the question...

5 Replies

Looking into purchasing a SF 3b/1b property with-in 5 miles of my home to set up as an income property. Question, Do I hire a property manager to handle the rental? I have many years of HVAC and Construction background, so it's not about the repairs. Mostly the management issues. My concern is when it comes to vetting the tenants and possible eviction issues. My target tenant will be the local seminary students that are married and would be in the property for no more than 4 years. The seminary provides names of families that are looking for housing. The other option is 1 year lease to 4th year students that are returning from a 1 year vicarage out in the "field". The seminary provides housing for the single men but not for the married families. The property is less than 1/2 mile from the seminary so the possibility of long term vacancies is slim.

Tom

Property management isn't that difficult- you put your time and effort in up front during the screening process and, if done well and you have a little luck, it should be fairly simple after that. A few items that might be helpful to you:

-Find your local NARPM chapter and see if you can attend a meeting or two. You won't qualify for membership, but typically members are helpful and share resources. 

-There are many free programs online for tenant screening and rent collection. We used to use Cozy and it was great. Lots of threads here on the topic, do a search and see what works for you. 

-I'd avoid deciding what your target tenant is for a couple reasons, but mostly because you are headed in to fair house violation territory, that's an expensive place to be.

-Finally, I'd start an LLC for your property management and use that veil as you operate as a PM. Being the owner/PM will create all kinds of problems for you. You are simply the property manager representing the owner.

Best of luck!

Fair Housing is a consideration but it may not apply to you (Does Fair Housing Apply?).

If you were renting only to seminary students, I would say it's probably unnecessary to hire a property manager. Seminary students are more likely to be honest and good tenants.

If you're opening housing up to anyone, I would consider a property manager for the first year or two while you learn the ropes.

If I already have a LLC setup for the property but PM as an individual, would that be proper separation with out the additional LLC? Also if the property is never advertised as "For Rent" bu the seminary fed me with tenants how could that be a fair housing issue. They are referrals...

@Thomas D Koeneman I am a big fan of managing your own property if you have the time, skills/resources, and stomach to make tough decisions.  We manage over 900 units for over 300 investors and they all lack at least one of those 3 requirements and some lack all 3.  In our research we estimate it takes a self manager on average 21 hours a year per unit to self manage and if you do your own maintenance it maybe a little more.  You also have to be prepared to handle things at times that are not ideal...doesn't always happen like that but it feels like it sometimes.  It maybe mental prep more then anything.  

Another word of advice for anyone that self manages is don't let the residents and neighbors know you are the owner. Present yourself as the manager or the guy that works for the owner. This helps when it comes time to make tough decisions. You can make the fictitious "owner" somewhere far away the bad guy. Tenants tend to take advantage of that relationship with the direct owner and it will work perfect with the LLC in place.

You can also be a self manager and outsource certain pieces.  Outsource tenant screening or outsource the work order line.  There is huge ability to piece meal self management these days.  Take @Corby Goade advice and connect with the local NARPM chapter.  You can always find one local PM that will give you free advice in exchange for lunch or a good online review.  Plus you have a nationwide network of guys like Corby or myself that would give you advice if requested.

PM as a schedule C would expose your personal net worth to any risk in PM, which I see some above are saying is small based on your tennants. Keep the accounting separate between your schedule C and LLC, and you should preserve your corporate protection.

The advantage of creating a separate LLC structure for the PM is to contain the risks of the PM and operations from the assets of the property managed and your personal net worth. I explain this use of separate LLC in Point 4 of this Bigger Pocket article.