Property Management - how many of you outsource?

Question

Just getting started and wondering how many of you manage your properties yourself versus outsourcing? I’m for sure leaning towards outsourcing as the appeal of getting a call at 3AM for a clogged toilet is near zero. Anything you look for in a manager? Have you been able to negotiate price based on multiple properties?

Interested in whatever information you’d like to share on the subject.

Terrell Garren · Answer

I've self managed local 20 SFHs for 11 years. Never a 3am call.  Gross monthly rents are around $20K and I spend maybe 5 hours a week. You can do the PM math. It's an enjoyable part time business that cash flows life.  What makes it easier - good tenant selection, telling tenants what you expect, property maintenance and good relationships with skilled trades. 1 LLC, 1 business checking account, 1 umbrella policy, 1 spreadsheet, 1 pickup truck, 1 mobile phone and Cozy. Life is good.

Kat McReynolds · Answer

Hi Tamera,

My mother has done property management for decades, so I was able to observe it for my entire youth, and I started helping at a young age.

For the most part, people are normal and responsible, but there are a few that seem to have attention-seeking behaviors or other issues. It is definitely the case that a small number of people will take up the most amount of time. My mother did not set strong boundaries, so the job has encroached on her personal life. Between people responding to ads, people having maintenance issues, people wanting to meet in person to pay late rent, etc., etc., her phone is always buzzing. Always. On several occasions, I have seen a rude or irresponsible tenant ruin her evening.

On the other hand, I cannot imagine how much money she has earned and saved our family business by taking on this role. Almost no-one will be as motivated as the owner to keep places rented, to screen properly, to stay up to date on where people are searching for their rentals, and the list goes on. As the owner, you also have the authority to act on your gut, offer a deal to a tenant that you believe will be great, etc. You can also keep your finger on the pulse and change your marketing tactics, adjust pricing and make all kinds of business decisions that you may not be able to do as well or as quickly if you are not involved on a daily basis.

For me, this decision would boil down to opportunity cost and personal preference. If you are a people person and you'd enjoy the constant interactions, it might be a great use of time. But if you would get sick of that OR if you simply have other ways that you could make more money, you are better to outsource.

If you do decide to self-manage, I would recommend to really prioritize systems and rules, to use an automated platform for rent collection (Cozy, etc.), to set boundaries on hours when you will accept calls, consider a business phone line that is separate from personal cell and perhaps hire a helper to assist with simple, tedious tasks like posting ads and initial screening.

Also, update: My mother is nearing retirement and has spoken with PMs that do offer discounts after X number of properties are managed by their firm.

Best of luck with this big decision!

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Scott Passman · Answer

@Tamera Jackson  Even if you choose to self-manage, you should not be taking phone calls at 3am...that is what voicemail is for and you can respond at a reasonable hour.  If you want to be involved in your property and take control of managing to save the money, get the experience, and invest yourself in mastering this skill then go for it.  It has great financial advantages and can be rewarding for many people.  However, if you really don't want to be investing a lot of time in managing (showing the property, screening tenants, taking care of repairs, dealing with issues etc.) or you plan to scale your portfolio then outsourcing is going to be your best bet.

There are a lot of resources on here to learn about specific questions to ask and things to look for in the FilePlace and in other threads.  Property manager margins are already pretty slim, but some do take a lower % of monthly rents if you have a certain number of properties with them. I choose to outsource management because I invest out of state. But should I acquire a property near my home, I wouldn't be opposed to managing it myself to better learn all that is involved.

Kenny Dahill · Answer

@Tamera Jackson, congrats on getting into rentals.  There's always unique perspectives when it comes to self-manage vs. hire PM.

Personally, I have 5 SFR's all within a mile of my home and I self-manage.  Last month was a bad month and I spent 4 hours because of a broken AC on Friday night/Saturday morning.  75% of the months the most I spend is 10 mins to confirm rent was collection.

Here's some quick tips:

• Screen tenants thoroughly!  The better the tenant, the easier they are to manage
• Set up online payments; don't pick it up in person
• Perform a thorough move-in inspection

You can easily self-manage one unit and save the 20%.  I would only consider hiring out once you have enough units that routinely need something.  Remember, you can always hire a PM after you've tried self-managing.  You can't hire a PM and then fire them to self-manage without major termination fees.

Matt DeBoth · Answer

@Tamera Jackson bringing on a 3rd party manager was the best business decision I have ever made. It has helped me focus on what I am good at, finding and closing deals.

Account Closed · Answer

Depending on how big you want to get, you will probably want to hire a property manager eventually.  When you analyze your deals, make sure you include an estimated expense for property management down the road so that you maintain solid cashflow.  While you can save this expense in the short run, it may make sense to eventually outsource it as your business grows.

JD Martin · Answer

😂 Pretty much describes my operation! Except for the 5 hours per week. We do full rehabs before they go on the market and after the first month it might be a few hours per year per unit.

OP: one thing to learn fast is that your tenant's emergency is not necessarily your emergency. The house is flooding everywhere and no one knows how to turn off the water? Yes, that's an emergency. The toilet got clogged at 3 AM? Not an emergency. The house is on fire? Yes, that's an emergency, but for the fire department first.

We provide info sheets with every property that lists emergency shut-off locations. We also provide water meter keys with every property so a tenant could shut off the water at the street in an emergency, probably faster than even the water department could get there.

Matthew Irish-Jones · Answer

@Tamera Jackson if you invest out of state you may legally need a property manager.  In our area you cannot invest, live out of state and not have local property management.  Something to consider before you go to far.

Rob B. · Answer

Generally, if you have a smaller business portfolio in REI (ie. only own anywhere from 1 to just a few units), it doesn't make as much sense to go the property management route, rather, manage it yourself with a bit of guidance. And it really also depends on your region; some have said you might pay 1-2% in prop management fees which sounds incredibly low (and borderline unbelievable), not factoring the standard 1-month rent fee policy; on average, you're going to be paying 4-6%, or higher out to a property manager in addition to that 1 full month rent fee. Give some thought to the number of units you have, and where you are in your REI process (if just starting out with only a handful of units, it probably is worth giving DIY self-management services another shot -- this way when you do go with a PM you'll have had your first experience managing it on your own, so you'll know what to look out for). Also, pay close attention to the fine print (specifically as it pertains to their fees and other charges that might come up). A lot of great options out there for self-managing if you decide to go that route; aside from providing the basics (listing, tenant screening, digital lease creation, rent collection, and maintenance tracking) some services also offer your tenants additional capabilities which makes it an easier sell on your end when getting them to transition over (ie. their ability to report on-time rent payments to the credit bureaus). But, the time you're putting into self-managing may mean less time towards learning about investing; all about finding a balance. Either way, I hope this info helps! Best of luck to you. @Tamera Jackson

Tamera Jackson · Answer

@JD Martin Great advice. I am looking at a couple of rehabs and the thought of that approach is appealing given you then know exactly what you’ve got. Should be lower maintenance if all goes well!

Great advice on emergency shut offs etc. I’ve moved personally  about 8 times and the homes I’ve purchased where the previous owner left those types of instructions made life so much easier. I can see the value for a tenant and I’m sure it helps to spell out where the communication boundaries are as well.

Thanks for the input!

Property Management - how many of you outsource?

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