When does it make sense to hire in-house management?
My father and uncle own 124 residential units with cashflow around $520,000/yr. This isn't including a management since they currently do it themselves. They are now looking to wind-down and focus on commercial properties while letting management take care of their units. They want to know if they should start hiring in-house employees or simply let a third-party management company do it.
I've been talking to management companies and getting quotes of 8% of gross rents for the entire portfolio. I've also done some research on here and throughout reddit where people hate management companies so I looked into seeing what an in-house management team would cost.
1 FT property manager = $45,000
1 FT Handyman = $40,000
PT bookkeeper = $20,000
Leasing an office = $15,000
Paying employees insurance = ?
Paying for vehicles or gas = ?
Software = ?
Total might be around $140k-$150k a year for in-house management, this is my estimate, I could be way off. I'm sure this also comes with a lot of it's own hassles that can't really be accounted for.
The management companies are charging 8% of gross rents collected. Gross rents are $1.12 million/year, at 8% that would be around $90k a year. The big issue I see online is that management companies might overcharge for repairs or add in fees here and there. \
Would it still be worth hiring in-house? If not, when does in-house become worth it?