Why Self Managing Investment Properties is CRAZY

Why Self Managing Investment Properties is CRAZY

Specialist · Wichita, KS · Member since 2020 · 7 posts · 48 votes

One funny thing about people is that while we are almost always well intentioned, we seem to do a lot of things that are just plain crazy. I, for example, still prefer to eat my oranges by dissecting each into their individual wedges, peeling back the skin on each wedge, and delicately crumbling each skinned wedge into the tiny teardrop pods that make up an orange. Is it crazy? I already know the answer, but, I'll probably still eat my next orange this way. 

Here is another example that I was luckily able to break free from - self managing my rental portfolio. Now that I'm on the flip side of this crazy behavior I want to lay out why this is crazier than my orange dissection ritual. 

To begin to frame things, investors can be categorized into three buckets:  

Bucket #1 - Those that hire a professional property management company

Bucket #2 - Those that self manage and love doing the work

Bucket #3 - Those that self manage and don't love the work

For those of you in Bucket #1 - Congratulations! I'm guessing you will run the world someday. 

For those of you in Bucket #2 - Really? Do you LOVE doing this work? Could it really be that you LOVE complete control instead? If you are sure that it's not a control issue or trust issue then by all means, manage away! I suspect this group is pretty small.

For those of you in Bucket #3 - I'm writing this article for you. Why? Because I used to be you! I didn't hate managing my properties (outside of a few late evening maintenance calls), but I definitely did not enjoy managing them either. I convinced myself that it was worthwhile because I was saving money doing it myself. And heck - I was even fairly qualified for the work. I could do most of the maintenance, I could turn a property in a few months time, and most tenants paid on time. The basic tasks were getting completed. So what's so CRAZY about this? Let me rephrase the reality of the situation...

The basic tasks were getting completed ------> Only the most basic of tasks were eventually getting completed. 

If we break down the more realistic statement we can see exactly why this behavior is CRAZY. 

"Only the most basic tasks"

I thought that completing maintenance requests, filling the property with tenants that passed a background check, and keeping an excel-based tenant ledger were enough. This list "checked the box" in my mind but didn't even begin to address the components of a successful rental portfolio. As a basic comparison, the below list is what I expect from my professional management company. 

Basic maintenance requests completed within 5 days, emergency maintenance requests completed within 2 days, preventative maintenance work twice a year, tenant-caused maintenance billed back to tenant, periodic inspections to make sure that the tenant is reporting necessary maintenance items, late fees collected, immediate 30 day notices posted, pet fees monitored and collected, move in inspections, move out inspections, move out damages charged to tenant, advanced notice on capital repair items, 30 day move out notices communicated, pre-leasing of property, tenant stay incentives, gutters cleaned, annual rent rate analysis, turns completed in 30 days, background checks on all occupants over 18, prior landlord references, co-signers on leases, direct deposit funds, monthly summary statements, online vacancy postings, post-eviction collections...

That in a nutshell is the different between managing a property and managing a property well. 

"were eventually getting completed"

Time is money. Just think for a second how much money is generated from decreasing vacancy rates from 15% to 8%. This alone will pay for professional management fees. How much money is going to be saved over time from having gutters clean out? How much better is tenant satisfaction (and average duration) if they get clear and immediate response to their maintenance requests? The benefits of timeliness are as real as the cash in your wallet. Every time you delay your property management responsibilities you are deteriorating your investment returns.

This is my best attempt to logically coerce you away from this CRAZY behavior.  If you are not already convinced to the point of taking action then I will try one last plea to your emotional side. Please, set aside your reservations, open up an additional browser tab, and begin researching for the best management company in your area. Your future self will embrace you with a warm hug. 

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Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
6y

@Joey Copper

I self manage.  Why would I "give" away 40-50% of my profits for someone to do what I can do very efficiently myself.  No one will care about my property/cash flow as much as me.  


I'm not saying property management is bad- it's just expensive.  It's great for some people and just an unneeded expense for others.  An example is-what does it cost a mgmt. company if the owner loses a month of rent because there is a vacancy?   Nothing-  What incentive does the owner have in renting it themselves to insure it gets rented-A LOT.   Who can tell a better story about a property- a management company with no financial stake or the owner who has their livelihood tied up in it?  


If I take an example of a small landlord with 5 duplex/triplexes and $20,000/month in rent.  At 8%, the management co takes $1600/month- That might be or 40-50% of their profit-I had a full time job and had 5 buildings.  

The post is more of a salesmanship post and does a good job trying to convince people they should hire a management company.  I'd advocate the best way to learn the business and optimize profit is to self manage.   

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  • Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    Did your decision coincide with your working for a property manager?

  • Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    6y

    We're all different. I like to eat chocolates, everyone does. But I like to roll each chocolate in my hand until it melts and then lick the melted chocolate off my fingers. I have a number of small, private pleasures like this.

  • Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    6y

    @Joey Copper

    I self manage.  Why would I "give" away 40-50% of my profits for someone to do what I can do very efficiently myself.  No one will care about my property/cash flow as much as me.  


    I'm not saying property management is bad- it's just expensive.  It's great for some people and just an unneeded expense for others.  An example is-what does it cost a mgmt. company if the owner loses a month of rent because there is a vacancy?   Nothing-  What incentive does the owner have in renting it themselves to insure it gets rented-A LOT.   Who can tell a better story about a property- a management company with no financial stake or the owner who has their livelihood tied up in it?  


    If I take an example of a small landlord with 5 duplex/triplexes and $20,000/month in rent.  At 8%, the management co takes $1600/month- That might be or 40-50% of their profit-I had a full time job and had 5 buildings.  

    The post is more of a salesmanship post and does a good job trying to convince people they should hire a management company.  I'd advocate the best way to learn the business and optimize profit is to self manage.   

  • Realtor · Pigeon Forge, TN · Member since 2018 · 230 posts · 111 votes
    6y

    We completely agree with your article. TIME is MONEY. Most investors my MOM as an example @Rhonda Blue  feel personally satisfied by maintaining and being hands on with her personal properties.  Hiring professionals to do the jobs that are better served like maintenance, repairs.  It is a mental and emotional leap for a lot of investors but definitely worthwhile.  

  • Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    @Bruce Runn This is my favorite paragraph:

    As a basic comparison, the below list is what I expect from my professional management company.

    Basic maintenance requests completed within 5 days, emergency maintenance requests completed within 2 days, preventative maintenance work twice a year, tenant-caused maintenance billed back to tenant, periodic inspections to make sure that the tenant is reporting necessary maintenance items, late fees collected, immediate 30 day notices posted, pet fees monitored and collected, move in inspections, move out inspections, move out damages charged to tenant, advanced notice on capital repair items, 30 day move out notices communicated, pre-leasing of property, tenant stay incentives, gutters cleaned, annual rent rate analysis, turns completed in 30 days, background checks on all occupants over 18, prior landlord references, co-signers on leases, direct deposit funds, monthly summary statements, online vacancy postings, post-eviction collections...

    So, I trade in managing my buildings, which I have down to a science, to managing a property manager? And why the heck do I care if he collects late fees?- he is going to keep them! I don't collect late fees... know why? Because I vet my tenants.

    Some day I may hire a property manager... though I can do many, many things remotely. And no doubt that there are advantages for different people and investors... but crazy? Not on your life!

  • Specialist · Wichita, KS · Member since 2020 · 7 posts · 48 votes
    6y
    Originally posted by @Bruce Runn:

    @Joey Copper

    "I self manage.  Why would I "give" away 40-50% of my profits for someone to do what I can do very efficiently myself.

    You can't do everything. If you fall into Bucket #2 and love the work then you should self-manage. If you don't fall into Bucket #2 then hire a competent management company and go pursue something else with your time.

      

  • Specialist · Wichita, KS · Member since 2020 · 7 posts · 48 votes
    6y
    Originally posted by @Bruce Runn:

    @Joey Copper

    "I'd advocate the best way to learn the business and optimize profit is to self manage."  

    I agree with @Bruce Runn on this point. I would make an exception for self managing for a limited time frame for educational value. 

  • Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    6y

    Joey, if you want to connect with your potential customers, you have to present an honest appearance. You own a property management company. Why not come out and say so? Your post reads like a tobacco ad telling me if I start to smoke I'll become one of the cool kids. 

    You stated that: The basic tasks were getting completed ------> Only the most basic of tasks were eventually getting completed. If that is true and it was your own property, why would I hire you to handle my property? You didn't care enough about your own property, you sure aren't going to take care of mine! 

    Your expect Basic maintenance requests completed within 5 days, emergency maintenance requests completed within 2 days from your property manager? I handle my own properties and emergency requests are almost always addressed within a few HOURS and routine requests frequently the same day or next day. 

    From your list of what you do, can you point out a single thing that takes a lot of time or is difficult to do? 

    preventative maintenance work twice a year, tenant-caused maintenance billed back to tenant, periodic inspections to make sure that the tenant is reporting necessary maintenance items, late fees collected, immediate 30 day notices posted, pet fees monitored and collected, move in inspections, move out inspections, move out damages charged to tenant, advanced notice on capital repair items, 30 day move out notices communicated, pre-leasing of property, tenant stay incentives, gutters cleaned, annual rent rate analysis, turns completed in 30 days, background checks on all occupants over 18, prior landlord references, co-signers on leases, direct deposit funds, monthly summary statements, online vacancy postings, post-eviction collections...

    None of what you listed is difficult or time consuming. 

  • Member since 2019 · 1k+ posts · 1k+ votes
    6y

    I whole heartedly disagree with your assessment here. I self manage from 5 hr away better than any professional property manager in my market. And generally speaking it runs me about 1hr/ turnover & a couple hours per month. So let’s drastically overestimate and say 100 hours per year for the portfolio. Last turnover season I think I rotated 13 and estimated about 9 hours input for the season.

    At 10% of rent it would cost me $20,000 to save 100 hours annually (it’s less hours, but we’re being friendly and assuming I’m crappier at my job than I am). And that’s not even including all the garbage extra fees where we all know management companies pad their stats. Example: the management co that used to handle the condo Corp where I own sending a non-certified “inspector” out once a month to “inspect” the boiler.... except that keys were never signed out from the office,.. because he never came. But they still charged $150/ month for it.

    You’re not worth $200/ hr. And in some markets, you wouldn’t be worth even $20/ hour. But it was a pleasurable read.

  • Specialist · Wichita, KS · Member since 2020 · 7 posts · 48 votes
    6y
    Originally posted by @Greg M.:

    "Joey, if you want to connect with your potential customers, you have to present an honest appearance. You own a property management company. Why not come out and say so?"

    I voluntarily listed that I own a management company on my profile for the exact reason that you highlighted. If I wanted to hide this fact would I not remove that from my portfolio? I've been on both sides of this decision and am confident about my points made. Like everything, there are exceptions that I respect. 

  • Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes
    6y

    People need to have an honest assessment of themselves and if managing is worth the money. Personally, I really do enjoy managing tenants and contractors. I dont know why but I love fixing things, be it actual properties and broken systems. I know eventually my time will be worth more than managing properties. I plan on self managing for years to come. 

    I think you are correct that most just want to save the cash. I don't think it's worth it if they're sacrificing any of their happiness. 

  • Property Manager · Minneapolis, MN · Member since 2014 · 380 posts · 167 votes
    6y

    @Joey Copper

    Of course I agree with this :-).

    1 can be a blessing or a nightmare depending on who you work with.

  • Huntsville, AL · Member since 2018 · 577 posts · 864 votes
    6y

    I don't think there is a "right" or "wrong" answer on whether to hire a property manager or not.  It simply depends on your business model and your time value of money.  

    For those of us like myself who have a W-2 job not in real estate, and for whom time truly is money, hiring a property manager is an obvious choice, and frankly, a necessary choice.  

  • Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
    6y

    Sure dude. I'm going to pay someone $2,000/month for 5 hours work.  Plus, they will select a tenant that changes their Harley oil in the living room.  I get the fact that PMs make sense for some.  To say it is right for everyone is just foolish click bait. 

  • Investor · Marietta, GA · Member since 2015 · 382 posts · 258 votes
    6y

    @Joey Copper

    I would hire in future only if i scaled up to multi family but honestly, with a small amount of SFH, management companies are no more competent than myself and needlessly skim my profits. Their preferred contractors are way too expensive (sometimes 3x More) and I typically get the most Yellow Letters in my "managed" properties because the landscaping looks the most rundown . Claiming that scheduled maintenance gets handled.......SMDH. Why pay someone just to have to "manage" them.

  • Member since 2020 · 1 post · 0 votes
    6y

    @Patrick M.

  • Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    6y

    If I get tired of managing my own properties, I'll hire a w-2 manager that reports directly to me-- not a property management company. I'll do this because there are (usually) financial incentives for unethical behavior by property management company employees to create churn (and additional placement fees) by failing to work with tenants having temporary problems and by failing to promptly take care of maintenance issues they cause unnecessary turnover, by nickel-and-diming tenants for late, lost-key fees, etc., and "damages" to increase their own performance incentives, by charging top-dollar for mediocre workmanship and pocketing the difference, and by steering tenants to their own or their most profitable apartments. By failing to make filing the units a priority and inadequate marketing, advertising and/or preparation.

    I look at apartments every day, and the VAST majority of the time, "professionally managed" properties are in the worst shape.

  • Peter TverdovBusiness Member
    Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
    6y

    I created my management company from scratch because I didn't trust anyone else to manage my property. Turns out I was good at it, very efficient with a lot of systems in place and it naturally attracted other investors. I do think people should start out managing because then they learn to appreciate the PM but all of my small Mom and Pop landlords saving money by self-managing, you're not saving as much money as you think, or you simply don't understand time value and what your time is worth.

  • Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    6y

    Make room for me in all 3 of your "buckets". I have a PM for some of my properties (the far away, class C ones) and not others (the closer, Class A ones). Sometimes I enjoy the work, other times I don't. Sometimes hiring a PM is worth it, other times not. Sadly, most PM's are terrible, some are straight-up criminals, and only a very small percentage are any good. Bad management kills a lot of investment properties. Like @Jill F. I look at a lot of buildings. The ones in the worst condition are typically run by "professional" PM's (although not always, and it may not always be the manager's fault if the the owner doesn't want to pay for repairs or keep up with maintenance). 

    For me, the ability to put some sweat-equity into a property, fix it up myself, improve living conditions, increase rents, add value is what separates real estate from other investment vehicles. I only turn properties over to my PM once they're stabilized and they have little chance of screwing it up. I would never expect a PM to manage a property as well as I would as the owner.  

  • Rental Property Investor · Bangor, ME · Member since 2019 · 8 posts · 24 votes
    6y

    My experience with property managers has been pretty lousy at best. It was often difficult for me to get my owners payment, and it was always late. The maintenance was sub standard and overpriced or completely fictional. The only things they were good at was keeping late fees, and collecting rent from tenants that wanted to pay rent. I realized that I could also keep late fees and collect rent from tenants asking me to take it. So I saved myself 10% of tents collected and a bunch of other made up fees and started to manage my own properties. It was easily the best decision i’ve made as a landlord.

  • Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    Its funny.... i cant imagine not managing my portfolio..... I just consider it part of the deal.... I like knowing who is living in my property, that it was spotless when they moved  in, that if there is an issue that it will be taken care of right away, etcetc....  that I know when they move out what they damaged (cause I cleaned it before they moved in), etc.....   Basically I consider my rentals my job... and I know no one will take better care of my money than me. 

  • Rental Property Investor · Lodi, NJ · Member since 2020 · 2 posts · 2 votes
    6y

    @Jill F. That’s a very interesting answer. A trusted employee who acts as a property manager? Rather than an entire management company correct? Following that logic, one could essentially build a company/team that does all the things the main article referenced, all reporting directly to you, at s much reduced cost I.e. hiring a family member to market on social media, etc. seems the jobs.

    Of the management company could easily be outsourced for a fraction of the cost.

  • Realtor · Las Vegas, NV · Member since 2015 · 12 posts · 29 votes
    6y

    Sorry, but I am also in the self-manage camp and don’t appreciate the implication that people who self manage do it because they are control freaks, or cheap, or too dumb to recognize “time is money”.

    My husband and I hired numerous bad PM’s in our rookie days. We were inexperienced, naive and assumed “professionals” in the RE industry knew more than we did. Sadly, that is often not the case. Out of necessity, we took over our problem properties and confronted the issues. It was stressful, but we figured it out, we grew, we became professional (without the designations) and it got easier!

    That said, it totally depends on the property and what your personal situation is. There is nothing wrong with hiring a good management company, or any other service provider, if it is of value to you. When I retire, scale up, buy outside my city, get sick of landlording or decide it’s time to lower my (possibly unreasonable) expectations a bit, I will find strong property management partners and be happy to pay them well. I will likely appreciate and understand them more, because of my experience.

    Best wishes. Take care of your investors and tenants and you will do well.

  • Carolina · Member since 2017 · 519 posts · 222 votes
    6y

    This feels very high and mighty.

    Do I love managing 11 units in C Class properties?

    No. Lol.

    Do I want to pay 10%-15% to some company that will (likely) b a pain in the *** to deal with, adding all kinds of fees, and putting god knows who into my units??

    HELL NO

    Calm down a little. Has nothing to do with control or not recognizing that "time is money". It's just silly. So many PM companies have some of the worst looking properties around and have awful reputations with the public (renters). I'm good on that for now. I need to make money.

  • Property Manager · Lindenhurst, IL · Member since 2016 · 854 posts · 506 votes
    6y

    @Bruce Runn "No one will care about my property/cash flow as much as me. "

    In a way, your statement is correct. That said, that does not automatically mean a property management company will do worse job than you. That said, even the best property management company out there probably won't manage exactly the way you want them to manage your properties.  

    FYI, I manage other people's properties, self-managed, still self-manage, hired a bad property management company and now use good property management companies for some of my rentals.

    I got nothing against people who self-manage. 

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