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.   

See this reply in the discussion

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

    @Todd Powell

    Todd, I'm like you just a bit bigger (on self manage).   I have 12 properties with 30 doors all within a 4 mile radius of my house and I manage my own and it takes about 10-12 hours/week on average.  My 10 year vacancy rate is 1/2 of 1% and like you, I screen extensively and get higher quality tenants than any PM could as they just don't care as much no matter what their sales pitch is.  I also know more than just about any PM owner about buildings and construction and have a lot more years experience than just about all of them. (they typically just have a realtor's license).  I use Buildium software and it is cost effective and very time efficient.  I have 3-5 trade professionals who do things for me that will respond the same day to a service call because I use them for renovations/construction so while they are subs, we have a very tight arrangement.  Tell me again why I need a PM?  I'll say again.  No one cares as much about my properties/cash flow as me. 

  • Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    6y

    @James Hamling    I am not a fan of the property management route.  My profitability went up by doing it inhouse.  But I do outsource some services with a management group:  Rent collection and tenant complaint calls. 

    The area where property managers interests do not intersect with mine is leasing.  I have a detailed algorithm that rejects quite a few tenants.  I find that leasing agents want to get their fees quickly and are not selective enough.  Further, you can't dictate to a property manager to really have a customized management program for you.  I have unique tenant incentives and attention to service that increases tenant stays.  Often since I know my tenants, I can even give individualized attention with the hope of creating long term tenancy.

  • Property Manager · Blaine · Member since 2015 · 209 posts · 276 votes
    6y

    @Peter T.

    It was the same for us Peter. We didn’t “discover” that we were good at it, but we are always tweaking our systems to get them where we need them. Most people that self manage do a bad job.

    The simple test on if you’re an ok property manager or not is if you have all of your tenants on a current lease, and adjusting rents annually. If so, you are most likely doing all of the jobs associated with being a good property management. If not, hire someone or sell it to someone who can do a job than you.

  • Rental Property Investor · Providence, RI · Member since 2015 · 1k+ posts · 594 votes
    6y

    @Joey Copper

    Do you dunk your Oreos in milk, twist them apart and eat the filling, or do you eat them like a regular cookie?

    We manage our own portfolio, do it efficiently, and wouldn’t do it any other way. Some could say it’s crazy to allow a third party to manage such a substantial aspect of someone’s financial portfolio. It’s all a matter of preference.

  • Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    No property management company is going to do as good a job as the actual owner. Unless you have 25+ units, it’s more of a waste of time & money going with a property management company. 

  • Rental Property Investor · Denham Springs, LA · Member since 2018 · 95 posts · 44 votes
    6y

    Self managing is not necessarily crazy. I self manage my 8 doors. It requires some work particularly my C class 4plex. But hey that is the nature of the neighborhood. Even a PM wouldn't do better than what I do. But I admit it takes time. My goal is to have 20+ rentals. And I already know that I will need a PM at some point unless I quit my full time job and create my own!

    Now if you invest out of state then obviously you need boots on the ground. Using a PM helps if you do not have family members or friends/partners in the area.

  • Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes
    6y

    @Joey Copper

    Imagine that you require your PM to be a Partner in your Investment.

    That's me!!

    In the $20 Million Portfolio my Partners and I own, I am am the PM and my incentives are directly in line with my Partners.

    Further, I have built a system in which all the Partners can see every single Maintenance Case and every Revenue and Expense in Real Time.

    That being said, I tried to get one of my Partners to take over the PM for me and he failed to even change a light bulb in a staircase for months. You would think even the thought of being liable would have given him the incentive to fix the light bulb!

    @Jill F. and I are on the same thought Pattern. If I wanted to stop doing PM work, I would just hire an employee.

    I will also say that after a while, you may qualify on Experience to get your full Broker's License without being a Salesperson.

    I did exactly that and NYS granted my Broker's License without first becoming a Salesperson.

    I immediately opened my Brokerage Firm to manage the Properties in the Portfolio under that entity.

    This gives me the ability to hire not just employees, but another RE Salesperson who may already have PM Experience. That RE Salesperson can also be a 1099 Independent Contractor as long as they have a Salesperson License. They can then hang their hat in my Brokerage.

    When I'm tired of Self-Managing, I'll be handing off the Management to someone I hire. The good thing here is that since I also own the Brokerage, I can create the Independent Contract Agreement (ICA) any which way I want. It will also be easy for me to let go of the Salesperson if they don't live up to my standards since Salespersons are Independent Contractors. I can't even imagine all the issues with letting go of an Employee. Better to go the Independent Salesperson's way.

    I'm also not opposed to having a PM firm manage other Investors properties. That would be the next step after I hire my first Salesperson! Might as well expand the Brokerage firm as I teach the Salesperson everything they need to know about doing a great job as a PM and learning my systems. 

  • Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    Everyone is entitled to their opinion based on their own experiences.

    I only have 8 properties, they are close by and self manage them.  I had one late rent payment last year and 0 turn over.  My tenants have my cell number and in 18 years have never had a call about a clogged toilet.  I have only had one call late at night about a water issue and I'm glad he called.  My tenants stay on average 5-6 years and most are neat freaks.  I don't always but have had several move in-outs within 24 hours.  The last turn over I had was in 2018 with an 8 year tenant that moved out of state and they left the property in better shape than when they moved in.  I'm too cheap to pay someone to do what I think I'm pretty good at.  If I was a new LL, or my properties were OOS it might be money well spent.   When I get too old to self manage them, I'll sell them.

  • Member since 2020 · 71 posts · 72 votes
    6y

    @Bob B. I’m like u. I think everybody different based off their experiences. I’d say whatever works 

  • Property Manager · Blaine · Member since 2015 · 209 posts · 276 votes
    6y

    @Bob B.

    It sounds like the rents too low. In many cases I tell people, I'm going to charge you $75 a month, but I'm raising the rent $200 so you will be +125 and you won't have to do a thing. There are plenty of online resources available to check and see if you're getting market rent. People complain about paying 10% but if rent is 10% under market. SFH have less turnover so you might be getting market rent. Plus, I find that a lot of the people I purchase from really enjoy the people and the work. When you really enjoy the people it's hard to raise their rent. I've seen some tears at the closing table from long time property owners who self manage. When they sell their small apartment it really is their retirement day and that check is the gold watch. However, I wouldn't have bought the property if I wasn't going to be able to slowly raise the rent a couple hundred dollars a unit.

  • Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    @Matt Higgins you wrongly assume my rents aren't at market rate and I don't have annual raises.

  • Property Manager · Blaine · Member since 2015 · 209 posts · 276 votes
    6y

    @Bob B.. Sorry to throw you in with the usual person that self manages.  I’m sure you’ve come across the person I’m talking about.  

  • Rental Property Investor · CT · Member since 2019 · 20 posts · 20 votes
    6y

    @Joey Copper do you think a 4th bucket exists where

    -I have my RE agent to fill vacancies because I trust him

    -I manage the contact with all my tenants through a portal (no late night maintenance calls). My customer service expectations can not be matched by a PM, sorry.

    -I decide who pays for the maintenance.

    -I don’t do the work myself, I could, I’m qualified and I really enjoy it. But i don’t because I know my time is spent better elsewhere.

    -I do however call for quotes or use one of the many contractors I’ve developed relationships with and choose who does the work.

    Would you agree there is some value in this type of PM strategy in that it balances time well valued/spent with balancing individual skillsets in our unique scenario.

    I think what you’ve painted is really black and white in that is has worked for you, but there is a world of grays and colors for other people to use that are trying to create the same picture.

    Best of luck out there.

  • Rental Property Investor · Spokane, WA · Member since 2018 · 64 posts · 59 votes
    6y

    I am in #2 but I do hire more complicated stuff out sometimes.  Sorry but mostly its just plain easy to collect the rent and deal with the people.   I have 16 units so its not too overwhelming.   I also work full time at a job.   For how easy it is I can't imagine giving a PM 8% of my take.   

  • Rental Property Investor · Los Angeles · Member since 2019 · 284 posts · 184 votes
    6y

    I don't think I need to read all the comments to assume you've gotten a lot of backlash from investors you are calling CRAZY.  LOL! 

    Property management is of course not for everyone...    But i think your assumptions might be a little skewed based on your own personal experiences.   If one finds the property, the right tenants and invest in the right areas, the right market... and rehabs the property correctly to reduce deferred maintenance upfront, property management is really NOT that difficult.  Im an investor in Los Angeles and invest primarily in Los Angeles where rents are super high (and so are management fees). Oh and there is rent control!   For my wife and I, it is imperative we run things like a business... that means being lean on monthly cap ex to keep our net income up.    Ironically, we ended up managing our own properties because we went through a slew of PMs that did not work out of us.  Btw, I can tell you none of those PMs really LOVED their jobs either.  

    What I find CRAZY is that you assume and expect some investors like us to LOVE give up 10% of our income on an average for something takes very little effort for me and my wife. Just some perspective.... we own an SFR that rents at $4800/mo... 10% of that is $480/mo. That is $5760/yr!!! This is just one of our properties where we hardly ever hear from our tenants. We have over 10+ doors like this that we manage. We're talking $60K+ a year for us to be giving up. Not to say we completely LOVE the job, but its not that difficult if you have the right strategy and systems in place.

  • Real Estate Coach · Salt Lake City, UT · Member since 2017 · 272 posts · 414 votes
    6y

    I agree wholeheartedly that you need to be in bucket #1 to be able to scale your business; however, there is value to self-managing a small portfolio... and it's not in the dollars and cents you save.  It's in the knowledge and experience you gain.

    In the process of scaling and amassing a large portfolio, you'll undoubtedly take on the role of managing the professional property managers.  Being able to see the world through their eyes is immensely valuable in hiring the right company, knowing whether or not they're performing well, and potentially even making the decision to fire them.

    Now, for small operators with up to 20 doors in their back yard... nothing wrong with self-managing as many people have posted.  There's the case of "things eventually get done" and the flip side of "nobody takes care of my business better than me" - I have mad respect for the owner/operator of portfolios like these, and I know a few that have managed to acquire 50+ units that they still self manage...

    Where each person draws the line between self and professional management is a personal decision based on time and resources.  

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    If you are fortunate enough to find an honest and hardworking property manager, then you’re very lucky and you should treasure them like gold.

    In my many years of experience, I’ve found that the tenants are more reliable and honest than the property managers. I have had about 2.5 property managers who were fantastic and dozens who were shoddy. These are the ways in which they have failed-

    1. Sent their in house handyman to the property countless times without informing me and over a year, deducted thousands of dollars for this service. Yes, it was permissible because work orders under $200 could be carried out without consulting me, as per the contract.

    2. Never once bothered to do a routine inspection of the property.

    3. Never answered the phone or replied to tenants maintenance requests, leading to very unhappy tenants.

    4. Failed to send a late notice or address tenants non payment until they were months behind.

    5. They all complain about how they’re only making a measly amount of money for the management services.

    I have self managed my own properties remotely for nearly a decade. I simply hire people on an adhoc basis, including repairmen, eviction companies and a person to show the property when there’s tenant turnover.

    Do I love it? Not particularly but I can do a better job than people I’ve hired in the past. The benefits are-

    1. I know exactly what’s going on with my properties.

    2. I establish rapport with my tenants.

    3. I’m not paying thousands of dollars for mismanagement.

    5. I can approve maintenance requests and deny requests when it’s clearly the tenants responsibility (eg changing light bulbs).

    When it gets to the point where I have dozens of properties in one city, i will revisit the need to hire a manager. I may start my own property management company so I can still have oversight and control.

  • Rental Property Investor · Lancaster, CA · Member since 2015 · 103 posts · 55 votes
    6y

    I wouldn't trade my knowledge of self managing in the beginning for anything. It taught me to understand that my renters are my customers and I treat them as such. I used to do everything myself because I wanted to learn as much as I could. For lack of a better term, I  have trained my tenants well. They know to call me asap if there's a water leak or pest issue, etc. My response time is fast because I can call one of the people on my team; plumber, handyman, electrician, contractor, people who I know and trust. Self managing has built up my instincts to see red flags for bad tenants and bad possible tenants. Seriously, if you take the time to find good people you know and trust, self managing is easy. 

    Now, after saying all of this, I self manage 9 doors. If I managed 90 doors, I would probably be hiring a PM. This is a very open ended subject and context is everything.

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y

    OP's little rant isn't worth a response from me.

    Just chiming in to say it's awesome to see so many fellow self-managers out there doing their thing and doing it well👍

  • Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    6y

    Now let me say I think PMs are good for people with a 9-5 or demanding full time.

    But the logic in your argument doesn’t work for those of us who do this basically as a full time (or almost). It’s pointless to have a PM. 

    Once you have the experience it’s not hard to get your maintenance done. Screening tenants is incredibly easy. & there are plenty of ways to make the overall job easier like a virtual assistant. Once you have scale you can hire your own employees to manage the day to day.

    I can guarantee I run my properties better than any other PM in my market. I make more money, have higher rents throughout my units, and have a lower vacancy. I can confidently say that about my self and 2 other top owners in the area. 

    So the cost of a PM, isn’t just their fee. it’s their fee + lost revenue from lower rents, higher vacancy, and higher maintenance cost. 

  • Flipper/Rehabber · HI · Member since 2020 · 9 posts · 4 votes
    6y

    @Joey Copper

    I have several rental properties in Hawaii and I self manage, I come to the realization that, I NEED to go to the next level,I rehabilitate “flip” homes for a living , my time has been consumed by tenants calling me for minor maintenance repair. It’s nice to get cash flow but it’s time for me to delegate my property portfolio to a property management team, That being said, I’m not just gonna hand over my portfolio to them on a SilverPlatter, I already done the hard work of ,pre-screening application, work reference, credit score check up, it’s deafly gonna be on my terms.........so that being said I can relate to what you’re saying.

  • Contractor · Chicago, IL · Member since 2017 · 102 posts · 181 votes
    6y

    @Terrell Garren

    Lol. Changes their Harley oil in the living room.

  • Rental Property Investor · Member since 2019 · 5 posts · 1 vote
    6y

    @Steve K.

    Very good article. I think there is a balance. At age 66, I use a property management company to handle tenant placement and day-to-day tenant relations. My blood pressure cannot handle tenant interaction anymore. However, I enjoy overseeing the maintenance and construction crew. Go figure. Everyone is different, so many solutions work. My son is working, has three kids and a full plate. He uses a property management company for all his properties. You bring up many good points to consider.

  • Member since 2020 · 71 posts · 72 votes
    6y

    I’m just curious??.. Record Unemployment sine The Great Depression... Entering a Forced Recession, Congress just Voted on a Second Round of Stimulus. The below Market Rent Comments. I just see this as a recipe for Disaster. All these Credit Investors reminds me of Cardone Capital.. goes on TV fires half staff sends out letters that he will sue in the event of retaliation from employees. Then few weeks later gets on TV and Begs for Help from Uncle Sammy._ ROFLMAO. Stack that Cash it’s Coning!!!

  • Dave PoeppelmeierBusiness Member
    Realtor · Maumee, OH · Member since 2015 · 491 posts · 722 votes
    6y

    I'm sorry, but a beginning investor should never jump straight into Property Management, unless you are out of town and have to invest somewhere affordable (not the coasts). I have self managed my properties in Toledo, OH up to this point, but I hope to grow myself out of my business, if that makes sense. I have 8 SFH right now, and at 6 and 7 I was beginning to not be able to keep up. So, I hired a bookkeeper. This is one of the best things I could have ever done, and MUCH less expensive than hiring management. My bookkeeper talks to my tax professional, I give the bookkeeper all of the water statements, our itemized monthly bank/CC statements, etc and they put it together all nice and pretty and bills the tenants appropriately. If a tenant calls with a question about a water bill, I simply tell them to call the bookkeeper. This has made my life so much simpler, with pros who know more than me, and I don't need a property management company. Yet. When I can't keep up with the screening/maintenance/customer service aspect, then I will turn things over to a management company, but only then.

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