Why Self Managing Investment Properties is CRAZY

General Landlording & Rental Properties
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Why Self Managing Investment Properties is CRAZY

Joey Copper
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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Bruce Runn
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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  • Steven Lowe
    Real Estate Agent · Scottsdale, AZ · Member since 2019 · 448 posts · 320 votes
    6y
    Originally posted by @Joey Copper:

    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

    I know plenty of investors in buckets #2 and #3 that are doing really well.  I can list a handful off the top of my head that are multi-million dollar companies with millions of square feet in their portfolios.  

    0Reply
  • Scott TrenchPro Member
    Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
    6y

    @Joey Copper it’s about the value of your time. Most people get started in real estate likely earning less than $100k per year, all in. That values their time at $50 per hour or less. Property management is more expensive than that, on average, in my experience. Over time, because we invest in real estate and other assets, the value of our time increases to where it no longer makes sense to manage the properties individually.

    When your time is worth $25 per hour, it can be foolish to outsource tasks at $100 per hour. When your time is worth $250 per hour, it’s foolish to do $100 per hour work.

    Also, the new investors getting started on the journey gain valuable hands on experience by diy self-management. There’s no black and white here!

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  • David Song
    Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes
    6y

    @Joey Copper

    Is this a joke? How many property managers can actually do their job right?

    As a REI, the key is to maximize the potential of a property, proactively renovate and maintain, increase the market value, increase the rental return, reduce the expenses. Then sell or refinance at a profit.

    Tell me one property management company that can do that. I will be more than happy to give them the job.

    2Reply
  • Gina Nicolas
    Member since 2020 · 65 posts · 15 votes
    6y

    Hello everyone,  I am a new investor and i self manage 2 of my properties and one is managed by a property manager. I have not yet had a good experience with property management companies. The one that is currently managing my one property, charge me 200 dollars dispatch fee. Last month, i was short on rent - section 8 tenant, and my property management told me that section 8 was late with payments last month. I am not saying that my property management is lying but i thought that section 8 is never late with payment since it is funded by the government.  This being said, I am learning a lot from the 2 properties that I am  currently managing myself but i do not enjoy it. One reason might be because I do not have systems in place. Tenants are calling me all hours of the day and night. I am currently reading "The book on managing rental properties" by Brandon and Heather Turner and I am learning so much. I will recommend it to anyone new to rental properties management. For the next weeks, i plan to create systems to make my life and landlording easier. I am looking for a good property management in Reading, PA. In the meantime i will continue to manage my properties, but i definitely know that self managing IS NOT for me. 

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  • Gina Nicolas
    Member since 2020 · 65 posts · 15 votes
    6y

    Can anyone share which systems they use to make landlording easier. It will be very helpful for newbies like me, without systems landlording can be a nightmare

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    @Joey Copper

    I self manage, and self maintain. I know what is going on with my properties at all times. For example- two of my properties are 25 mins from my house, they are twin homes,side by side. Mowing the yards is a pain because of a hill in the back yard and there are small yards out back, then a set of steps from each yard to the upper. Not very tenant friendly mows especially for women trying to get the mower up and down the stairs. Sure I could hire someone for $40/week or whatever, but I’d rather do it simply for the fact that my tenants know I’ll be around and I can check on my investments.

    I am very hands on, and take care of my properties. No way could I just sit back and not know what’s what, and pay some company $5000/year to not give a sh**. And I’d much rather go out and show my properties and meet people and save the month rent fee to fill a unit, and not be sitting on the couch losing money.

    Management is not for me.

    2Reply
  • Cliff H.Pro Member
    Rental Property Investor · Nashua, NH · Member since 2014 · 587 posts · 477 votes
    6y

    Anyone that has self-managed has also seen that what makes a great maintenance team is not necessarily what defines a great leasing team and that that leasing team is often the lynchpin in the entire assumption that professional PM reduces vacancies. 

    In some cases, professional PMs have multiple teams/personnel with expertise in both contractor and marketing fields, but many smaller PMs just fall into the field by starting as GCs that see an opportunity for more a more recurring revenue stream of 8-10% in exchange for housing an on-site super or hiring their spouse as a receptionist to route calls to the applicable local plumber, electrician, handyman, or landscaper. 

    What I see in the response of many of us who self-manage is the aftereffect of having experienced enough bad PMs to simply create own system that often functions at a lower cost, provides more consistent/reliable results, and (yes) accomplishes a similar goal of avoiding having to fix toilets at midnight.

    In short, let’s stop creating false dichotomies so we can get to the more interesting conversations around what your great PM, my great system, or your great VAs are doing for you, how you found them, and how you keep/support them. 

    1Reply
  • Shane Ussery
    Member since 2020 · 71 posts · 72 votes
    6y

    @Gina Nicolas you know that reminds me of myself starting out. If you have a property on Section8 that means overall condition is good as they inspect and have strict guidelines. I don’t know how long this contract is with current pm? After my property manager was done with me condition 1 house was left in and the tenants he put in other house.. his actions prolly set me back a year. I just told him I would take it from their. He’s lucky I didn’t sue but I just moved on. I would check with section 8 office in your area and see if the story they say matches to theirs.. Napoleon Hill speaks of a Mastermind Principal if you’ve ever read any of the material. That’s what I’ve mastered over time is getting what I want to get done through others.i just had that one bad experience from pm after that I just started doing it myself. Private message me I’ll give u somebody pointers that will help if u decide to take over yourself.

    0Reply
  • Alvin Sylvain
    Los Angeles · Member since 2018 · 464 posts · 471 votes
    6y
    Originally posted by @Julie Marquez:

    @Alvin Sylvain I think we have the same dad!

     ...... so ...... should we tell Mom, or what?

    1Reply
  • Alvin Sylvain
    Los Angeles · Member since 2018 · 464 posts · 471 votes
    6y
    Originally posted by @Cliff H.:

    In short, let’s stop creating false dichotomies so we can get to the more interesting conversations around what your great PM, my great system, or your great VAs are doing for you, how you found them, and how you keep/support them. 

    That's a very good point. It's not a one-size-fits-all situation, and it doesn't have to be 100% of one thing vs. 100% of the other. For example, if you're living in one unit of a multi, it would make sense to do your own management if you're half-way comfortable around tools. But clearly an out-of-state investment will require a good team, including a good PM, where the property is. If you have both; do both!

    0Reply
  • Alvin Sylvain
    Los Angeles · Member since 2018 · 464 posts · 471 votes
    6y
    Originally posted by @Gina Nicolas:

     There is a book entitled, "Landlording: a Handymanual for Scrupulous Landlords and Landladies Who Do It Themselves" by Leigh Robinson.

    It was my Landlording Bible when I first started renting.

    0Reply
  • Shane Ussery
    Member since 2020 · 71 posts · 72 votes
    6y

    @Gina Nicolas I don’t or can’t speak on your situation and I’m not saying all pm are bad people. It’s a wonderful hands off approach. However, not everyone is honest and true in their intent. I remember one time, I used to do a lot of houses where I’d look for multiple properties at one time. I went to this one where their was 4 houses owner was in New York houses are in NC. Ok the houses for Sale were listed through a whole different group of Realtors. And in order to be a Property Manager in NC(unless your the owner) you have to be a Realtor. So why would if your selling go to another Realtor? That told me he didn’t trust the ones managing his houses. To test my theory I asked the ones that managed the houses if I was to buy would they manage them for me? The Listing Agent put them on the phone on speaker so I could hear. When I asked the question they said no. Reason being they wanted houses for themselves. So, I was just disgusted with that scene I told Listing Agent she should contact her client and advise him they were trying to make him  discouraged so they could get them cheap. So im telling you you’re smart for questioning. Same token until you know facts don’t jump to conclusions.

    1Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @David Song:

    @Joey Copper

    Is this a joke? How many property managers can actually do their job right?

    As a REI, the key is to maximize the potential of a property, proactively renovate and maintain, increase the market value, increase the rental return, reduce the expenses. Then sell or refinance at a profit.

    Tell me one property management company that can do that. I will be more than happy to give them the job.

    If you've been managing your own properties for a couple years, then you know how they're performing under your tutelage.  You probably have an accurate annual proforma for the past, say, 3 years.  Why not walk over to the best property management company in your area and just say: "Here's how my property is performing. Can you make it perform better?"

    To me, that's the test - if you can get the same (or better) performance with less work, yet we still decide to do it ourselves, it means we should be skeptical of our motivations for keeping control. 

    2Reply
  • Helen Zhang
    Austin, TX · Member since 2016 · 160 posts · 39 votes
    6y

    @Joey Copper Those who tell you that you might not be able to do XYZ, or it is too complicated for you to do XYZ, is simply telling that they want your money because they only know how to do XYZ. (I'm sure you already get that).

    It is your money that you are investing in, and you have a right to do everything the way you wanted to do and know everything that you wanted to know. Anyone who tells you otherwise, tell them f* off. 

    If one day you have decided that you no longer wanted to manage a property, you can then hand it off to someone else. Meanwhile, I say go eat the orange in whichever way you wanted to eat. You put your money on the table for investment, you should at least get a chance to have a taste on your orange peels regardless you will like it or not. 

    0Reply
  • Hal Thompson
    Las Vegas, NV · Member since 2014 · 284 posts · 123 votes
    6y
    Originally posted by @Terrell Garren:

    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. 

    LOL this +1000. I won't lie, it would be nice to have someone else do the work. However, you can't turn over the management of your business to another entity any more than you can turn over management of your life and expect good results by definition. Some of the dumbest people I've ever met have worked for property management companies. They were lazy, stupid and seemed to lack any internal drive whatsoever. Turn your livelihood over to some random property manager at your peril.

    Bucket #1 - Those that hire a professional property management company
    For those of you in Bucket #1 - Congratulations! I'm guessing you will run the world someday.  


    Well...there is Trump I guess, so maybe he's not wrong. This whole thread seems like one big troll to me.

    1Reply
  • Jason Taliaferro
    Real Estate Agent · Baltimore, MD · Member since 2014 · 113 posts · 71 votes
    6y

    Different strokes for different folks. I personally fall into bucket 1 and 2. Why because sometimes it doesn't make sense for me to manage the property. It is a mix of property types and location for me. If I could I would self manage all. My wife always reminds me I am different,  so that may not be for you. I am a fairly accessible person. Every job I have ever had calls me at whatever hour so a 2 am call about a toilet, big deal. I will add that you are still the business owner and you will at some time need to manage your property manager. Also, you can just get a realtor to market the property or market it yourself. I have done all with similar results. If you are pressed for the money dont do it. All services property managers do on retainer now other services do for a fee.  Need a place rented, get a realtor, need an eviction I know management companies that will do it for me at least for a fee. Need to find a contractor, I love thumbtack. Over time you will find good contractors and keep working with them.

    0Reply
  • Michael Jones
    Investor · Louisville, KY · Member since 2017 · 199 posts · 253 votes
    6y

    15% vacancy? If you were running 15% vacancy you should have stopped self managing and let a company do it for you to fix that vacancy issue.

    I am in bucket number 2. I self manage my 28 units all the way down to the actual books and filing taxes. And here is why:

    If I have a tenant that has a plumbing leak and it is managed by a property company and the tenant calls them and then they call a plumber to repair any type of leak it is going to be $300 no matter how minor the leak. 

    Instead, I just got this exact text yesterday. The toliet is leaking. I replied with "can you send me a picture of where it is leaking? Once I recieve the picture I see that it is dripping from the wall valve where you shut off the toilet inlet water. 

    I hop in the truck, stop by the hardware on the way and match up the new valve with the picture and within 30 minutes i am knocing on the unit.

    I go to the hot water closet and shut off the main to the unit, test the water in the sink next to the toilet to ensure it is off, grab my adjustable wrench, pipe wrench and thread tape and replace the valve in under five minutes.

    I show the tenant what I did and how I fixed it and thanked her for always being so prompt with any issue and for being such a great tenant.

    She is in her 60's and says to me "I have rented apartments my entire life and I have never had landlords as good as you and your wife. As long as you two own the building I will never move."

    The value of fixing the leak $300.00 minus an $11.00 valve and one hour of my time.

    The value to my tenants for not having to deal with the red tape of a company and having me respond in an hour is priceless.


    And I didnt give up 10% of her rent for someone else to call a plumber.

    I am not saying that property management companies do not have great value to certain owners in many situations but they are not for a large majority of independent owners. 

    If i start running 15% vacancy then I might consider one.

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Dan L.:

    "Self-Manage" doesn't mean you're fixing toilets.  It just means you're managing the property & tenant.  I self-manage but I call electricians, plumbers, etc.  I only have a few properties now, but likely as I grow I'll hire someone to help manage it, for a fraction of the cost of a property manager.  (30 units, $100/unit = $3,000/mo... Could easily hire a part time assistant for half that).

    not dissing the PM industry but the monthly management fee is just part of the profit arm for PM and cost to owner.. you have placement fee's  ( which I pay to brokers )  then mark up on maintenance ( which if I owned a PM company I would surely do).  etc.. 

    So many folks on this sites number one goal is to live off of rental real estate cash flow so they can quit their job.. in my mind your just changing jobs.. you going to the ranks of self employed.  So nothing wrong with working your own portfolio if you can..  Now out of state and lower D C low B that can be pretty tough trying to do it from afar.

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  • Stone Saathoff
    Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
    6y

    If your investment property isn't too far from where you live and you don't have a massive portfolio it's great to manage them yourself. Saves money and allows you to have total control of your investment. Might not be for everybody but if you're in the position to do it you should, especially in the beginning.

    1Reply
  • Justin Curtis
    Rental Property Investor · Waverly, TN · Member since 2016 · 5 posts · 5 votes
    6y

    @Joey Copper

    Bucket 2 here. I have 40 properties and do all my maintenance and management. I truly love it. I guess I guess I just enjoy working with people. I want them to feel like I’m bringing personal value to them. I understand it’s harder to scale and it is getting harder to manage it all. Thanks for the read.

    2Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y

    @Joey Copper  based on your statement, "I could turn a property in a few months time", I would argue you were not a good property manger. We like to have tenants in back-to-back or at most within less than 30 days. 

    That puts me in Bucket 4 - those that self manage because they do better than a PM.

    2Reply
  • Daniel DietzPro Member
    Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
    6y

    @Joe Splitrock hit it on the head for us. My two partners and I own 30 units and do all of the PM, some of the unit turns and maintenance. We each have our specialty area; business, PM/Tenants/Maintenance. If our maintainence guy is gone on his two month summer vacation and we turn a unit that needs paint we hire it. He loves to do it when he is here etc....

    We do really like dealing with our tenants.... we screen really hard for good ones that bring *us* gifts at the holidays because we take good care of them.

    We have less than a 3% vacancy rate and an average stay of over 5 years. I dont think I would see that from a PM. We often have turns of less than 3 days.

    We save about 30K per year in PM fees, and we track hours religiously for the way we split profits. We spend about 100 hours per year on PM (not counting maintenance, which we 'pay' ourselves for as it happens) so that means we are 'making' about $300 per hour for work we actually enjoy. I'll take that :-)

    Dan Dietz

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  • Dan L.
    Rental Property Investor · Albany, NY · Member since 2019 · 125 posts · 47 votes
    6y

    @Jay Hinrichs Exactly.  I didn't get involved in RE with any dream of chillaxing on the beach as my investments made me money - that's fairy tale stuff.  And it's funny you mention maintenance costs...  I'm happy because I finally found a good, reliable, licensed plumber who charges a low, reasonable rate.  Why would I give up all my savings to a PM company?  There was a leak in a tenant's sink.  Tenant texted me (1 min of work).  I texted the plumber (1 min work).  After the plumber fixed it, I had a 5 min conversation on the phone with him (mostly just bs'ing). I mailed him a check (2 mins).  So for less than ten mins of work I took care of this uncommon problem.  And now I'm a hero in the eyes of the tenant and a responsible businessperson in the eyes of the plumber, who had a check in the mail to him within 24 hours.  And I saved myself the PM fee & maintenance markups (at least $200).  Plus my plumber fixed my tenants' gate for me while he was there!  This is how you grow a business, IMO. 

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    6y

    Everyone should do what works for them. 

    It would be interesting to see how many DIY landlords here also self-manage their IRA, 401k and other stock/bond investments? How many work on their own cars to change the oil, brakes, etc.? All these things are relatively easy to do and can save you the same amount of relative money that self-managing your rentals does.

    On another note, in our experience the property class dictates most of the challenges and problems. 

    A Properties
    Tenant Placement: relatively easy as property in popular area and mostly white-collar applicants. Can just go off credit score and income = 3x rent.
    Management    : easy rent collection, rarely any evictions or other tenant-related problems. Most tenants have savings to cover financial surprises.
    Maintenance: only small stuff as property in great condition.
    Overall    : easy to self-manage, even remotely. Don't really need systems. PM fees should be low.

    B Properties
    Tenant Placement:     takes longer to find a good tenant. Tenants are mix of white-collar and solid blue-collar. Credit scores will be mixed, can still use income = 3x rent. Will want to also check job stability and with past landlords.
    Management:     Occasional rent payment issues due job loss, but many have savings to cover. Rare evictions, but may need to send eviction notice to get their attention. 
    Maintenance:     more due to deferred maintenance issues and tenants being a bit harder on the home.
    Overall:     usually easy to self-manage if you find a good handyman. Some tenants may require hand-holding on rent payment options. PM fees are higher as requires more resources.

    C Properties
    Tenant Placement:     some blue-collar, but mostly no-collar tenants. You better have a great screening system! Credit is usually questionable, so just look for evicitons/convictions patterns. Employment AND income stability is most important. Multiple recent jobs makes calculating stable income difficult. Should NOT use income = 3x rent requirement as tenants will make car payment before paying rent. Better to use Debt-To-Income ratio like mortgage industry. MUST check with past 2 landlords and verify they are the landlords and not family/friend poser. Check bank statements for NSF issues. You should also learn about Section 8.
    Management:     Excuses and more excuses on late rents, so must have a robust tracking system. You will be become very familiar with eviction process or lose lots of money. Any financial surprise means late rent and then struggles to catch up. Many Section 8 offices understaffed and overworked, so multiple followups required for results.
    Maintenance:     tenants very hard on the home. You will need to learn to do repairs cost-effectively and not to overspend as tenants will just damage them again. Large capital expenses are often delayed due to budget issues, leading to upset tenants. Break-ins are an issue.
    Overall:     you better be very organized and have systems for everything. Takes a LOT of time as tenants will want to tell you their lifestory as part of their excuses. Lots of hand-holding. PM fees much higher as more resources to effectively manage.

    D Properties
    Tenant Placement:     Occassional blue-collar, mostly no-collar and Section 8 tenants. Even more difficult to qualify than C Properties above.
    Management:     very time consuming! Constant hand-holding, whatever can go wrong will.
    Maintenance: they are D properties for a reason. Maintain to the neighborhood is the mantra not to overspend. Tenants damages are a way of life. Periodic break-ins cause damages tenants can't/don't want to pay for.
    Overall: The PM fees an owner is willing to pay, rarely align with resources required to effectively manage. Local, self-management is best.

    There have been a lot of comments about PM maintenance costs being too high. From our experience, many DIY landlords hire the cheapest workers with zero insurance. Many commenting here seem to fail to understand a PM cannot do that! It also doesn't make sense to send a cheap "C-level" contractor to a class A home.

    Yes there are a lot of terrible PM companies out there. We compete against them everyday. Many owners screw themselves though, because they only focus on the cheapest PM to hire. Then they come to forums like this and proclaiming all PM's are bad!

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Drew Sygit:

    Everyone should do what works for them. 

    It would be interesting to see how many DIY landlords here also self-manage their IRA, 401k and other stock/bond investments? How many work on their own cars to change the oil, brakes, etc.? All these things are relatively easy to do and can save you the same amount of relative money that self-managing your rentals does.

    On another note, in our experience the property class dictates most of the challenges and problems. 

    A Properties
    Tenant Placement: relatively easy as property in popular area and mostly white-collar applicants. Can just go off credit score and income = 3x rent.
    Management    : easy rent collection, rarely any evictions or other tenant-related problems. Most tenants have savings to cover financial surprises.
    Maintenance: only small stuff as property in great condition.
    Overall    : easy to self-manage, even remotely. Don't really need systems. PM fees should be low.

    B Properties
    Tenant Placement:     takes longer to find a good tenant. Tenants are mix of white-collar and solid blue-collar. Credit scores will be mixed, can still use income = 3x rent. Will want to also check job stability and with past landlords.
    Management:     Occasional rent payment issues due job loss, but many have savings to cover. Rare evictions, but may need to send eviction notice to get their attention. 
    Maintenance:     more due to deferred maintenance issues and tenants being a bit harder on the home.
    Overall:     usually easy to self-manage if you find a good handyman. Some tenants may require hand-holding on rent payment options. PM fees are higher as requires more resources.

    C Properties
    Tenant Placement:     some blue-collar, but mostly no-collar tenants. You better have a great screening system! Credit is usually questionable, so just look for evicitons/convictions patterns. Employment AND income stability is most important. Multiple recent jobs makes calculating stable income difficult. Should NOT use income = 3x rent requirement as tenants will make car payment before paying rent. Better to use Debt-To-Income ratio like mortgage industry. MUST check with past 2 landlords and verify they are the landlords and not family/friend poser. Check bank statements for NSF issues. You should also learn about Section 8.
    Management:     Excuses and more excuses on late rents, so must have a robust tracking system. You will be become very familiar with eviction process or lose lots of money. Any financial surprise means late rent and then struggles to catch up. Many Section 8 offices understaffed and overworked, so multiple followups required for results.
    Maintenance:     tenants very hard on the home. You will need to learn to do repairs cost-effectively and not to overspend as tenants will just damage them again. Large capital expenses are often delayed due to budget issues, leading to upset tenants. Break-ins are an issue.
    Overall:     you better be very organized and have systems for everything. Takes a LOT of time as tenants will want to tell you their lifestory as part of their excuses. Lots of hand-holding. PM fees much higher as more resources to effectively manage.

    D Properties
    Tenant Placement:     Occassional blue-collar, mostly no-collar and Section 8 tenants. Even more difficult to qualify than C Properties above.
    Management:     very time consuming! Constant hand-holding, whatever can go wrong will.
    Maintenance: they are D properties for a reason. Maintain to the neighborhood is the mantra not to overspend. Tenants damages are a way of life. Periodic break-ins cause damages tenants can't/don't want to pay for.
    Overall: The PM fees an owner is willing to pay, rarely align with resources required to effectively manage. Local, self-management is best.

    There have been a lot of comments about PM maintenance costs being too high. From our experience, many DIY landlords hire the cheapest workers with zero insurance. Many commenting here seem to fail to understand a PM cannot do that! It also doesn't make sense to send a cheap "C-level" contractor to a class A home.

    Yes there are a lot of terrible PM companies out there. We compete against them everyday. Many owners screw themselves though, because they only focus on the cheapest PM to hire. Then they come to forums like this and proclaiming all PM's are bad!

    YUP X 1000  issue you have with many is that A class on paper just don't make the same returns on Paper that C class makes.. and well investors go for the bigger returns hoping against hope their experience will be better.. what you describe is EXACTLY how my rentals over the years have played out..  

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