Why Self Managing Investment Properties is CRAZY

Member since 2018 · 1 post · 5 votes

6y

Before the internet it was probably harder to self manage. To be honest I see properties (not all) from PM companies sit for a month at least between turns. I post my properties on Facebook/Zillow/Craigslist and have them rented in a few days of the tenants even mentioning leaving.

5 Reply

Navin Hiralall

Member since 2019 · 3 posts · 1 vote

6y

It all depends on size. Someone with 8 units and under, it makes sense to self manage. Otherwise, a property management company would be needed for 9 or more.

1 Reply

Paul Sandhu

Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes

6y

I self manage 23 short term furnished rentals. 83 beds total. It's a full time job. If a PM was doing what I do, there wouldn't be much money left for me. You got to have 3M talent. Mechanic, Magician, Mindreader.

2 Reply

Houston Porter

Member since 2020 · 8 posts · 4 votes

6y

Wait a minute. Is that not how everyone eats their orange? ...I'm not normal??? LOL.

Anyway, I enjoyed your post, if for no other reason then that it confirmed that there is such thing as a "Bucket #2."
Although, I will admit that there could be a time when I no longer enjoy the work, but for now I do. (I didn't know there were others who ate an orange like I do and also wasn't sure if there was something wrong with me that my friends all use management companies and I handle things myself.)

I have a background in construction, real estate sales and management and was the economist for a REIT for a few years (along with customer service, security and a few other things.) I am also an attorney specializing in Real Property law. Of course, one might say that my time is worth more/paid better when I practice law, which I still do, however, I am working towards a day when I can retire on just my passive income, which in large part due to my former careers, especially in the research side of my REIT days, is increasing quite nicely. However, my personal relationships with my tenants have increased my average tenant tenure considerably too and as you know, vacancies can be an big part of our properties' lost potential. And call me a hippy, but I value speaking with every one of my tenants, at least when they move in. (It's not like I want to hear from them all the time or anything.) I want them to know that we want to provide a place that they enjoy and that in return we ask that they treat our property with respect and that above all else, they communicate with us if they are having any problems with the property. It's the complete customers service package and I believe it makes a difference. Will that approach work everywhere with all classes of property and all people? Maybe not. But so far we have properties all over the country and it seems to be working. ...admittedly though, there will likely reach a point where I can no longer handle it on my own but I am more inclined to hire help then to hand the whole thing off.

However, your post has inspired me to add a couple things to our checklist for our semi-annual business plan meeting, so I thank you for that. I need to make sure that 1) I am still enjoying the work and that 2) there isn't a more affordable way to go.

3 Reply

John Aloisi

Investor · Allen Park, MI · Member since 2016 · 25 posts · 13 votes

6y

You didn't like managing your own rental properties and didn't do it very well, so now you own a property management company? That's crazy.

5 Reply

David S.

Investor · Prairieville, LA · Member since 2015 · 311 posts · 424 votes

6y

This topic is highly depending upon if you have available vendors, personal goals, grit, tolerance for BS, and many other things, hence my Q and A format:

Q. Do you have competent property managers in your area?

A. No. Most owners in my area experience an increase of 20 percent vacancies and 100 percent increase in expenses as well as a 900 percent don't give a f**** attitude towards their properties and tenants when they turn properties over to a PM.

SOLUTION: 1. Self manage or 2. grow big enough to hire W-2 PM that you can vet and manage.

Q. What class of property do you have?

A.

A Class a below average manager can handle

B Class a below average manager can handle

C Class Good F****** Luck

D Class Fo-get-about it. You're toast.

F Class-Call the bank to give back properties.

Me= a mix

Q. Are you in growth mode, comfortable mode, or don't give a F**** mode?

A. If you are in growth mode, you need sweat equity and need to reinvest every cent. Comfortable mode you can go either way. Don't give a f**** mode you can go either way.

Q. What is your personal situation?

A. I have no competent managers in my area. I have to self manage. I can self manage 42 rentals for less than 5 hours a week, which translates to over $200 an hour. With technology, everything can be handled by text or email. I cheat a little bit because I hired a hungry leasing assistant who handles all of my most time consuming task: finding new qualified tenants and placing them. Result: 100 occupancy and immediate addressing of issues, NOT 3 DAYS OR 5 DAYS. Try telling a tenant in the deep South 90F days that he has to wait 3 days for AC REPAIRs classified as emergencies. My colleagues with property management: 25 percent vacancy and higher maintenance costs and unhappy tenants. My colleagues with hired gun, W-2 employee: 10 to 25 percent vacancy and higher maintenance costs.

MY GOAL: I intend to grow my portfolio to 75 units, which is the minimum number of units needed to support a FULL TIME property manager and maintenance technician. I would actively manage, fire, and hire good quality people.

0 Reply

Shane Ussery

Member since 2020 · 71 posts · 72 votes

6y

@John Aloisi some of the things I’m seeing posted here I’m starting to wonder myself. Personally and I’m ok for people starting out actually I encourage it but a lot of people on here I keep hearing pawpaw earl was a landlord I’d hold on to his overalls as he demanded payment. Or I’m such a sophisticated investor I social destinanced myself before it was cool... this whole site isn’t what I thought. No wonder they don’t have any Big Players on here.

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Fleming Schutrumpf

Member since 2019 · 8 posts · 7 votes

6y

I disagree with hiring property managers for local properties. Having hired 5 different firms in the past, I think there is a common theme. Really good month 1. Pretty good month 2. Ok month 3. Overcharging, and often actively defrauding you month 4 and on. Here's some of the downsides of property managers: don't have my interests at heart. Their job is filling the unit and sending me paperwork, and eventually my share of rents. Their eye for upcoming maintenance items, tenant satisfaction etc, is pretty limited, and many property managers aren't owners themselves and just lack the mindset for what matters to an owner. Next, most property managers are salespeople, not building operators. They don't really have time for client care or building management, maintenance, or the simple things (that screen is loose, I can just pop it in between tenant showings)... Everything in property management is finger pointing. That's the maintenance guy's job, or it's accounting, or .... There is little accountability, and there's a lot of money spent on their services. 8-12% of monthly rents, plus 40 - 100% of rent for filling a unit. With little to no downside to a vacant unit, and that 40 - 100% upside to filling one, why keep tenants happy? Better to churn and burn, cost the owner a month between leases and some marked up property management performed make ready services, than just stay on top of tenant care and keep the same tenant for many years.

Since I started self managing 5 years ago, my tenant turn over has gone down literally 80%. I take care of my tenants, and my properties, it's the same thing, and it's in my best interests. They appreciate me, I'm consistently viewed as the best landlord they've had. People stay and stay and stay, and I keep my overall turnover low, my vacancy costs low, my workload is a fraction of what property managers complained was "Sooooo difficult" and I keep the money I make instead of spending it on something that is high cost, low benefit.

Sure if I owned an apartment building out of town, that would be different. However, for in town rentals, I spend part of Thursdays dealing with maintenance issues, and addressing vacancies and make ready's when they come up. Other than that, property management is simple, and it's way better for that amount of work load to keep $4k a month than give it to someone who performs 1/10th aswell as I do in my ~3/4 day of work per week.

4 Reply

Hal Thompson

Las Vegas, NV · Member since 2014 · 284 posts · 123 votes

6y

I also want to point out that "self-managing" does not equal do all the work yourself. I have my go to plumbing company, my go to fridge repair guy, go to handyman, etc. In some cases, I show up to do the work. In others, I have someone else go do it for me.

The difference is my hand is on the rutter at all times.

2 Reply

Mike Branche

Investor · Winter Haven, FL · Member since 2014 · 3 posts · 2 votes

6y

When you have your property manager charge you for a new AC air handler in an attic, and find out the one he replaced it with was a used one the AC company had laying around. Then shows you the recipt for a new air handler.

Turns out he had the new air handler was installed in one of HIS rental units. The random charges, and the cozy realtionship they have with some contractors is more than i can stomach. After a while a

I was paying management fees for them to collect rent only. I self manage and glad to do it. I average about 2 calls a month on 31 units. Many property managers are realtors also, so to say they always have your best interests at heart might be a little too optimistic.

2 Reply

Bruce Runn

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

6y

As this thread has gone on and taken a life of it's own, it should be obvious to newer owners that a lot of us self manage but don't physically do the maintenance. A property manager doesn't either. They hire some one and they tack on a service fee on top of the bill. I talked to one plumber who saw the string of invoices at a place that he charged $120, that was then marked up to $180, which was then marked up to $260. Do you think you could call the plumber and save the $140? This is on top of the 10% fee for managing. The truths are, no one looks out for you as well as you do and a PM is a job where the more units they have with the least amount of people means more profits for them. I just make a lot more $ self managing as all the incentive is for me to keep everything filled and do the small things which keeps tenants happy and in place. My places are in high demand/ Under 30 crowd and some landlords turnover 80% every year, my turnover is about 30% each year but I'm on top of it and fill them fast so I almost never even a month's rent- out on the 30th- in on the 1st. If you just don't have time to self manage, have a PM. I have nothing against them, just be aware, they take a large chunk of your profits and their personal goals don't necessarily match up to your goals.

2 Reply

Syam Tadavarthy

Real Estate Agent · Metro District of Columbia · Member since 2018 · 10 posts · 3 votes

6y

A business owner definitely wrote this so I commend you for that, however, there is nothing wrong with self managing. Real estate typically is a disproportionate amount of an individual's wealth, and directly managing your investments provides an invaluable education on the rental market and cost of repairs to name a few. Once you scale your investments to multiple or distant properties then you will need help to make sure you keep up with the level of service your have previously provided.

1 Reply

David Benton

Investor · Charleston, SC · Member since 2015 · 113 posts · 50 votes

6y

We buy trailer parks which is a lot different in some aspects than apartments and a lot different than SFRs.

We've used a few management companies only to learn, we still have to put the time in, still have to follow up for things to get done. Basically still have to manage the parks.

Anytime we didn't manage the managers things didn't get done. The only things they were usually efficient at was collecting rents and reporting and then when needed sending notices.

This last management company in N Augusta is the worst we've seen, by far, and proved to be negligent at even collecting rents. They blamed everything on the Pandemic. Fortunately as soon as we saw a problem we couldn't correct and were't able to get satisfaction we started collecting rents ourselves. This company is negligent even to the point we still haven't seen $17,000 that was supposed to be deposited into our account no later than the 10th of this month.

This is a licensed property management company based in Augusta, Ga that manages numerous parks and other properties in several states in the southeast and over 7000 pads. The company is named Sherman & Hemstreet. I just filed a complaint with LLR yesterday to see where this goes. Hoping we don't have to hire an attorney but looking like we will need to. Anyone with experience in this please chime in.

This is an example of what can go wrong hiring a 3rd party company vs self managing. I've never seen this much of a failure but whenever you rely on a 3rd party, this is the risk you take.

3 Reply

Bryan Trelegan

Rental Property Investor · Hyannis, MA · Member since 2016 · 19 posts · 18 votes

6y

It is possible to keep the advantages of Self-Management without creating a full time job for you or your beneficiaries.

The two biggest advantages to self management are not paying 10%-15% off the top and the ability to screen tenants more thoroughly.

The best way to avoid creating a management job with each rental is to carefully select your rental properties to start. The Average age of my first 6 properties was 6 years old. That greatly reduces capital expenditures. Also I have bought rentals with locations and designs the greatly appeal to retirees with above average mostly passive incomes. Older people in nice places don't move as frequently or create much wear and tear.

I believe this economic crisis will create a lot of opportunity to buy Quality rentals , But as always , no need to guess .. just watch the markets and fish where the fish are.

Stay safe, prosperous and amused .. and warm !

Bryan

4 Reply

Joe White

Property Manager · Philadelphia, PA · Member since 2015 · 515 posts · 196 votes

6y

Property management companies make you far more than you pay them.

You simply don't have the buying power I have with contractors. We refer many contractors 6 figures a year in business, and we have systems in place that make working for us, far less work than working elsewhere. We get heavily vetted contractors, at deep discounts.

And we market for tenants constantly. We get over 40 inquiries daily from prospective tenants looking for rentals. We have a waiting list and we are able to get far more for a rental than a landlord, or real estate agent ever could hope to.

1 Reply

Kirby Nichols

Investor · St. Louis, MO · Member since 2019 · 6 posts · 3 votes

6y

I manage my own properties because I love my properties and I love my tenants. I want to be sure that both are getting the attention they deserve, so that I can collect the top-tier rents that I deserve!

I would hire a personal assistant before I would hire a property manager. At least until I can afford a full time property manager as an employee of my company, so that I can ensure that my properties are being managed in a manner that fits my business plan.

2 Reply

Richard Haupt

SFR Investor · FPO, AE · Member since 2014 · 2 posts · 2 votes

6y

I add my "vote" to those who suggest there is a case to self-manage, a case to hire and oversee management, and a case to do some of each. I have done all three, and currently, my wife and I have our dozen-plus investment home portfolio professionally managed and intend to keep it that way.

For years we have been away from all our properties which are scattered across the nation in no small part due to my military career from which I just retired. Because of that time and distance, we are comfortable with professional management, although remain vigilant to work with the managers and ask plenty of questions regarding the status of our tenants along with any maintenance and repair work. We try and visit our properties every couple of years, incorporating property visits with vacations. And my wife -- a former licensed general contractor focused on rehabbing retail and professional spaces -- taught me to vote with our feet, ie, if we aren't getting along with a manager, we replace them. We also try and keep tabs on contracting practices and prices across the country, get multiple bids and talk directly to our managers' contractors when we feel it appropriate. At times we request proposals online or via phone outside our managers' family of vendors.

Bottom line, we feel engagement is essential, even with professional management. We don't believe there is anything "passive" about real estate investment other than that the government considers it so in the sense that income continues when we die. Caveat emptor (buyer beware)!

PS - we prefer management that are members of the National Association of Residential Property Managers (NARPM). We have found that member property managers apply principles that fit our overall philosophy and requirements. NARPM's framework thus provides a solid foundation from which we can build a successful provider-client relationship.

2 Reply

Michael K GallagherBusiness Member

Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes

6y

@Joey Copper interesting post, My issue with just hiring a property manager is that like most things in RE there is a crazy low barrier to entry, and therefore the vast majority of PM's, REI's, Agents, contractors, etc as quite frankly garbage. So my desire to do it myself came from the desire to know what I'm looking for when I do go hire someone. I only manage one unit at the moment, and its a house hack so its pretty easy...I also considered it a business from the beginning and set it up as such. My main objective was to learn it so that I know what I'm looking for when I hire it out. I don't mean this to be pomposity or anything but if I'm hiring you to do something you better be able to do it faster, better, and of higher quality than me, otherwise whats the value add to me?

So if I set myself up to be an elite property manager, I figure I have two exit strategies, either just train people to do it for me under my own company, and hold them to my same cultural and productivity standards....or if I do go with another company I'll be able to confidently pick a fellow elite manager to do so.

[email protected]614-362-2231

0 Reply

Gustavo Rodriguez

Member since 2020 · 2 posts · 2 votes

6y

I read the title then clicked on the link BUT I didn't even read the editorial. Cuttings costs where it matters and making things work with minor efforts is an art not to mention a money making technique. Why would I regret self managing if my bank account looks nice and fatty because I save on management costs?

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Jared Stasch

Member since 2018 · 15 posts · 7 votes

6y

Hiring a manager allows you more time to find more properties. My greatest deals come from self managed properties due to burnt out landlords who get too close to tenants and don't want to raise rents. I can tell you that the richest investors don't manage their own properties.

0 Reply

Sheryl Roberts

Member since 2020 · 1 post · 6 votes

6y

I have owned rental property since 1993. I have both managed my own properties and used a property manager. Both have their advantages and disadvantages. However, I far prefer to manage my own properties. Maybe it is a control issue but I have 100,000's of dollars at stake, so of course, it is a control issue. No one loves my properties like I do and no one has more at stake. I dont love managing my properties, but I do like it. I like making my tenants happy, doing extensive vetting of tenants, the challenge of filling a vacancy as quickly as possible by being selling my property to prospective tenants, creating a great team of contractors around me (no, I dont do any work myself), and being part of a family of owner-mangers who know what it feels like to watch that ROI increase with diligent and dedicated work. You still have to manage your property manager and this is a real pain. Doing it yourself is real freedom.

6 Reply

John Wright

Real Estate Agent · Cincinnati, OH · Member since 2017 · 54 posts · 63 votes

6y

Some people are problem solvers and actually derive enjoyment and other personal benefits from troubleshooting problems, coming up with solutions and executing on them. Let's refer to them as "quarterback" type of investor. These may be the "Bucket 2" people. In my opinion the quarterbacks happen to be some of the most impressive investors I have encountered. They are usually above average intellect, successful other aspects of their lives, and extremely confident in their capacity to handle almost anything that comes their way. When an issue arises, my clients who are quarterbacks really can't help but dive in and would naturally have a hard time outsourcing the results (winning) to someone else because really they are just built for it. With the game on the line they want to call the play and throw the winning touchdown. They would even catch the game winning touchdown if they could. They may justify this with the cost savings or control arguments that you have read from responses above, but the truth is they get way more personal value than the cost savings or control alone.

What the "Quarterback" does not usually understand is that in this role they are exchanging time for money(or cost savings) instead of exchanging time for equity. The quarterback has to play and play well if they are to win. If he does not play or does not play well the team cannot win or is less likely to win.

Someone who exchanges time for equity would be the coach or even the owner of the team. (Bucket #1 people and some Bucket #3 people who eventually move to Bucket #1) The coach has a result that he needs to attain (winning) and invests time into the quarterback to get the result. The coach cannot be the one to throw or catch the game winning touchdown himself but directly benefits from the result with equity. They equity for the coach could be a annual salary that most people could retire from after one year or even status of the position. The coach may not even be the best example of time exchange for equity. The owner of the team may be investing money and time in the finding and hiring a coach but is gaining equity from attaining the result (winning).

I apologize to the non sports fans who will not relate but as you can probably tell I really miss not having sports.

2 Reply

Tom Havey

Member since 2019 · 3 posts · 5 votes

6y

Today, in Phoenix, Property management is so easy, it would be a waste of profit to hire a manager. My rents are like an annuity, collecting 100% in the April/May virus pandemic. 10 years ago was a different story and I estimated that I would lose 25% of gross by hiring a property manager. How? Well first is their fees; but mostly in higher vacancy. They are not answering the phone at 5:05pm on Friday and skipping happy hour to show a house. In my model, I have a couple full time construction/handy men working full time on my remodels, so when I need repairs on one of my 30 units, they break off and go deal with it. Also, over half my tenants are using Zelle or some electronic form of rent payment.

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Calvin Thomas

Developer · New York City, NY · Member since 2015 · 812 posts · 718 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

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.

I do not think managing real estate is right for you. Have you considered investing in a REIT instead?

0 Reply

Jamie Heinz

Investor · Phoenix, AZ · Member since 2019 · 7 posts · 4 votes

6y

It all depends on the investor's individual situation... if I had 100+ properties? Maybe. However, I only own a few and do enjoy dealing directly with my tenants... the stronger of a relationship you have with your tenants, I believe the better they will treat your home. Also as a REALTOR, many of my rental clients turn into clients who will choose ME as their Realtor when they purchase because of the relationship and good customer service/ responsiveness/ overall property management they've received from me during their tenancy.

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Why Self Managing Investment Properties is CRAZY

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