Why hiring a PM is CRAZY!

93 Replies

Just thought I’d write a few words as a counterpoint to the trending post.

I own and self-manage 5 properties. I have had rent collection issues but never had to evict anyone, nor have I lost even a month’s rent. But I have sent out notices.

I keep the properties well maintained so do not have many maintenance calls. But it happens.

I have two hvac and two plumbing contractors that I use. The solo guys are my go to and the others have a 5-8 guy crew that are 24-7...and the plumbing crew has rooter equipment, etc.

A PM would cost me about $500 a month. I guess if I made $100 an hour every waking moment I would feel more than justified hiring a property manager. But I don’t, so I consider it paying myself $100 an hour when I manage routine issues, probably much more if I actually recorded time spent but probably quite a bit less when I have a vacancy. However, I prefer to be immersed in the reletting of my properties because I like the properties to rent out very clean and my new tenants to seem nice and organized...as well as financially qualified. After all, it costs me, not a PM if my place gets let to a less than optimal tenant. (Slob, non-compliant type, constant complainer, bad vibe.)

Lastly, I can rent a tad under market. My tenants have no reason to move because my rents are less than comparable properties that have to cash flow after paying PM fees as well as the initial cost to fill the unit.

PMs provide a service. Undoubtably a valued service to their customers. I probably could list a few positives for using a PM, but the PM who started the opposing thread did not offer a balanced view, so neither will I.

@Marian Smith sounds like you are running a tight ship, so there is no need for you to use a PM.  However, if you had 50 doors that may change.  At that point you are either paying a PM company or you are essentially running your own in house PM company.

Also, lots of investors can't invest where they live so they are paying a PM company in a market that is advantageous to them.  

Like you mentioned paying a PM company is a service to save you time.  If you are not worried about your time commitment you are doing ok.

Have you considered learning how to do HVAC repairs so you don't need to pay the HVAC guy?

One of the things we all must be mindful of, is that the majority of landlords and PM's that regularly contribute on this site are committed to running their operations professionally. So the knee jerk response to defend ourselves is really misplaced.

One of the interesting things that will come out of this lockdown is the use of video showings and other remote showings. I know that would be the only thing that may require me using a PM or realtor when I retire. I have all the necessary connections otherwise and I don't have needy tenants.

If you are an ever expanding and mixed market investor, then a PM is likely a part of your operation. 

If you may be picking up a few more properties within the same general area and you have your "team" in place- then a PM is overkill and bares a ton of unnecessary expenses,  

I agree with the others posts that once you reach as certain amount of rentals, you either have to outsource property management or you might as well start a property management company.  Its a very time consuming endeavor to take tenant requests, coordinate maintenance, handle showings and leases, etc.  A job that I'm happy to farm out so I have more time to focus on acquisition, relationship building, growth.  

However, I think if you have 5-10 properties its great to self-manage if they are local to you.  Once you do switch to a PM, there's no better way to know if your property manager is doing a good job than to have done the job yourself.  

Its not a religious argument. There is a case for both PM and personal management. I have a A class property that I remote manage from 8000 miles away. The tenant of the last 4 years sends the payment every 29th without fail. If something breaks he gets it fixed on his own and just sends me the cost (after pre approval of course). He treats the house as his own and keeps it immaculate. It would be crazy to pay a PM to manage that. I also own some C class homes in Indy. Tenants often have to be chased for rent. Lots of maintenance calls. More turnovers and tenant screening etc etc. Impossible to manage remotely. Id be crazy to manage them myself. 

Speaking from experience, a lot of Mom and Pop landlords are not good property managers. The ones that fix it themselves, show the property themselves because they're "saving" money, are often the clients who are most shocked when the repairs start rolling in (and conversely when we get more in rent for their property).

You driving to your property, sitting and waiting for a no show tenant and driving back home is not free.

You doing a background check on a tenant, taking the time to do that is not free.

You running back and forth to Home Depot, cutting your lawn, shoveling your snow is not free.

Your tenants calling you up threatening not to pay rent because of the virus, or lying to you asking for a break...that stress cannot be quantified.

So in short, a lot of people have no idea of the value of their time. Yes, you can self manage...but it costs money, stop telling yourself it's free. That hour you spent meeting some prospective tenant, that half day you spent turning over the house...that's less time spent with your spouse, kids, more stress etc.

I can go on and on and I am happy too. I know this site is full of self managing folks who hate PMs, but they're not all bad. So feel free to fire away!

Personally for me a PM would not be an option but a requirement.... Day job with rotating shifts doesn't allow time to tend to the needs of tenants. Agreed though, if you got the time/resources to go without one, save that cost! 

Originally posted by @Paul Shannon :

I agree with the others posts that once you reach as certain amount of rentals, you either have to outsource property management or you might as well start a property management company.  Its a very time consuming endeavor to take tenant requests, coordinate maintenance, handle showings and leases, etc.  A job that I'm happy to farm out so I have more time to focus on acquisition, relationship building, growth.  

However, I think if you have 5-10 properties its great to self-manage if they are local to you.  Once you do switch to a PM, there's no better way to know if your property manager is doing a good job than to have done the job yourself.  

That's what I did.  I was so tired of the garbage PMs I had hired, I just put a plan together and handled it myself.  After a while, I expanded and hired and now we're working across four States.  So, there you go.  I am not the cheapest by far, but each property is treated like our own.  Our properties are on the same level as everyone else's.  All tenants, whether ours or a clients receive the same amazing service.  I can insure of this because I am BCC'd on each and every service ticket and request.

 

@Marian Smith you make several good points here which is indicative of the overarching moral. There is no right or wrong answer because this isn’t a simple dichotomy.

Whether or not self managing vs hiring a property manager is best for someone is entirely dependent on their situation, goals and skill set.

I’m not sure why so many people on BP want to act as if everything is binary (“multi family is better than single” “invest for cash flow or appreciation” etc). These are complex issues that are entirely dependent on the specific context. Most arguments FOR one side can also be turned into arguments AGAINST that point of view. Very few things are black and white.

I hit about 20 doors self-managing while I had a full-time job, a wife and young kids before I had to acknowledge that I was not able to do a great job at it anymore.  If all units are full, managing is a piece of cake - just get a reliable handyman and a couple of HVAC folks and plumbers on hand and you should be fine.  But with tenant turnover and the resulting repairs, listings, showings and other tasks (especially mulitple vacancies at once), it can quickly start piling up and not attended to as quickly.  A lot of times a good PM will pay for themselves because they likely are more on top of the rental market than you are and can achieve higher rents, offsetting the monthly management spend. Also remember that you are likely going to feel a lot different about things 5 or 10 years or longer down the road and don't want to be in a position where you can't outsource the PM work because you analyzed the purchase of the property without factoring a PM %.

With all that said, there is certainly nothing wrong with self-managing 5 units, if you still enjoy it and have no goals of scaling up to a point where you start getting stressed and the juice isn't worth the squeeze.  You do you.  That's the beauty of real estate - there are a lot of different ways to be successful and happy.

Originally posted by @Marian Smith :

Just thought I’d write a few words as a counterpoint to the trending post.

I own and self-manage 5 properties. I have had rent collection issues but never had to evict anyone, nor have I lost even a month’s rent. But I have sent out notices.

I keep the properties well maintained so do not have many maintenance calls. But it happens.

I have two hvac and two plumbing contractors that I use. The solo guys are my go to and the others have a 5-8 guy crew that are 24-7...and the plumbing crew has rooter equipment, etc.

A PM would cost me about $500 a month. I guess if I made $100 an hour every waking moment I would feel more than justified hiring a property manager. But I don’t, so I consider it paying myself $100 an hour when I manage routine issues, probably much more if I actually recorded time spent but probably quite a bit less when I have a vacancy. However, I prefer to be immersed in the reletting of my properties because I like the properties to rent out very clean and my new tenants to seem nice and organized...as well as financially qualified. After all, it costs me, not a PM if my place gets let to a less than optimal tenant. (Slob, non-compliant type, constant complainer, bad vibe.)

Lastly, I can rent a tad under market. My tenants have no reason to move because my rents are less than comparable properties that have to cash flow after paying PM fees as well as the initial cost to fill the unit.

PMs provide a service. Undoubtably a valued service to their customers. I probably could list a few positives for using a PM, but the PM who started the opposing thread did not offer a balanced view, so neither will I.

 Sounds like you are doing a good job. 

I am a supporter of both self managing and using property management. I do both. It would be impossible for me to manage my multifamily properties out of state. At the same time I self manage my single family rentals located here in Omaha. Since I only own three SFRs in Omaha and SFRs in general are easier to manage than multifamily, it isn't a huge burden on me.

Overall I feel that I am a more well-rounded investor for having experienced both sides of the management issue. I will likely move to having all of my properties under a property manager at some point because I simply do not have the time to dedicate to managing a large number of properties, working in my demanding full-time career, and being a good husband/father. 

As a PM, I think it's great when investors with local portfolios can self-manage. I happen to operate in a market that attracts a lot of OOS investment, and many of our clients have absolutely no local knowledge of our market. We are here for investors who are not local, investors with large portfolios, investors who don't have time to vet and coordinate and manage vendors, investors who don't have the knowledge or systems to consistently screen tenants within Fair Housing, investors who are too emotionally triggered by lease violations or sob stories why the rent isn't paid, for accidental landlords, etc etc etc.

For those who are local and have a small enough portfolio to handle it themselves, I think it's a great experience and makes you a smarter investor in the long run. If your goal is to continue growing and expand outside your local market, a professional PM will add value.

Good Afternoon, 

Just to let you know once you start investing it is mandatory you get a property manager we want success but  afraid to go to the next level worried about small amount a dollars.  You can't purchase a restaurant and be the cook, janitor, waitress, cashier, manager, accountant, plumber, A/ C guy , and HR person.... you can't build a team with I …. Learn how to be a success not a failure over small amount dollars that will cost you more in the long run!!!!

@Marian Smith

I feel the same way. As long as I am able to walk and talk, I won’t be hiring a PM. I enjoy taking care of my properties. My kids aren’t little, they do their own thing, so if I’m out in the evening on a service call or showing a property, or sitting on the couch, it makes no difference. My wife is all about the $ end of us having rentals and knows I have to do what I have to do. I don’t know If any of the PM companies in my area have an overall good reputation. One of my clients had 2 properties sit empty for 6 months.. price drop after price drop and no new tenants. He took them over and had great people in 2 weeks. *No one will ever care about your investments more than you will.*

Originally posted by @Peter T. :

Speaking from experience, a lot of Mom and Pop landlords are not good property managers. The ones that fix it themselves, show the property themselves because they're "saving" money, are often the clients who are most shocked when the repairs start rolling in (and conversely when we get more in rent for their property).

You driving to your property, sitting and waiting for a no show tenant and driving back home is not free.

You doing a background check on a tenant, taking the time to do that is not free.

You running back and forth to Home Depot, cutting your lawn, shoveling your snow is not free.

Your tenants calling you up threatening not to pay rent because of the virus, or lying to you asking for a break...that stress cannot be quantified.

So in short, a lot of people have no idea of the value of their time. Yes, you can self manage...but it costs money, stop telling yourself it's free. That hour you spent meeting some prospective tenant, that half day you spent turning over the house...that's less time spent with your spouse, kids, more stress etc.

I can go on and on and I am happy too. I know this site is full of self managing folks who hate PMs, but they're not all bad. So feel free to fire away!

No one said their time was free. The question is what would the landlord rather have, X amount of their free time or the X amount of money they have to pay a PM. At the typical 8%-10% rate a PM charges, each unit costs $1000-$2500 in PM fees per year. Let's go back to that original post and see what a PM does: 

  • Basic maintenance requests completed within 5 days, emergency maintenance requests completed within 2 days, - Call handyman and have them assess and fix the problem. 2 minutes.
  • preventative maintenance work twice a year - Call HVAC company to inspect the system and a plumber to clean the sewer lines. 3 minutes each.
  • tenant-caused maintenance billed back to tenant - Template letter. 3 minutes. This should be rare.
  • periodic inspections to make sure that the tenant is reporting necessary maintenance items - Drive to property and look it over. 30 minutes maybe twice a year.
  • late fees collected - Template letter. 3 minutes. PM keeps the late fees collected. This should not happen often with a properly screened tenant.
  • immediate 30 day notices posted - Template letter. 3 minutes. This should not happen often with a properly screened tenant.
  • pet fees monitored and collected - Collected at same time as rent. 0 minutes.
  • move in inspections - Drive time and inspection, 30 minutes. Done on average once every 2.5 years. 
  • move out inspections - Drive time and inspection, 30 minutes. Done on average once every 2.5 years.
  • move out damages charged to tenant - Template letter. 3 minutes. Should be rare.
  • advanced notice on capital repair items - Phone call. 2 minutes.
  • 30 day move out notices communicated - Template letter to tenant and phone call to landlord. 5 minutes. Done on average once per 2.5 years.
  • pre-leasing of property - Maybe 5 hours. Done on average once every 2.5 years. PM usually charges 40%-100% of a months rent for this.
  • tenant stay incentives - WTF!??
  • gutters cleaned - Phone call. 2 minutes once per year.
  • annual rent rate analysis - Zillow search. 10 minutes once per year.
  • turns completed in 30 days - On average, every 2.5 years you're going to have my unit vacant one month between tenants!!! If marketed early and properly, there should be little time in between tenants. 
  • background checks on all occupants over 18 - 10 minutes. Done on average once per 2.5 years.
  • prior landlord references - 5 minutes. Done on average once every 2.5 years.
  • co-signers on leases - 2 minutes. Done on average once every 2.5 years.
  • direct deposit funds - ACH transfer. 2 minutes.
  • monthly summary statements - Generated by accounting software. 3 minutes.
  • online vacancy postings - 5 minutes. Done on average once ever 2.5 years.
  • post-eviction collections - Turn over to collection agency/attorney. 15 minutes. This should not happen often with a properly screened tenant.

Now if I assume you have a dilapidated unit, packed with awful adult tenants in the unit and they have pets, they pay late every month, damage the place, and stiff you on move out, I come to around 10 hours of work during the year. That's worst case scenario. I value my free time greatly, but not at the $100-$250 an hour rate a PM is going to be making. And if you screened well and have a maintained unit, the amount of time you'll spend on it is significantly less. 

@Greg M. with your time frames you are assuming you already have all these vendors vetted on speed dial, there is no back and forth coordinating visits, tenants not cooperating to let vendor in/not being available, no multiple bids on a project, etc. To post a property online in 5 mins you have to actually do a walkthrough, take photos (ok hire a photographer but that's not free... would be included in your PM's leasing fee), write a nice description, syndicate the posting across different rental aggregation platforms, etc.

Most investors are not in that boat and as a result your timeframes are completely inaccurate.

Originally posted by @Anna Sagatelova :

@Greg M. with your time frames you are assuming you already have all these vendors vetted on speed dial, there is no back and forth coordinating visits, tenants not cooperating to let vendor in/not being available, no multiple bids on a project, etc. To post a property online in 5 mins you have to actually do a walkthrough, take photos (ok hire a photographer but that's not free... would be included in your PM's leasing fee), write a nice description, syndicate the posting across different rental aggregation platforms, etc.

Most investors are not in that boat and as a result your timeframes are completely inaccurate.

Sure it takes you time to get to know the vendors. I use the same vendors for my units that I use for my home. Makes life simple, they take care of me, and they give me fair pricing. And don't forget, it takes time to pick a property manager and set up everything with the property manager.

I don't need to take new photos every time I list a unit. I'm using 10+ year old photos for some of mine. If I update a unit I'll take new photos, but if not, there is no reason to take new pics. And there is no reason to hire a professional photographer. I'll admit that they take better photos, but the photos don't need to be great, just representative of the unit. 

And I absolutely can list a unit online in 5 minutes. All you need to do is write it once and it is saved under your profile on the major listing sites. Login, adjust rent amount and availability date, and click activate listing. 

@Greg M. Right but in your scenario everything stays static. And again you really aren’t factoring in all the back and forth, missed appointments, etc.

Your timeframes are unrealistic for the vast majority of investors, especially if they’re out of state or adding new properties.

If this works for you, great! You’re not our target client. But don’t pass those off as realistic timeframes.

Look, I'll be the first one to say it as a PM. For your typical, run-of-the-mill landlord who has a handful of units that doesn't mind the occasional phone call, that has decent tenants and decent apartments (oof that was a mouthful) property management is a luxury. Yeah, I am a property manager and I just said that. 

Yes, I have told people to not hire my company, if I didn't feel they needed us / our services. 

Yes, I have shared our contractor list with everyone who is willing to click the link (Hey CT / Connecticut / MA / Massachusetts people, this is the link )

BUT there is a place and a time for property management, and it usually falls into one of (or multiple) of the following scenarios. 

1. High net worth individuals who would rather write the check and not deal with the potential hassle of being a landlord.

2. People who don't have the time to spare (see #1 above) - or think they don't have the time to spare. 

3. People who are afraid. Whether it's about Fair Housing laws, state landlording laws, or just don't want to have relationships with tenants.

4. People who have enough of a portfolio that even the 2/3 minute tasks makes managing overwhelming and they would rather be completely hands off. 

5. Out of state people that feel they need boots on the ground (I generally agree with them, although do think it's possible to be an OOS landlord). Given so few people succeed at that (and I'm sure plenty of them will come in and beat their drums in this thread) I don't personally recommend it. 

This just about covers all of our clients in one way or another. These are the people I recommend property management to if the alternative would be staying out of the real estate game forever. Just my thoughts - probably worth about what you paid for them. ;)

@Marian Smith let me make it clear that I don't own any properties at this point other than the one that I reside in. I've been studying real estate investment for a few years now wow going up every day for my regular job as an auto transporter. I've always considered having property managers because it was told to me that when you go from working for someone else to working for yourself oh, all you are doing is switching handcuffs.

@Marian Smith I agree. Currently self managing because it’s worth my time at the moment to self manage but in the future, I likely will not be once I have more doors and more value to my time. The one thing where I disagree is that my rents are actually at the top of what I can charge. A PM would likely want to get it rented easily. I had an agent that knows my building well tell me that I could rent a unit for $1200 that I then later rented for $1350 during a pandemic. It’s an older building, and I did some minor improvements, but I bumped rents from $800 whereas a PM would’ve likely just stuck it on the market for $1200. It also probably helps that there are very few affordable units in the school district my property is in as it is mostly owner occupied houses and new construction apartments that while nicer on the inside, go for $1600. Not sure about you, but I’ve terrible jobs marketing available units for some PM companies so if I saw a good one willing to be aggressive with rents and adjust accordingly I might go for it

Originally posted by @Greg M. :
Originally posted by @Peter T.:

Speaking from experience, a lot of Mom and Pop landlords are not good property managers. The ones that fix it themselves, show the property themselves because they're "saving" money, are often the clients who are most shocked when the repairs start rolling in (and conversely when we get more in rent for their property).

You driving to your property, sitting and waiting for a no show tenant and driving back home is not free.

You doing a background check on a tenant, taking the time to do that is not free.

You running back and forth to Home Depot, cutting your lawn, shoveling your snow is not free.

Your tenants calling you up threatening not to pay rent because of the virus, or lying to you asking for a break...that stress cannot be quantified.

So in short, a lot of people have no idea of the value of their time. Yes, you can self manage...but it costs money, stop telling yourself it's free. That hour you spent meeting some prospective tenant, that half day you spent turning over the house...that's less time spent with your spouse, kids, more stress etc.

I can go on and on and I am happy too. I know this site is full of self managing folks who hate PMs, but they're not all bad. So feel free to fire away!

No one said their time was free. The question is what would the landlord rather have, X amount of their free time or the X amount of money they have to pay a PM. At the typical 8%-10% rate a PM charges, each unit costs $1000-$2500 in PM fees per year. Let's go back to that original post and see what a PM does: 

  • Basic maintenance requests completed within 5 days, emergency maintenance requests completed within 2 days, - Call handyman and have them assess and fix the problem. 2 minutes.
  • preventative maintenance work twice a year - Call HVAC company to inspect the system and a plumber to clean the sewer lines. 3 minutes each.
  • tenant-caused maintenance billed back to tenant - Template letter. 3 minutes. This should be rare.
  • periodic inspections to make sure that the tenant is reporting necessary maintenance items - Drive to property and look it over. 30 minutes maybe twice a year.
  • late fees collected - Template letter. 3 minutes. PM keeps the late fees collected. This should not happen often with a properly screened tenant.
  • immediate 30 day notices posted - Template letter. 3 minutes. This should not happen often with a properly screened tenant.
  • pet fees monitored and collected - Collected at same time as rent. 0 minutes.
  • move in inspections - Drive time and inspection, 30 minutes. Done on average once every 2.5 years. 
  • move out inspections - Drive time and inspection, 30 minutes. Done on average once every 2.5 years.
  • move out damages charged to tenant - Template letter. 3 minutes. Should be rare.
  • advanced notice on capital repair items - Phone call. 2 minutes.
  • 30 day move out notices communicated - Template letter to tenant and phone call to landlord. 5 minutes. Done on average once per 2.5 years.
  • pre-leasing of property - Maybe 5 hours. Done on average once every 2.5 years. PM usually charges 40%-100% of a months rent for this.
  • tenant stay incentives - WTF!??
  • gutters cleaned - Phone call. 2 minutes once per year.
  • annual rent rate analysis - Zillow search. 10 minutes once per year.
  • turns completed in 30 days - On average, every 2.5 years you're going to have my unit vacant one month between tenants!!! If marketed early and properly, there should be little time in between tenants. 
  • background checks on all occupants over 18 - 10 minutes. Done on average once per 2.5 years.
  • prior landlord references - 5 minutes. Done on average once every 2.5 years.
  • co-signers on leases - 2 minutes. Done on average once every 2.5 years.
  • direct deposit funds - ACH transfer. 2 minutes.
  • monthly summary statements - Generated by accounting software. 3 minutes.
  • online vacancy postings - 5 minutes. Done on average once ever 2.5 years.
  • post-eviction collections - Turn over to collection agency/attorney. 15 minutes. This should not happen often with a properly screened tenant.

Now if I assume you have a dilapidated unit, packed with awful adult tenants in the unit and they have pets, they pay late every month, damage the place, and stiff you on move out, I come to around 10 hours of work during the year. That's worst case scenario. I value my free time greatly, but not at the $100-$250 an hour rate a PM is going to be making. And if you screened well and have a maintained unit, the amount of time you'll spend on it is significantly less. 

 This is a text book example of what I am talking about. Yes of course, you can call the first plumber you find on Google and pay $450 to snake a sewer line. Meanwhile, the plumbers we have taken the time to find (through trial and error) cost $175 to do the same job.

But remember, you saved money.

Your rent rate analysis LOL. We know the rents and how they change per block in some towns. You're the guy who is under renting their house that we take over management for. Or even worse, thinks he can get $100 over market value and wastes a month of vacancy to save on the Leasing Fee.

We can do that for every single example you tried to mention that only takes 2-3 minutes. and "saves you money".

If I looked at a hundred investors in the Landlord forum, I would bet dollars to donuts that as much as 80% of them would make more money AFTER hiring me than they currently make self-managing.

But it's a pointless debate. You figure out what works for you and give it a shot. Some will do better than they would with a professional. Most will do worse. Some will fail miserably and scurry back to the stock market or bitcoin. That's life.

There are a lot of bad renters in the world. Do you write off all tenants and leave your property vacant? NO! You educate yourself and then screen until you find a good renter. Property Management is no different. Landlords need to educate themselves on what a good property manager looks like and then screen until you find one. Most Landlords have bad property managers because they fail to put the effort in.

P.S. I know there are some areas where a good PM is not available. In most markets, they exist.

@Marian Smith I appreciate the point you're making with your post and think it's something people should certainly consider when they're deciding to use a PM or not. 

One of the biggest barriers to entry into REI I've noticed is people saying "I don't want to deal with tenants." There are many people who don't have the personality or skill set to deal with tenants, especially bad ones. Hiring a PM removes that barrier and keeps your attention on the financial aspects to REI and frees up to time to find the next one!