I notice that it's a mixed bag when it comes to management on here. Half prefer to manage all their properties themselves and the other half won't touch a property without a manager/management company. Why is this such a polarizing topic in real estate investing?
Coming from a small business world, I couldn't imagine owning my business and doing all the work AND being on call 24/7 for customers. I never had any issues hiring employees and managers. So when I started real estate, that's the first thing I did upon acquiring a new property, started looking for management companies. I was surprised when I came to online forums to find that so many people DESPISE property managers and do everything themselves.
I have manager for my small business, I'm paying him $40k+ a year! I pay that because it makes my life easier, I don't want to deal with a bunch of min wage employees and customers asking for me. Same thing for tenants.
It seems to me that many real estate investors are opposed to management it unlike your average small business owner.
Cincinnati, OH · Member since 2020 · 299 posts · 476 votes
6y
@John Liaaz For most part, I feel like if you own just a single unit or even a handful, the challenges of marketing and managing your rentals are fairly doable. But as your portfolio grows, managing your units can then get quite time consuming and can start to feel like a headache. For smaller landlords that live close to their rentals, I think adopting some sort of property management software is the easiest way manage, instead of hiring a property manager. You can automate your invoices, collect payments online, sign leases and store them too, screen your tenants, track maintenance, the list of benefits is truly quite long. Some might disagree with me and say that hiring a PM, is definitely the easiest way to go, but I know of many smaller landlords that make effective use of these softwares and hire a maintenance guy to look after any work orders.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
I see both sides, a lot of PMs aren't very good at their jobs and require babysitting, at which point someone might want to manage themselves, but it is also nice not to be on call all the time for little things.
Cincinnati, OH · Member since 2020 · 299 posts · 476 votes
6y
@John Liaaz For most part, I feel like if you own just a single unit or even a handful, the challenges of marketing and managing your rentals are fairly doable. But as your portfolio grows, managing your units can then get quite time consuming and can start to feel like a headache. For smaller landlords that live close to their rentals, I think adopting some sort of property management software is the easiest way manage, instead of hiring a property manager. You can automate your invoices, collect payments online, sign leases and store them too, screen your tenants, track maintenance, the list of benefits is truly quite long. Some might disagree with me and say that hiring a PM, is definitely the easiest way to go, but I know of many smaller landlords that make effective use of these softwares and hire a maintenance guy to look after any work orders.
Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
6y
@John Liaaz I manage my local properties in San Diego because it’s simple and doesn’t take any of my time. My OOS properties I have PM for due to the distance.
I notice that it's a mixed bag when it comes to management on here. Half prefer to manage all their properties themselves and the other half won't touch a property without a manager/management company. Why is this such a polarizing topic in real estate investing?
I’m not sure this is unique to real estate investing. Why do some people work on their own cars, while others take them to their local mechanic/dealership for everything? Mow their own yards every weekend when you could just hire a gardener? Manage their own retirement investment funds versus paying a small percentage to have a professional financial advisor do it for them?
Point is, when it comes to deciding whether or not to use a property manager, there’s a multitude of pros and cons on both sides of that argument. There’s no one universally right choice. Both are equally valid options.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
6y
I'll step into this, in the full knowledge that we have a heated debate going on elsewhere about why you absolutely do or do not need a property manager.
I live in a very affordable city and own a small, local portfolio of low C-class SFR and small multifamily. The properties are elderly and need regular ongoing maintenance. There's really no upside to managing this kind of property for a property manager. Moreover, property managers are usually not particularly good at carrying out the lower-cost maintenance that is the only thing that make such properties profitable.
I knew exactly what I was getting into when I started buying properties like these. I already had a bit of a background as a handyman, having renovated properties in the past. This is not passive real estate, no, not by a long shot. I'm running a part-time-going-on-full-time small renovation and dedicated handyman services business. Running these rentals and adding to my portfolio is a job I've bought myself, although I also have a W-2 job. Committing to this, I firmly believe, is the only way to make running a limited portfolio of properties like these profitable.
If I were a twenty-something working in software in the Bay area, on the other hand, this would not be realistic. I would not buy houses like these. I would instead look out-of-state for A and B-class properties offering much lower C-on-C returns but with minimal maintenance needs and tenants who on balance would have much more substantial and regular incomes. I'd probably be buying larger multifamily. I'd work 80-some hours a week, live as cheaply as possible, and push all my savings into real estate.
If this was my situation, I would most definitely have a property manager.
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
6y
@John Liaaz
I’d love to hire someone, once I have enough properties and experience to see the value in hiring someone. I’d have a hard time managing someone if I have little experience to run my
own rental properties. By getting some experience first I can at least have a strategy on how I want my PM to run my properties.
I take it you hire in house? If that’s so, I want to do that too so I’m an arms length away from my PM at all times. But I think I need more than 6 units to make the magic happen.
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
6y
It is a personality question many times. Is the person trying to prove something on either side? Are they good at building systems? Do they like managing? Do they believe being a landlord comes hand in hand with someone else managing? There are a lot of reasons.
Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
6y
After our initial learning period, many of us have our properties operating like a fine tuned machine.
We believe we are the best at vetting our tenants because we have skin in the game. I enjoy meeting my potential tenants and making sure they are a proper fit, this is all the more true as I read threads about tenants telling managers they aren't going to pay rent anymore. I am at 100%.
Every time we address a small issue in one of the units we recognize that anyone else may have charged us significantly more or misdiagnosed it so they could employ their friend's plumbing company.
The bottom line is that we know what it takes for our buildings to run how we want them and we realize it ain't all that hard. If we felt it was then we would pay someone +10% a year of our BEFORE expense profits.
I have 9 units and it is absolutely no sweat. I travel when I want and don't see the occasion text as an issue.
This is not at all like hiring a manager for a small business! At least not with my tenants and my buildings. There is no "daily work" required. Besides- when there is, they are going to charge you on top!
I think it just depends on preference and portfolio. I only have a single unit so property management didn’t make that much sense to me, however, I tried it last year due to being very busy. I feel like I went from managing tenants to pretty much managing the property manager, especially on the accounting end. They screwed up accounting more than once so I felt like I always had to audit my statements.
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
As a property manager, it really comes down to personal preference. As @Kyle J. points out, some people enjoy turning wrenches, swinging hammers, filing their own nails, or chasing down rents. Some people are really good at it. Some people aren't nearly as good as they think and their amateurish attempts actually causes them to lose money.
If you think it's expensive to hire a professional, try hiring an amateur.
That's not just a cute saying. In my experience with hundreds of Landlords and from what I've read on this forum in the past 12 years or so, the vast majority of amateur Landlords think they're saving money but they're actually losing money.
You have to honestly, objectively assess your skills and your goals and see what works best for you.
Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
6y
I would just add to @Nathan Gesner's post to say- Managing your own properties does not mean you have to "turn a wrench or swing a hammer."
There are a whole host of tasks you can outsource, from landscaping to record keeping to chasing down rents.
I don't have to chase down rents for the tenants I place... but I imagine it is probably a bit frustrating when rents have to be chased down for tenants that a property manager places.... and they keep the late fee.... after having just received a full months rent for placing them... and the costs of the looming eviction... and the vacancy... and the subsequent loss of the the first months rent to the property manager for replacement of another tenant... and...
Property Manager · Cleveland, OH · Member since 2019 · 446 posts · 566 votes
6y
Lots of "spicy opinions" on this all over the forums, especially lately, but I think the "why" boils down to who the owner is and their reasons for getting into rentals in the first place.
Some see this as simply a passive income opportunity and truly don't want to think too much about all the details. They educate themselves on the financial side just enough to manage the manager (many don't even get that far). Many of our OOS investors here in Cleveland do fall into this camp.
Others want to maximize every aspect of this opportunity, and what does it mean to maximize? Well it's different for every person, because you can only grow within your means. Are you a high net worth individual? Most people are not, and so for many in this camp, "maximizing" means staying as hands-on as possible to cut costs. Others (with the means to do so) will argue that to truly maximize, you have to grow outside your market, and diversify your portfolio as much as possible. When that happens, unless you plan on starting your own de facto management company (even if you don't call it that), you need professional management in place.
Finally, some people are passionate about one side or the other because they've been burned. There are people who started out self-managing and it was a disaster. They now swear up and down about the necessity of hiring a third party PM. Unfortunately, not all PMs are created equal (as with literally any business/industry), and some people have had an unfortunately terrible experience, or two, or even three, and now preach against PMs based on that. It's worth noting that some people's "terrible experiences" are due to unrealistic expectations and severe control issues, but I think that is still the minority compared to people who truly experienced poor service in some shape or form.
Now, that's the "people" side of things. But then there are those people who have a PM for some properties and not for others. These are the folks who have really done their homework, had the means to invest in diverse properties/markets, and understand that it's not a one-size-fits-all approach. @Anish Tolia said it best in the related forum thread.
Rental Property Investor · Chicago, IL · Member since 2017 · 219 posts · 180 votes
6y
From experience of self managing and using a property management company. At the end of the day it can be tedious to find that right PM that will take care of your properties as good as you or better. With all the PM software out here now it is very easy to self managed your properties with having processes and systems set up as well as good reliable contractors. Now as your empire grow you will get to the point where either you will build your own in house PM team or hire some company.
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y
Pretty good list of responses so far. Here's my 10 Commandments of No PM:
1. You may pay a manager $40k in that business, but I'm betting that business probably does at least half a million in sales, maybe more, for it to make any sense, and is likely growing and expanding rather than standing pat. So your percentage of payment is small relative to the size of the business. If your business had $50k in sales, would you have a $40k manager?
2. Property management often doesn't work (especially with current prices) unless you have enough scale to justify the reduced income on each property with volume.
3. Property managers often are not interested (I don't fault them for this) in managing C or below properties. There's a lot of headache and time involved and those kinds of properties are a drag on profits.
4. Many owners are "managing on a shoestring" and simply can't afford to pay the fee, especially if they are investing with leveraged money.
5. Finding good property management is just as difficult as finding any other good trade.
6. Depending on where you live, any property management might be non-existent or incompetent. It is far easier to find a host of choices in a larger urban area. In my area, for example, there's just a small handful and they're nothing to write home about.
7. No one will care about your property more than you will (or should).
8. Many of the things that you can/will do yourself related to property management returns direct equity into your pocket. If a PM charges you $50 for a service call to a property for a 5 minute no-material fix, and you can stop at the property yourself (this assumes you are local) and make the same fix, you just paid yourself $600/hour. I don't know too many jobs paying $600/hr.
9. Selection of tenants is arguably the most important factor of whether or not you will have a successful investment, and most owners will spend more time evaluating whether the tenant will be a good fit for their property than PMs, who have to juggle the time commitment of your property with X number of other properties.
10. You still have to manage the manager. There's no way you are investing in real estate and just watching it on a computer screen a couple of times per year unless you want to have an unsuccessful investment.
Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
6y
In my market I've heard and seen so many terrible things about most of the property managers here so I choose to self-manage, at least for the time being. I have even self-managed from out of state/country. It's not scalable and I don't enjoy it, but I effectively pay myself $500+ a month for a few hours work here and there. And I can do a far better job than the local PM's. I'm going to pass off my portfolio in the next year or so, but need to find the right PM.
I have a network of reliable contractors, a solid handyman, and a great attorney for any evictions that come up. That's the majority of what you need to self-manage.
All that said, a lot of investors are way out of touch with what a PM does. They expect to get top-notch service when they have a single 100-year-old house renting for $800/month. A PM isn't going to bend over backwards for those kinds of clients and that's what a lot of BP members are. PM's need scale to be profitable so the expectations have to be in the right place.
Investor · San Diego, CA · Member since 2015 · 89 posts · 89 votes
6y
We only have a few units (4) so it's relatively easy for us to manage. We use Tenant Cloud for all our rent collection, applications and leases. It makes it so easy. I also concur with many of the self-managing folks on reasons for it. I would add a couple of things
1. I really like chatting with and vetting my own tenants. I feel like I have a relationship with them, and that seems to help me to choose good people, and get people to cooperate on the things that need to be done. I have had tenants actually help me sell my property, find new tenants, and make repairs and changes that might have been more difficult if there wasn't a good relationship there.
2. I enjoy working on the property. I don't know why, I just do. Maybe it's weird, but I think it's fun to clean and paint and do maintenance. For stuff I don't want to do, I just hire someone.
3. I like having control of all of the financials. I just like seeing everything and managing work, banking, etc. myself.
I see this as well, and I often have many conversations with investors that are still on the fence. I will disclose that I am a Property Manager as well as an investor myself (Both locally and out of state). One of the BIGGEST complaints that I hear and see is, chasing down a PM to find out what is going on with a property. The second one is cost.
I think what happens is, most investors do not take the time to interview PM organizations. They simply find one, ask questions and go from there. As a PM, I offer my personal cell phone out as well as our office staff, I also check in with every owner monthly, not just about their properties, but just to make sure that they are good and happy. I also ask how many PM they have spoken with, and are planning to speak with. While I appreciate the business, I also want to make sure that we are a good fit for them AND they are a good fit for us.
I commonly see PMs taking any client and unfortunately, this bombards PM companies and you lose the personal touch. I also hear that costs are insane and it is more costly to hire a PM than to self manage. Essentially, if an investor is looking to expand a large portfolio, and work on growing, I would recommend a PM, there are a lot of benefits to working with a PM.
I guess it just depends on a personal goal. If you are at liberty to self manage, I recommend it. However, most are just not wanting to handle the daily ins and outs so it is a convenience to have representation. There are other positives as well that most people seem to forget. Most PM have legal counsel ready to go, contractors at hand (My PM for example, has W2 employees but if there is something out of our scope, we have a close network of contractors) and most PM have connections already in place for leasing, software etc. There are more pluses than minuses (As long as you hire the right PM).
Lets come at this from a different point of view. You probably have some sort of property and casualty insurance right? Ford self insures their properties. Are they right or are you?
That's a dumb way to look at the issue; one is a multinational company with 70+ factories and the other is a small business who probably doesn't have 70 employees. Both you and Ford are making the right choice.
The same thought process applies to PMs.
The choice to use a PM is one of strategy, one that is not made in a vacuum. It depends on number of rentals, class of rentals, the owner's goals, location. owner's time commitment.
Someone with a mid six figures job that takes up 50-60 hours a week who has 10-30 C class units in the mid-west probably will have a PM.
An investor making $90k/yr who owns 2-5 B+/A- rentals within five miles of their house most likely doesn't need one.
If I'm focused on cash flow to replace my W2, I'll want to minimize costs and self manage. If my strategy centers more around capital preservation/ appreciation, then expenses don't matter as much and a PM can fit.
There is no one size fits all answer for these questions since not everyone shares the same goals and circumstances.
I notice that it's a mixed bag when it comes to management on here. Half prefer to manage all their properties themselves and the other half won't touch a property without a manager/management company. Why is this such a polarizing topic in real estate investing?
Coming from a small business world, I couldn't imagine owning my business and doing all the work AND being on call 24/7 for customers. I never had any issues hiring employees and managers. So when I started real estate, that's the first thing I did upon acquiring a new property, started looking for management companies. I was surprised when I came to online forums to find that so many people DESPISE property managers and do everything themselves.
I have manager for my small business, I'm paying him $40k+ a year! I pay that because it makes my life easier, I don't want to deal with a bunch of min wage employees and customers asking for me. Same thing for tenants.
It seems to me that many real estate investors are opposed to management it unlike your average small business owner.
What would be the reason for that?
Simple. Most PMs are garbage. Yes, when they first start out they are decent to excellent. However, once they expand, grow and now a big shot, they no longer have time for your business. No problem. I decided to use my leverage and build my own. And yes, we treat all doors just like our own. That's how it should be.
As a property manager, it really comes down to personal preference. As @Kyle J. points out, some people enjoy turning wrenches, swinging hammers, filing their own nails, or chasing down rents. Some people are really good at it. Some people aren't nearly as good as they think and their amateurish attempts actually causes them to lose money.
If you think it's expensive to hire a professional, try hiring an amateur.
That's not just a cute saying. In my experience with hundreds of Landlords and from what I've read on this forum in the past 12 years or so, the vast majority of amateur Landlords think they're saving money but they're actually losing money.
You have to honestly, objectively assess your skills and your goals and see what works best for you.
It's not that hard for a landlord to go to Thumbtack, Home Advisor or Yelp and find a company to fix something. This is what most PMs do anyway, then add a service fee to make the call.
Property Manager · DeLand FL · Member since 2012 · 860 posts · 243 votes
6y
I have a couple thoughts on this, first I am on board with the idea that there are alot of really bad PMs out there and the stories never end scaring people off. I did property maintenance for several PM companies and saw first hand how much they wanted to cut corners and pad bills.
Second, nobody is going to work harder for you then you.
As a property manager, it really comes down to personal preference. As @Kyle J. points out, some people enjoy turning wrenches, swinging hammers, filing their own nails, or chasing down rents. Some people are really good at it. Some people aren't nearly as good as they think and their amateurish attempts actually causes them to lose money.
If you think it's expensive to hire a professional, try hiring an amateur.
That's not just a cute saying. In my experience with hundreds of Landlords and from what I've read on this forum in the past 12 years or so, the vast majority of amateur Landlords think they're saving money but they're actually losing money.
You have to honestly, objectively assess your skills and your goals and see what works best for you.
It's not that hard for a landlord to go to Thumbtack, Home Advisor or Yelp and find a company to fix something. This is what most PMs do anyway, then add a service fee to make the call.
Yikes. We don't do that at all. Nor do we markup on the repair.
Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
6y
It's personal preference. Some people like spending their time fixing properties and dealing with people. Others want to treat it like an actual passive investment. Then sadly, you have the people who overpaid for a property and can't even afford to hire a PM when they need the help.
A good property manager will add more value than cost.
