Question to all self managing rental property owners
Property Manager · Seattle, WA · Member since 2019 · 7 posts · 2 votes
Question to all my fellow rental property owners who self manage.
Why do you self manage Instead of finding a professional property management company?
A- Fees
B- Service
C- Trust
Please be descriptive if possible so I can learn more.
Thank you
@Seemant Nakra
Because nobody will care about my properties as much as I care about my properties. And most PM’s in my area either do a poor job, or they charge too much, or they charge too much for the poor job they do. And, because I have the time to do the job.
The one thing that annoys me the most is the fees they charge to renew a lease. $300,400,500 to simply do a new lease addendum for an existing tenant! Ridiculous.
@Seemant Nakra I self manage an A-class condo I own in a large building that has on-site maintenance personnel. If a repair is needed, I put a ticket in an online system and it's done the same or next day.
I only self manage my higher rent properties.
Too many PM’s wanted a percent of rent. My $3,000/mo tenants are easier than my $1200/mo tenants.
I have two tenants that over 6 years have needed 1 repair every 2-3 years (microwave, garage door opener, and an occasional appliance repair) other than that I never hear from them. They’re set up on EFT and the money just arrives on the first. I certainly can’t pay $240/mo (8%) for that. Honestly I don’t think I’d pay $50/mo.
My tenants know me as a person, not some company out to screw them or enforce the rules. As I mentioned in another post I recently raised their rent $300/mo with a simple call explaining that property taxes and insurance had gone up or I wouldn’t be raising their rent as I appreciated them. Not a form letter from a PM saying “hey, your rent is going up this much on this date or you’re moving out.”
Maybe the $100/mo is wasted on the cheaper rentals, but I prefer a professional find those tennants and abide by all the fair housing laws for me. And sometimes it's nice to have a middle man when you're enforcing picky HOA rules you don't even agree with, charging late fees or explaining to tennants why they have to pay for certain repairs. (issues that never seem to come up on the more expensive rentals.)
@Seemant Nakra
Because nobody will care about my properties as much as I care about my properties. And most PM’s in my area either do a poor job, or they charge too much, or they charge too much for the poor job they do. And, because I have the time to do the job.
The one thing that annoys me the most is the fees they charge to renew a lease. $300,400,500 to simply do a new lease addendum for an existing tenant! Ridiculous.
More than not wanting to pay the fees, I know that no one would be able to manage our C/D class portfolio better than we can. We do many of our own repairs, and when we need to call in a pro, we have several whom we work alongside. If we didn't manage our portfolio ourselves, we wouldn't be making any money on it.
I'd say for me I wont ever have any management because I simply dont have the need for one. I'm small fries, own a plumbing company and am capable of handling 98% of problems i encounter.
That being said though I would like to meet and network with any PMs out of NJ! Especially in the commercial/retail end in Centeral NJ.
When I started it was just assumed I would self manage. I thought one day, I will turn it over to a pm, but what better experience is there but to manage them myself and so I will know what it takes to manage them. I found that I don't get that many calls for repairs and rarely the 2:00 am. That has occurred twice in 6 years. Selecting a tenant is always exhilarating and took a while to figure out how to set up showings. I try to group showings together because to many potential tenants just don’t show and rarely call. Of course I save a few dollars by self managing, but I agree with previous responders no one cares about my property more than me. I can usually find a tenant within two weeks.
I think the short answer is this: Managing properties is really pretty easy. We manage 40 units that we own. On an average week we get 2-3 calls from tenants ... sometimes none. Sometimes I need to go check on it, but usually I can trouble shoot via text to figure out, “sounds like I need to call the ___________ (plumber, AC guy, septic people, etc).
We use Rentec-Direct to both collect our rent and to affiliate market through Zillow. We can fill units in less than 2 weeks EASY.
So you have to ask, “Why would I give 10% of gross rent to someone to do so little??” Keep in mind that if financed, 10% of your rent represents about 30% of your profit.
The other question you have to ask is, do you have the time, patience to manage them. It’s our full time job. And that is not to minimize a lot of other things we do as to maintenance... we paint properties, pressure wash, replace pool liners, do what preventative maintenance we want to do and farm out the rest. It’s a full time job.. but we may start at 10am, finish at 2, or just take the day off if we want.
If you are just getting into properties, the secret is to get a couple of resources for each type of issue you have... a couple of plumbers, a couple of ac guys, etc, etc. Network with people to make that happen. Once you have that in place there just isn’t much you can’t handle as a landlord.
By choosing our tenants carefully - holding them to the same standards that banks do (3x income to rent) - we very seldom have issues collecting rent. Even with the pandemic we only have about 10% of our tenants having issues paying and they are all paying what they can.
Why would you use PM if you have the time and inclination to do it yourself? It’s just not that hard. In addition to their fee, you are going to pay a premium for everything they do. My wife had a PM before we married and they wanted $1,100 to replace an existing garage door opener... we did it ourselves for $200 in 2 hours. Lots of vendors will up charge and rebate back to the PM as an additional profit stream. No thanks! We’ve got this!!
I am building a business. I'd rather run my own show than punch a clock for someone else. I am not a passive investor. I didn't have enough money to make a living off passive investments. I did have enough money to start this business and lucky for me, I actually enjoy the business of property management. As soon as we get through our current round of substantial DIY renovations and (hopefully) close on the deal we have under contract, we should be able to pay off the reno costs out of revenue in pretty short order and at that point we should be able to hire a manager if we want to, but we probably won't because I enjoy managing -- I am tired of DIY renovating though. Right now we have 49 doors and 10 under contract (B - D neighborhoods).
@Seemant Nakra
Initially my properties were employee housing, then when we transitioned them to LTRs the plan was for my partner to take 10% off the top and for me to travel the world full time...
Turns out he hated C class property and therefore undercharged for rents, overpaid for contractors, and sent me weekly emails about how much he hated it.
We’ve been great friends for years but this just wasn’t his thing so back I came. I’m at 92 units now but aside from the initial Reno and leasing up of a property, it doesn’t take a huge amount of time and In the last 18 months of self managing non-employee tenants I’ve learned a TON.
If for no other reason- I say self manage for a couolw years at least so you learn how to do it and you’ll know when a PM isn’t doing it right.
I self manage to ensure my tenants are properly vetted and managed, ensure the property is well maintained and keep costs down. It has the added benefit that late fees come to me.
Nothing is more important the selecting a good tenant. PM companies take no real responsibility for this. They say they will do it, but they do not cover the losses when it doesn't work out well. They may give you a free new tenant if they realize they didn't do so well, but I've never heard of the PM company paying for a renovation of a trashed house.
I had a few PM companies ask me in their pitch, "What are you going to do if a tenant calls you with a backed up toilet in the middle of the night or on Christmas day?" I told them, "The same thing you will do: Tenant - clear the cog or call a plumber. They might not be available until tomorrow." I've had very few calls overnight and only 1 over a holiday, but I only have 6 SFRs. I'm sure this becomes more frequent with more properties.
PM companies pitch their extensive list of proven contractors. They probably do have that in general. If have 2-3 for critical skills, like plumbing and electrical. The internet is full of listing and referrals if I need more or other skills. I've never been unable to find someone to do work.
As mentioned above, PM companies charge more than the actual contractor bill. They charge for their time and support as they will often go to the property to let the contractor in, etc. The problem is this charge is in addition to the monthly charge. Since most PM companies require a cash account to immediately draw upon for expenses, there is really no justification for additional charges except profit.
Many folks cite the monthly fee as their first reason not to hire a PM. I was quoted 8% of rent. At the time, my rent was $1,200/month. The monthly fee would be $96. That is the cost for a no-activity month. A month requiring inspections or services costs more. I don't see this charge as unreasonable since these companies have overhead to pay for an do provide a nice service. Bookkeeping and tax information is properly maintained. There is someone to call in the middle of the night and holidays. They do have a nice roster of contractors. I find I can also do these things and my cost is my time with little additional dollar overhead cost.
The biggest selling point for a PM company for me is time saving. They will also take away a lot of emotional grief of dealing directly with difficult tenants. These are important points for folks highly valuing them. Of course, it is a tradeoff.
Lastly, regarding economics, I looked at it at the property level and a macro level. How would I differ from a tiny REIT or a rent-secured bond if I owned a bunch of residential properties and outsourced all property management? I would have no interaction with my properties or tenants, so real estate ownership would be nothing more than another company out there that sends me checks and bills each month. That wasn't interesting to me, but it was actually a burden. I had no liquidity, of course, and no real insight into how my properties were doing. It would be better and lower risk to simply buy a diversified residential REIT or real estate-secured bonds.
I manage my properties because I enjoy the industry and all the interactions that take place with my properties and tenants. I can't say I enjoy everything, but overall I do find it enjoyable. It is one part of my financial portfolio that I feel I significantly influence, if not control.
@Seemant Nakra I self manage my units and intend to keep doing so. Eventually, if my portfolio grows beyond my capabilities, I'd rather hire someone and put them on my direct payroll. As far as your three considerations:
A- Fees - In real estate, you're typically working on fairly tight margins and hoping to take advantage of compounding interest. Giving up 8-12% of monthly revenue hurts now and hurts a lot more when projecting out total gain on the property.
B- Service - For me, this is mostly about software. Property managers primarily find and screen renters, collect rent, and handle maintenance. Other than physically going to the property for showings and repairs, software can handle all these. I have a few local handymen I tap when I can't handle a maintenance problem, and showings haven't been very difficult to manage.
C- Trust- This is a huge one. You hear just as many horror stories (if not more) about property management companies as you do recommendations. I know there are great property managers out there, but I'd rather not risk it and simply handle it myself.
All of those reasons and others.Is it ideal? No. Everyone is striving for the ideal situation some get there sooner than others. Managing your own units is absolutely a tool to use in ur way to where you want to go in real estate. In your way to your goal do anything and everything that will help you get there, including self management.
@Seemant Nakra
For me it’s all of the above but more importantly it’s the constant contact with the tenants. I had a solid management company but at the end of the day, I found my repairs were less (job done 1X and properly) and my rents were more easily collected. Saving $1000 a month also helps. Also, listing my rentals myself and giving them to a bunch of brokers works much better than relying on management. As I said, I liked my manage to company and still do business with them but my units rent faster and if it is no broker I save the months fee. The sense of urgency to rerent is definitely less with brokers and management.....it’s not their money! Good luck to all ✌🏻✌🏻
I actually enjoy it, and my other job fortunately allows me the opportunity to deal with issues as they arrive. Once you get properties dialed in its very simple and not time consuming. Also its nice to have the experience, so if I ever do decide to hire PM, I know what I'm paying for.
The fees and trust are the biggest part for me, having under 20 units I can effectively manage everything with my property management software. If I get closer to 100+ units then I will reconsider a property manager.
@Seemant Nakra
Not up to scale yet. Once I have a sophisticated method of management, I’ll hire in-house and train a person to be an extension of my company.
PMs are better employees than individual contractors IMO. More control of my assets and my manpower. As long as the property can support a full time onsite manager.
A,B and C... plus so much more!
I only have 9 units and I am not looking to grow. I repositioned them and came out of it with a complete understanding of every aspect of my assets and my business.
1- It is, now, probably the easiest job or endeavor I have undertaken in my life.
2. It pays great.
3. It is fun as hell! You get to be creative in many different levels when renovating or doing capital investments. You can put in a good hard days work when you want to. You get to teach your kids about business.
4. You earn it! You get out of it what you put in- in all of my years of employment I have never experienced it like this! You renovate- they pay, you maintain and invest in capital improvement they want to stay and pay rent increases. You stick to your guns and vet properly- you are rewarded.
I don't know if I would give that up if a property manager offered me $20k to run it!
@Seemant Nakra we bought our long term rental in a small resort town so there were basically no property managers that I felt would be worth the fee (only real estate agents that did PM as a side gig). We have a cottage nearby so we complete the upgrades during the summer months and get to write off the gas and some food expenses that usually would just be vacation money.
@Seemant Nakra
None of the above.
I self manage so that I could have practical and hands on experience in property management so that I could be a better real estate investor.
Not only do I self manage, but I also use property management on the real estate that I own out of state. So I don’t fit the common stereotype of those that self manage.
I have heard so many horror stories of management companies and I agree with most of the responses that nobody is going to manage my properties like I will. I make sure when a tenant calls repairs are completed ASAP. My tenants are my customers and I want them to stay in the home and to be happy to do so. Management companies usually don’t build a rapport with tenants but I take the time to do that . I only have ten properties at this time but I have a full time job teaching . For now managing ten really hasn’t been that time consuming and I have lots of time off as a teacher to do both jobs.
Fees are always a factor, but more importantly is the service, trust and education.
You’re not going to learn the ins and outs of your property as well unless you do it yourself and see what breaks/needs work yourself.
Not only that but you’ll know who really lives in your property and be able to deliver the service you want. Some PM companies are slow to respond or might not have the best service as you could give the tenants.
You’re also going to get an education so you can be better in your investing career as you move along and grow in the business.
@Seemant Nakra, in the beginning I had a partner to manage the first property. As things grew my partner did the managing and I just helped out. My partner moved and I took over, it was tough for awhile. Why do I do it now? The first is truly cost. Rental properties here are a pretty tight margin, so paying 10% off the top would make it dam tough to show decent cash flow. Next they can find people to rent, but don't do so well on keeping properties fixed up, finally I find that keeping myself in the renting game is a very important factor in measuring demand and setting rent prices and knowing what I can pay for a property and still cash flow. I know where getting renters get tough in terms of dollars. I know what I can pay for a property before renting gets tough and I lose money. I still have some apartments managed. I see that most repairs are done, but the amount of time it takes to manage them due to higher turnover justifies paying the 10%. I don't know that if I bought them right now if I could afford a property manager.