So as the title states, What is everyone's take on this.
I am in the process of putting my first property up as a rental. I found a property management company that charges 10% all in, no other fees, etc.
Now, for only one property, do you recommend I landlord or hire it out?
Depends on your resources @Account Closed and your goals. How much cash flow will it generate and can the property afford to give up 10%, do you have time to manage it yourself, and probably the biggest in my opinion are you wanting to get into this game long term or is this just a 1 time 1 property deal? If your wanting to invest in buy and hold I would suggest managing it yourself to learn. If not then get it managed as long as it will still cash flow.
I typically can get a property manager for 8% in my area but I'm guessing 10% isn't bad.
I would say it depends on what you're trying to accomplish, and your numbers. Would the 10% fee dig into your returns in a way that you cannot deal with? If not, and you still like the return you'll be getting, that may be a great option.
It frees up time for you to do/focus on other things, and begins the building blocks for you to potentially scale your system easier, build more relationships, and could snowball into new deals through the partnership you'd have with the property management company.
If the 10% would dig into your returns more than you're comfortable with, go ahead and manage yourself to get the experience, but have the knowledge that this property may always be one that requires your direct attention.
Congratulations! This can definitely be a scary but rewarding experience! I remember I was terrified renting out my home initially; then excited!
You need to verify that the property manager is not just there to collect money and be there only for the tenant. There are good property managers and really bad ones. I would vet the property managers; just as you would a tenant. After all, no one is going to take care of your stuff, like you.
I personally have enjoyed managing my property.
Disclaimer: I was burned by a property manager and now manage myself.
I hate to chime in on the depends answer, but I will. So, here you go, it depends.
Obviously for all the reasons above. I will just tell you why I would in your shoes use a PM, even with one property. That's just simply that I don't want the headache. The hundred bucks off the top or whatever, is perfectly fine for me to pay.
This sounds so terrible, but I just can't get involved in a renters business or life. It depresses me and makes me more negative of a person. Now, there are great renters out there, but many are not. When I get involved at the mirco level, walking properties, interacting with renters, hearing the stories, excuses, evicting children, it hurts my soul. I read people very well at times, and I don't like being right about this stuff.
I spent a great many years of my life paycheck to paycheck, no credit, no money, around drugs, around addiction, around fraud, around poor money management and I payed very close attention to it all. So for your case, I'd say get in the habit of PMing all of your properties from the get go. Don't do a couple of months just to get caught up, and then hire a PM...you'll get used to the money and find a reason to keep going.
Set it and forget it. Passive income. Boom. On to the next investment.
As always best of luck in whatever you decide. Personally, I have to stay macro...renters depress me. It's so terrible to say, and I get that not everyone can pull themselves up by their boot straps but damn, so much is self inflicted. Best.
@Jimmy Lee How did you get burned by a PM? I'm curious what kind of treatment I'll get when I give a single property to a PM.
Account Closed Long story; but my property management was the only shop in town. They focused more time on making sure tenants were happy than to be my representation (afterall, I paid them 12% of my monthly rent). They also wouldn't make a decision without contacting me first (despite having agreed upon "anything less than $200 please fix" statement in contract). We also discussed my reasons for using them (collect rent, background check, handymen/contracts with laborers, etc).
Issue 1: AC went out during the hottest day of August (capacitor issue). Property Management called me to ask what I wanted to do and who I wanted to use. After I informed them to fix it (duh); they called my wife and played the sympathy card for the family in the house. My wife is very caring. She started stressing because the AC isn't working and all the bad things that are going to happen. End of story: $80 for labor and capacitor.
Issue 2: Tenants had several late payments leading up to Tenants texting PM that they are breaking the lease at the end of the month. This was March 13th. I was made aware that they had paid late the last couple months. PM called me and gave me the news as if it was something I would be OK about. PM told me that there wasn't anything that they would do (I could use their lawyers for a charge). In fact, they started telling me about the issues that the girlfriend was having and how bad I should feel for her in the situation, and she is a victim, etc. (This sounds cold-hearted, but my concern does not pay my mortgage).
Issue 3: After the 2nd month of the contract, my rent checks started coming later and later. I was assured that my rent check would arrive between the 20th and the 25th of that month (Rent is due on the 1st, they pay vendors on the 12th, rent checks are mailed around the 20th). Basically, my November check came December 12th. December check came January 20th. February I called and complained and my check arrive February 25th (January check came February 5th). The kicker: I had no vendor call outs during any of those months. They were blaming it on a snow storm in December and sicknesses in January.
Issue 4: After tenant (from issue 3) vacated; they performed a walkthrough and told me things that the tenant broke (laundry door, punched a hole in the wall, the usual). I had already decided to manage myself by now (I hope you can see why). I went up to the house to do cleaning and inspect the property and found that they had broke the door frame of the front-exterior door causing the door not to shut. It was visible that there was something wrong with the door. Believe it or not, this was the issue that made me the most angry. This is my house and someone who is in charge of "watching" it, for pay, did not even visually inspect the house.
Issue 5: Obviously I got my security deposit for the damages and the breaking of the lease. Well that security deposit did not get mailed to me until the middle of May (50 days after lease "ended"). I received every excuse in the book. Legally they cannot take the check out of escrow until 30 days after the lease or until tenants sign the deposit over to landlords. Every excuse was made including by the Broker himself (who promised to handle himself), including lost check in route and "We have 5 offices, 135 agents, sell 2400 properties a year. I don't deal with the day to day of the Mgmt company."
Like I said, I was burned by how much I paid someone to do nothing, other than collect rent. I've heard there are good PMs out there, but I did not have one. The house was leased for 9 months with this PM. Since self-managing, I was able to hand-select my tenants. Rent is paid on-time. House is being looked after. And I'm cashflowing an additional 12%.
It is true that all of those issues are due to the tenant, but a good property management company should shield you from those issues. At least that's my opinion.
I couldn't even make it through that story. OMG I would have choked someone out.
I think you got the bad apple obviously, but thank you for sharing. I will make sure I put contingencies for all of these things in my contract.
Awesome! Thank you all for your input! I see the upsides to both avenues of approach.
Let's say i went to self management, how do you find your tenants?
Web rent management systems such as cozy.co make it easy. They connect to realtor.com and doorstep.com and post the house for you. Best of all; it's free! If you need additional posting, you can post on zillow.com or put signs in the yard, advertise in the paper; pretty much anything!
Use the webflyers in your property management software. It will allow you to post photos and descriptions as well as the basic info like rent and security deposit and whether you allow pets. Once activated those webflyers are automatically posted to many different URLs. You will start to get inquiries from prospective renters via the contact data listed on the webflyer. You can also post to Craigslist for free and my software has the copy and paste option to make that easy.
First time? IMO get a property manager.
Do you want to find tenants?
Do you want to advertise the property?
Do you want to accept calls from tenants complaining about things?
Would you accept a job managing the property for 10% of the rent?
If your answer to all is NO. For 10% of the rent, IMO it's worth it.
@Account Closed start with a PM company. Save your time to find more deals. The only good thing to manage your first property is so you have a complete understanding of all that is involved. Other than that, the 10% savings isn't worth it, in my opinion.
For first time investors one of the biggest problems they will encounter, and will often sink their investment, is a poor property manager. The reason their investment will go south is because a new investor, having zero experience in property management themselves, has absolutely no skills or ability to manage their PM.
They buy a property, hire a PM and blissfully sit back believing business is being taken care of. By the time they realise it is all going down the toilet it is too late.
I strongly advise new investors buy local and manage their own properties until they become callused and hardened toward managing tenants of their own. Then when they do hire a PM they are experienced enough to never fully trust them and will keep them on a short management leash. If you are not managing your properties you should be tightly managing your PM.
If you believe real estate is a arm chair investment by all means hire a PM...and good luck.
Thanks to Christian for starting the thread for the rest of us in a similar situation. This information from experienced investors is invaluable to those of us starting out.
Like Christian, I have also just purchased my first investment property. The basic info: purchased with cash using part savings and part Heloc taken out on my primary home. I plan to refinance the property after some rehab.
Here are my questions as a newbie and I apologize if treading over some of the same ground:
1. LLC for investment property - One LLC for multiple properties or individual LLC for each property?
2. Best way to screen and credit check tenants (favorite online tools?) - Major warning signs?
3. Property management software / online tools / online advertising / online applications / online rent collection tools?>
Thanks in advance for any advice you all may have to those of us starting the journey,