I'd love to hear from people who have jobs on this. How many houses, or units do you feel you can handle? Some of this depends on how flexible your job is of course. I'd love to know how close people feel they can get to critical mass (replacing your income) while holding your existing job. And additionally, what are some of your tricks to automating things to take out lost time, hassles etc in landlording?
At the moment four. Note: All are within the same neighborhood that I live in.
I feel I can manage several within the same zip code and my maintenance team is already accustomed to working that area.
Have you listened to any of the podcasts? There are a ton of investors working full time while investing heavy. I remember them mentioning things such as setting up 1-800 numbers with recorded messages for tenants to use, having a good handyman that can take care of small maintenance jobs, setting up an online work order request form for tenants to fill out if there is anything needing fixing so they don't blow up your phone at 10pm, training your tenant on what to do in certain situations...etc
I think, in general, buy & hold investors want to create as much distance as possible from the tenants, especially while working full time. Setting up automated process like the ones mentioned above will eliminate the possibility of a tenant having direct contact with you.
I may be the lone wolf in this discussion- but if I cant afford a 6-8percent PM - where they do the heavy lifting and I just mange their progress- than it is not worth it for me.. Now that's just me--I rather use my time finding other properties. I deligate.
@mikekrieg The way I analyze a deal includes always figuring in a management fee. I would find a good management company and like @kylegregg mentioned, create as much distance a possible. good luck
I don't see the point in haveing a PM myself. FIrst it's a waist of money. Second, have you ever heard of anyone tlaking about how WONDERFUL their property menager is? NO!
@Mike H. Manages 30+ with a job, and he posts a blog AND is on BP constantly...but I am not sure if he sleeps at all!
It has been prevailing wisdom that 6 units while working FT is nicely doable. Did that myself and enjoyed it. Funny thing was when I added units all hell broke loose.
There are people that design systems where they are managing many properties and working FT. They are very driven and organized.
If you want to work all your weekends and evenings then go bigger.
It is easier to get to "critical mass" when units are higher end then when you have 6 35k houses that have iffy characters for tenants @Mike Krieg .
If you seller finance your houses like I do, you don't have to manage the properties. I'll leave the landlording 'fun' to others on this board, as well as dealing with PMs :). So I can have as many as I can buy, no matter what else I have going on.
Hi @Mike Krieg ,
I currently manage 2 units about 1 hour away from where I live and I feel as though I can take on many more (in fact, I plan on it). I wouldn't travel farther than 1 hour personally, the closer the better for obvious reasons.
The number one best tip for automation was the day I required my tenants to take care of the lawn and snow. This has saved me priceless time because I used to do it all myself since hiring a landscaper was a cash flow killer. I got this advice from seasoned landlords who have been doing this way longer than I have, and they all said the same thing: Put it in the lease as a requirement.
Now my tenants mow the lawn, rake the leaves, and shovel the snow while I get that time back to spend with my family. Priceless advice.
Good point on the price point of your rentals being a factor in how many you can handle.
I currently have 32 rental properties. All SFH's. And I have a full time job.
I rarely have my nights and weekends tied up when it comes to the existing stuff. Now when you start talking acquisition stuff, thats different. That will eat up a few nights and weekends as my wife does the painting and I do a little here and there. Plus, I tend to buy a lot of the finish materials and also need to check in on the contractor.
But in terms of strictly managing existing properties. I think you can easily do 50.
Here's the thing. I'm not fixing anything myself. So what time does it actually take to PM a house? Repair call? I don't answer the phone - ever. I have them text or email me. I might ask (via email/text) a couple of questions about the issue and then ask when someone will be home. I then forward that info and maybe a contact number of the tenant to my contractor (hvac, plumber, handyman, etc) and thats it.
I probably get about 2 to 3 calls a week on average. I don't go to the houses at all to fix anything so whats my time? 10 mins for each one? 20 to 30 mins a week on repair calls.
Mortgage payments. Whenver I get a new loan I automate the payment from my one company bank account. All payments go out from there like clockwork. I don't have to do a thing.
My insurance company (NREIG) is a specialized insurance company for investors. They charge by the month. They send me an invoice with all my properties and bill my credit card every month. I might review the bill and make sure its updated when a house goes from rehab status to occupied but thats about it.
Lastly, collections. I've got about 80% of my tenants using the online bill pay service (I use payyourrent.com). I have a simple spreadsheet with the house in the first column and the months of the year columns across. When I get a payment, I put in the dollar amount in their box. Come about the 5th or 6th, I look to see who the laggards are and send them an email/text telling them that rent is late and what is the status.
Then I may have to do some follow up with that as well. But its all text and email. I'd say maybe 3 to 4 hours a month for collections if that.
And, strangely enough, I don't think that time has changed much from when I was at 20 to when I jumped to 32. I think the online payment thing is huge.
So for the regular stuff, I'd say I'm spending 5 to 7 hours a month tops in PM'ing these houses. And I'm guessing that the jump to 50 or 60 will increase that to 7 to 9 hours a month tops.
Where the time in PM'ing really hits is the make ready stuff. And, for now, my wife and I are still doing most of the make ready work. Typically its a full weekend of cleaning and painting. My houses all have the rekeyable locks so I am able to do that myself which is huge.
And some houses need a handyman to fix some things too.
I recently started using a cleaning service to eliminate that piece of it now that we have so much income coming in - the 150 to 200 bucks is one less thing we need to do. And, pretty soon, I think I'll be offloading the painting as well.
Once we do that, then make ready effort for turnover will be:
1) Go to the house and assess what needs to be done.
2) Have handyman/contractor fix what needs to be fixed and paint/touch up where needed.
3) Have cleaning service hit the house.
2 hours for my assessment and to arrange the work to be done and that should be it.
Then, its about the showings. This is where the real time comes in for turnover. On average, I think it takes me about 2 to 3 nights of my time. I try scheduling them in bunches and for most of the homes I have now, I can actually get a good renter out of the pool from that first or second night.
Now some houses aren't as easy to rent so they tend to bring the average up. Also depends on time of year.
Good example is the house in crete. I had one night of showings. Had 4 great applicants. Picked the best one and got the hold deposit the next day (Xmas Eve no less). Great house at a great price.
That same time of a year, I had a vacancy in Braceville, small town. Usually its next to impossible to find someone there during the december/january timeframe. But I got an unbelievable applicant the first try.
Then, the last one, in braidwood. New acquisition. No garage. Took about 6 showing appointments before I got one. Strangely enough, the tenant that I ended up taking was from out of town and I gave them the lockbox code to let themselves in since I couldn't make the showing.
So that one took a little longer than normal. But the house (no garage) and the time of year definitely play a role.
Still. Thats not really burning up my entire night or weekend. A showing takes me about 30 minutes to get to and 15 to 20 to go through. 30 to get back. I'm usually home by 7pm after my showings and can settle in and watch some tv or something to relax.
Is it work? I guess. But look at the reward. And, again, if you take out the acquisition leasings. I think I've had a total of 3 houses turn over in the last 8 months or so...... I'm sure I won't be able to keep those numbers up that high. But if you rehab right, price it right, and target the right renters, you'd be surprised how long you can go without turnover.
That being said, I'm in the lower middle class price point too. 130k to 150k houses that rent for 1300 or so per month. 3/2, 1,500 sq ft , etc.
If you're in the lower price point (30k), I don't think some of these numbers would apply. But I see no reason at all to pay a PM to do what I'm doing.
Repairs, collections (7 to 8 hours a month)
Make ready (2 hours a month - once I do what a PM does and outsource all the work).
Leasing - 5 to 8 hours to lease it up. But remember. A PM is going to ding you a month's rent typically for leasing a house. So I would much rather save the 1,300 and give up the 5 to 8 hours. Plus I think when you do it yourself, you get much better results.
I truly believe I can handle 50 to 60 houses and maintain the full time job.
And still not miss an episode of Vikings, Suits, or any of the other crazy shows we watch. And my fantasy sports teams are still pretty competitive too. :-)
btw: Any BP'ers out there interested in putting together a fantasy baseball league? Let me know and I'll put one up on espn and see if we can fill it up.
I think @Mike H. is spot on with his analysis, and there's very little to add. As he points out, the management is the easy part; it's the acquisition and initial remodel that's the time suck. Moreover, SFRs at the quality he targets (which is similar to what I target) are really, really easy to manage. Once they are up and running (and appropriately "hardened" for rental), they kind of run themselves. I manage 21 houses and a fourplex while working full time as an attorney, and it is very doable once you have your systems in place. (Heck, I don't even show units anymore or meet tenants in person.) I don't think anyone will tell you that it is not time-consuming to initially get up and running. I agree with Mike H. that 50-60 homes while working full time is achievable without ruining your life.
Mike H pretty much covered everything. Managing my properties once they are occupied is easy. The time suck is scoping out deals, taking out time to go to purchase closings, refinance closings etc, showing the properties and managing your trades during rennovation. I have gotten better now and have handymen that I like working with and am able to give them a list of things to do. I know their hourly rate and speed of work based on past work so I don't worry about getting bids....only from trusted people I have used before.
That said, I buy 20+ year old properties that typically need significant rehab so I have to deal with a fair share of punch list items on my own that just come up or I don't know about til later in the process, tenant move in etc.
I just got # 4 rented yesterday and know I can handle more. My wife wants me home more and I will start working to sub out showings, experiment some with giving strangers lock box codes (nervous about that one) and continue to work on improving my list of needed repairs - and order to do them to speed things up and minimize my need to go to the property.
I am nowhere close to considering hiring a property manager. In fact, now that I am licensed, I want to get clients so I can do it full time and generate enough revenue to help ditch my full time job. While building a sales business as well.
If you can find a good property manager, I don't think you have a limit. I work full time and own 22, soon to be 26 units. I would agree that finding a good property manager is easier said than done but worth every penny in making your business scalable and not having to deal with tenant issues.
I have a full-time, 40 hour per week, office job with absolutely NO flexibility. My portfolio consists of four houses and four commercial buildings (total of 27 tenants). I handed off all my QuickBooks data entry to my accountant, and have my HVAC guy, plumber, contractor, electrician, attorney and accountant on speed dial. I run everything using my cell phone, however I feel that I am getting close to the breaking point.
The setting up of QuickBooks takes time. But once everything is setup, the data entry involved only takes a few minutes, or a couple of hours per day, according to how many rentals you owned.
My husband and I had 40 rentals, and I handled all my court cases myself. My husband and I also handled many of the repairs ourselves. So we were busy 24/7. But the time for me to enter in data at the end of the day only took me, maybe 20 minutes.
The only time it took me a few hours was when I billed my tenants for rent that was due. Even though QuickBooks generates the bill for you automatically, I would print them out and stuff them in envelopes and mail them out. That's what took time. But you can also e-mail tenants for rent that is due, which you can do as a mass batching via e-mail.
What's great about QuickBooks, is that once everything is set up you can memorize QuickBooks to do most of the stuff for you. You just have to click on a button with your mouse and perhaps print something out, but we're just talking about a click here or a click there, but never a click click everywhere.
We are rehabbing on home #4 right now, and we might add one more that we manage. Everything over that, we're going with a PM. One reason to do it is having enough cash flow to afford it. Now, I'm looking for one I can groom personally.
I work full time and manage 8 units without much problem. Setting up systems will give you more time and freedom from running day to day operations. As far as PM is concerned...I feel that no one will care more about my properties and tenant selections than I do.
With that said, I will be forced to go the PM route some day as I scale my buy and hold business.
The work we put in now will pay later...short term pain for long term gain:)
We're handling 16 SFH's and I work full time as a federal employee. We do most of the work ourselves but have a good HVAC guy who is very responsive. Recently started including my youngest son helping out learning the rental business.
There will be months that go by with no problems; then you might be hit with several in a row. The real pain in a low spot are the calls in the middle of the night or on the weekends when the places to get parts aren't open (especially frustrating if the tenant tells you the issue has been going on for several days during a time when the issue COULD have been addressed sooner).
@Account Closed This is your standard answer to all land lording questions! From what I understand you are essentially buying, rehabbing and owner financing sales on long term notes. Why is this such a great model? The way I see it
1. You have exposure to Dodd Frank in a big way
2. You have converted tax sheltered income into full tax rate interest income
3. You have tied up your money for a long time (even up to 30 years!!)
4. You have very limited exit strategies. Its not like you can sell the house.
5. You have to deal with foreclosures rather than evictions
6. You give up any equity gain in appreciation (ok, not really likely in your properties but still..)
And at the end of it, all you really have left is a note. Why not just buy notes? Its the exact same thing without the hassle of the home purchase and rehab?!
Wow, great comments all. I love all these great ideas about how to automate the processes. I have gone to complete web-based paying methods,(google wallet and direct bank deposits) an email address that is unique for each property, Jotforms for applications, and templates for late rent emails, etc. and I also pay $20 to partners for showings when I'm not available. But I know there are even better ways. I'm eager to learn what they are. @Mike H. @John Chapman do you have any experience with web-based tenant applications? That is something I'm considering as another tool in my automation toolbox.
I'm curious also how you are running your finances? I have my rental going through one account right now. But I heard from another investor last week who has a separate bank account for each house. Dang! That would drive me nuts! He gives a debit card to each tenant so they can make deposits.
You would be surprised at the volume you can handle if the right systems are in place. I ran over 50 units with a full time job. I did have some flexibility and my lunch hours turned into 2-3 hour breaks. Having a job will force you to automate and constantly improve systems.
How do you handle showings? I have 8 properties and that seems to be the activity which requires the most time. Otherwise, I agree, rentals purchased in the "right" are easy to manage.
Also work full time and am only on my third SFR but I self-manage from a distance and typically use home warranties to address any repair issues. I factor the cost of the home warranty into my monthly expenses and like the ability to potentially control surprise repair or replacement expenses. I pay a $75 trade call fee for any service visit. Some landlords pass these fees onto the tenants. I also use a leasing agent to advertise and show my rentals. She charges 50% of the first month's rent and does not require an annual contract.
I have one bank account for all my properties. But when 80 to 85% of your tenants are paying via an online payment service, its really easy to manage collections. No more check is in the mail stuff. And sometimes the mail can be very slow.
I actually won't take a tenant that doesn't have a checking account any more. If they don't have a checking account, then they can't use my online payment service and thats no good. Plus I've found the people that no longer have checking accounts tend to be problematic tenants anyway. You have to do something pretty serious to have your checking account privileges taken away (i.e. bounce checks).
I'm guessing the reason they're setting up separate accounts is because they either want liability protection and are setting up separate llc's or something and then need separate accounts for each one. Or else they're just trying to protect tenants from another tenant knowing the account info.
I can't imagine having to deal with 32 separate bank accounts though.
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