here's a way to think about property management fees

Managing Your Property
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here's a way to think about property management fees

Patrick Britton
Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes

My "net" income for one of my rentals was $330 before PITI, PM fees ate $140 of that.

NET was reduced by 43%.  Consider that the next time you think someone else can manage better than you.  

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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y

This is how cheap investors who never scale think about property management. If that $140 saved me even an hour of my time towards managing the property it is worth it. 

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3y

    @Patrick Britton

    can you elaborate

    1Reply
  • Joshua Matthews
    Real Estate Agent · Indianapolis, IN · Member since 2022 · 45 posts · 52 votes
    3y

    How many properties do you hold and manage? Is peace of mind (not screening tenants, answering the phone, not collecting late rent/enforcing lease) worth $140/month? And is there a ratio of # of doors to manage vs peace of mind? 

    1Reply
  • Brandon Vanderford
    Property Manager · Raleigh, NC · Member since 2022 · 117 posts · 110 votes
    3y

    At the end of the day, many investors would prefer to earn a passive $190/month than deal with marketing, showings, leasing, maintenance calls, vendor relationships, accounting, rent collection, occasional eviction, etc. for $330/month. 

    Passive income > active income

    3Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    This is how cheap investors who never scale think about property management. If that $140 saved me even an hour of my time towards managing the property it is worth it. 

    6Reply
  • Soh Tanaka
    Property Manager · Lindenhurst, IL · Member since 2016 · 854 posts · 506 votes
    3y

    One of my goals is to have more time, so I'm happy to pay my property manager. 

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    I think it depends on the individual and the PM.  There are good PM and bad PM and some that nickel and dime owners.  I've mostly had good experiences with my PM (a few problem).  The reality is none of them are going to care as much about your property as you do and many of them will have a one month vacancy when you turn over.

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  • Andrew FreedBusiness Member
    Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
    3y

    This all depends on where you are in your wealth building phase. If you are early on in your career / profession and your hourly wage is low, it might make sense to self manage the properties since it'll cost you more per hour to hire a PM. However, if you average a good hourly wage and can arbitrage that time into more income producing activities, it makes total sense to sub out property management since its a lower cost per hour task than what you can be doing. More or less, are you in the bootrapping phase or in the snowball effect of wealth building. Depending on the phase, self managing or hiring it out can both be the right decision in my opinion. 

    [email protected]781-964-3200Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
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  • Ben Zimmerman
    Rental Property Investor · Raleigh, NC · Member since 2016 · 396 posts · 995 votes
    3y

    My opinion:  Let the plumbers plumb, and let the investors invest.

    I don't know how many times I've seen forum posts by self managers concerning ESA animals, or asking which party is responsible for damages, questions about a lease dispute, or should I accept a highly qualified tenant but has a red flag of X.  A property management company offloads the responsibility of being intimately familiar with tenant screening laws and regulations.  

    I don't know how many times I've seen someone run over to their rental unit on a Saturday because the toilet is leaking and they plan on fixing it themselves because it will be a 'quick and easy fix'.  So after driving across town to go to the unit, you see what's wrong and head to Home Depot to pick up the required parts.  Drive back to the unit but realize you forgot to pick up an insert_random_part_here so you drive back to home depot.  Then you go back and realize you need a slightly larger wrench than what you brought with you, but you already own one so instead of buying a new one you drive all the way back home to get the one you had.  Then after watching 30minutes of YouTube on how to fix a toilet, you triumphantly fix the toilet and save yourself $150 in plumber fees, but cost yourself $40 in parts and 4 hours of your time.  Time that could have been used to analyze future deals that would potentially earn you multiple tens of thousands of dollars because you 'bought right'.  It takes a lot of time at $140 per month to offset the gains from being able to better analyze properties and find that diamond in the rough that allowed you to buy your next property at 10k, 20k, 40k under price of what you normally purchase homes for.

    Instead of being a shoddy plumber, or manager, I would much rather focus my time on the aspects of real estate that generate long term wealth, which is the acquisition, remodeling, and eventual disposition of real estate. 

    That's not to say that in all instances it is universally a bad idea to self manage.  If you enjoy managing then good for you!  If you don't want to scale and just want a few properties to supplement your lifestyle then good for you!  But if you want to scale, you need to let the professionals do their job.  

    3Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    3y

    @Patrick Britton A baseball player that hits 0.300 will get paid a LOT more than the 20% performance difference between them and a 0.250 hitter (0.250 x 120% = 0.300).

    You can manipulate any numbers to justify your goal, so what's your point?

    What better argument do you have?

    [email protected]248-209-6824
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    1Reply
  • Richard F.
    Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
    3y

    Aloha,

    It's not all about "managing". It's much more about experience and knowledge. Maybe you have a few rentals and are just lucky.

    A qualified PM handles hundreds or thousands of different properties over the years and takes frequent (and in most states, required), courses every one or two years to keep up to date on new laws and best practices in the industry. This, in addition to the actual experiences we have every month that just make us shake our head in disbelief.

    When you hold yourself out to the public as a business person, or Landlord, you are expected to play by the rules. But of course you need to first know the rules. You need to know not only how to conduct your business, you also need to know how to protect yourself and manage your risk.

    If you do not even know the rules, much less play by the rules, just one Notice of Violation will wipe out far more than $140.

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    3y
    Quote from @Patrick Britton:

    My "net" income for one of my rentals was $330 before PITI

    Your net cf must be like negative -$2000/mo? That's horrible.  

    I paid my PM about $8k last year to manage.  I was fine with that.

    What got me to sell was the constant service call trips from marginal but expensive contractors for every little thing. They were also bad at selecting tenants.   

    If they are doing a good job for $140 a month,  count your blessings.  

    2Reply
  • David Cooper
    Member since 2023 · 1 post · 0 votes
    3y
    Quote from @Eliott Elias:

    This is how cheap investors who never scale think about property management. If that $140 saved me even an hour of my time towards managing the property it is worth it. 


     really well said.

    0Reply
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