Underwriting a BRRR while partnered with a PM company

[Joe Remschak]

Hi, I have some questions for BRRR investors using PM's.

I recently decided to learn what it's like partnering with a PM in a low-risk setting by hiring a local one for the vacant unit of my house hack. Although I've adamantly viewed any expenses associated to be part of the learning experience, I can't deny that it's been one of the worst financial decisions I've ever made - 5 months in, and I'm net-negative over $6,000, not even including vacancy. I am extremely confident that the unit was in above-average condition and rent-ready, because I was the last occupant and took meticulous care of it. These expenses were non-invasive, surface level repairs (like spot-staining trim or painting inside a closet), in addition to standard onboarding fees.

That being said, I have two questions, as I'm currently in the process of underwriting a second purchase, which will be a BRRR:

1. Many investors share that they work directly with their PM for BRRR rehab coordination. I can't understand how this would make sense - if light touch-ups are $5k, then anything slightly invasive will have to be in excess of $100k. Do BRRR investors typically execute a rehab independently, and then hire a PM afterward to mitigate this?

2. As I'm underwriting my 2nd purchase, I can't get past the fact that onboarding a rent-ready property to a PM will eliminate the entire first year's cash flow. Do BRRR investors budget a PM onboarding expense of ~10k IN ADDITION to rehab costs? Is my experience an anomaly?

[Jim Johnson]

That’s a rough experience — but what you’re describing usually comes down more to how the operation is structured than the idea of using a PM itself.

On your first point — most BRRR investors I've seen don't rely on a PM to run the rehab. PMs are typically set up for stabilization and ongoing management, not cost-controlled project execution. Rehab is usually handled independently (or with a dedicated GC), then handed off once the property is rent-ready.

On the cost side, what you ran into doesn’t sound like a normal baseline — especially for light turns. Smaller “touch-up” work can get expensive quickly when there’s no clear scope, approval process, or cost controls in place.

For underwriting, most people aren’t baking in $10k+ just to onboard a stabilized unit. You’ll usually see:
• Leasing fee / placement fee
• Ongoing management %
• Maybe minor turn or setup costs

But if onboarding alone wipes out a full year of cash flow, that’s typically a sign something’s off in pricing or process.

The bigger takeaway is making sure roles are clearly separated:
• Rehab = cost-controlled, scope-driven project
• PM = leasing + stabilization + ongoing operations

When those blur together, that’s where costs tend to run.