Is Becoming a Property Manager Worth It?

Question

Hi all,

Currently manage 10-15 of my own rentals by myself (all Section 8) using TenantCloud. Have had PM's in the past and never really liked the process, and enjoyed keeping the 10%. This is all for my rentals out of state.

Honestly, it's not as hard as people seem to make it. Rent's automatic, maintenance requests are made through the portal, and anything in-person is handled by my local handyman. Anything eviction related is sent to a lawyer.

Recently, I had a few big investors ask if I was interested in forming my own PM company and handling their 100-150 Regular/Section 8 units. This would be in Ohio, Michigan, Indiana, Alabama, and Missouri. I am aware that I may need to partner with brokers as I am only licensed in Virginia.

My question is NOT whether I can handle it or not. I am sure I could hire multiple VA's or even in-person staff to handle the bulk of work. My question is if it is WORTH it. I have heard that profit margins are slim with management, but maybe there are more benefits than I realize.

For context, estimated rents on each is $1300/m.

Allan C. · Answer

How many millionaire PMs do you know?  Why would you take on 100s of other people's headaches for a slim margin?

if you already have your own portfolio, why not just focus on growing that. Your opportunity cost is too high to waste your time enriching others. Focus on your own deal flow and business optimization

I'm not degrading what PMs do and I'm sure there are a number of high NW PMs. However, it's tough sledding and not an easy path to success.

Lee Waldrop · Answer

Property Management can be highly profitable if you dedicate yourself to it. When I started investing and syndicating among other ventures, all of my colleagues wanted me to manage their properties and the PM Co was the bastard child of my enterprises until I finally realized it was the golden goose that could be the hub for helping others create wealth through real estate. If you're just in it for the profit margin, but not passionate about PM, then I'd say don't do it. I went to 64 units self managing while fixing/flipping before I hired an assistant. It was too late before I realized that managing for others means double the communication. My 64 door portfolio was fine because I was the boss, just tenant stuff to deal with. Hell, I was a fix and flipper so I just told crews to go handle work orders when needed and quick unit turnovers. When I started managing others, each door added meant two clients, an owner I had to manage and a tenant I had to manage. You actually have to get approval to spend their money. It can go quickly downhill unless you're passionate about it and have systems/safeguards/take a business approach to looking at numerous revenue streams beyond monthly mgt fee/ Pod, hybrid silo model approach, and many other functions that I learned through the school of hard knocks.

It's only worth it if you want to help others through Asset management. If it's about the money you're better off staying focused on your own investments. I also got out of section 8. Landlords and tenants are way too time consuming and the program is riddled with fraud that I don't want to be a part of.  It's all fine until you're faced with two dozen section 8 move outs in one month who have not respected your property the entire lease. I'd say it's not worth it in your case. Go bigger before managing for others. Do 50 or 60 unit turns before managing other people's money and retirement. Also out of 10-15 rentals you should almost never have an eviction except maybe one in 5 years, so if you've had one recently, you're not ready, just my opinion.

Jason Wray · Answer

Joseph,

To be in that many states spread out and not have a "Niche" market like STR or MTR I would say focus on buying REI versus PM.  I know a lot of people who own large PM companies and most of them focus on their local state and a niche market or clientel.

Example Florida PM becuase its an ammenity state it attracts millions of people for Golf, Fishing trips, Family Vacation, Business, Entertainment and more.  You can be a little aggressive on the margins because it caters to a certain group or niche market so it pays well.

Look at your PM company the same way you would buying REI whats your ROI versus time invested.  You mentioned Michigan and Section (8) if you can focus on that only then you have your Niche!  As you know Sec 8 can be a hassle but either way good luck.

Drew Sygit · Answer

How are you going to solicit business from fellow investors like you, that "Have had PM's in the past and never really liked the process, and enjoyed keeping the 10%"?How are you going to make a profit with this mindset, from others with a similar mindset?

"it's not as hard as people seem to make it." just means you haven't done it long enough and are pretty naive.

You can DM me is you really want the brutal truth...

Joseph Khateri · Answer

I appreciate your enthusiasm for property management. In regards to Section 8, I run a consulting company specifically used to help people buy and rent section 8 homes. I have assisted with 100+ purchases and have my own Section 8 portfolio. I am confident in my ability to navigate Section 8, been doing it for 4 years now.

Also, I have had 1 eviction in 4 years, not shabby I think. Ironically it was with my 2nd ever tenant as my screening process was terrible back then.

Your enthusiasm is actually the main point im thinking about. I won't lie, I do not have your love of property management, im very neutral about it. I was mainly exploring the idea as a way to grow in "vertical integration" for my business.

Jon Westrom · Answer

Managing your own 15 doors is completely different than managing 150 doors for other investors. When you manage for others, you aren't just managing properties... you're managing people, expectations, and their retirement money. The margins are tight and the liability is high. Unless you are fully committed to building the systems and team required to do it right, stick to growing your own portfolio.

Marcus Auerbach · Answer

Your net profit after all expenses is maybe $30/door - if all goes well. And there is a lot that can go wrong.

PM's are quite literally stuck between a rock and a hard place - between the owner and the tenant and both are pulling and pushing on the PM for their interests. I have a feeling you are looking mostly at the virtual part of the business, but the grind happens in the real world: trash, damage, drama, evictions, repairs - and getting them approved is a fight with the owner, who always thinks you are talking advantage of them.

You send a qualified guy on W2 with benefits with a work truck to change a lightbulb and it takes half the morning to drive there, deal with the tenant, get it done and come back. Your fully loaded cost is $60/hr and now you have to explain to the owner why changing a light bulb costs $155.

I think the worst part is that nobody really likes you for what you do. "Okay" is the highest compliment you'll ever get.

David Peschio · Answer

Nothing is easy but the better question is what will make you happy.  I love creating and working on a business so I think it is absolutely worth it.  Always interesting and I would not trade it in for a normal office job.  Obviously, it comes with its challenges and when you grow employee issues but that is always going to be the case with whatever you choose if you move beyond a single operator.

Odoh Theophilus Tochukwu · Answer

You’ve already done the hardest part, you built a simple system that works.At 100–150 units, it’s not really about the 10% anymore. It’s about how you grow it without stress.If you run it like a normal PM company, profits can be small.But if you keep your current style (using tech, VAs, and good vendors, which is what I help investors set up), it can make good money.

Remington Lyman · Answer

No I do not think it is worth it

Is Becoming a Property Manager Worth It?

Most Popular Reply