Property Managers The most expensive lesson I learned as a remote landlord

[Denise Gochenouer]

The most expensive lesson I learned as a remote landlord: you cannot be 100% hands off. Not even with someone you trust.

When we moved to Minnesota, we handed our properties to a manager and did the thing a lot of people dream about. We stopped looking. The units were occupied, money hit the account, and we told ourselves that hiring a professional meant we no longer had to pay attention.

She was embezzling. Siphoning funds while we sat hundreds of miles away, congratulating ourselves on being truly passive.

Hiring a property manager does not remove your responsibility. It changes it. Your job shifts from daily operations to oversight: reading the statements line by line, reconciling them against what you actually own, and asking questions when a number looks off. Especially when you like and trust the person.

Passive income is not the same as zero attention. Check your books. Then check them again next month.

For the remote landlords here, what is your system for catching something like this before it costs you?

[Adam Tafel]

Every property manager needs to be managed. PMs are the most frustrating thing about the business, because even the best PM won’t be as effective as a skilled owner-operator. In a tight market where cashflow can be tough to come by, it’s the PM factor which puts most deals out of reach for investors in the 1-12 unit space in our market.

It’s not so much the fees and lease up commissions, it’s the unknowns regarding maintenance and repair pricing. I used to have a PM contract on a 30 unit building in Saint Paul, we actually made most of our profits off the air filter contract at 12k/year. A previous vendor had bid it at 12k, we saw this when we took over and thought “hmmm we can take care of that..”. I had another PM tell me recently that his biggest profit margin activity is swapping fire detector batteries. These are the things a self-manager doesn’t think of when underwriting to add PM.

Everyone should self manage for as long as possible IMO, and by “everyone” I mean the 99% of us who own under 5 properties. Get to know the buildings and their quirks, the best lease schedules, the difficult neighbors, the best tenant sources, the boiler system, etc. If you don’t, you’ll be paying $100/hr or more for vendors to figure everything out, as it can take a year or 2 to stabilize a new deal.