If you work full-time like I do and you chose to be an active real estate investor, you will likely face tough decisions every week. One area in which I see new investors struggle, and where experienced investors have strong opinions is the use of property management.
As one of the experienced investors, I know for sure that if I managed my properties myself I could do a better job, save some money, collect more rent, and produce a better return on my capital. However, I work full time, invest in a market 3 hours away, and travel for a living, so while I might produce a better return on my capital, I would produce a horrible return on my time! If I didn’t have a full-time job, I would absolutely manage my own properties.
I would literally be working 24/7 if I tried to do property management across our portfolio from 3 hours away and between flights and client meetings. Additionally, I would lose out on the opportunity to cherry pick the best deals to add to my portfolio by focusing on creating relationships, writing offers, and even taking a break once and a while, because my time would be spent on management.
Let me be very clear. I use property managers because I have to, not because I want to. That said, I focus on managing expectations, tracking key metrics, asking hard questions, and performing non-scheduled visits to see what is going on.
If you work full-time, invest in a market that is more than an hour from home, and have family commitments, I wouldn’t even try to manage your properties by yourself. Even if you were successful, you would be saving a few hundred to a couple of thousand dollars a year; however, you would be wasting time that could be better spent finding the next deal that earns you tens of thousands of dollars in equity, or maybe spending valuable time with the family.
Before you say anything, I know most property managers suck, and it can be hard to find, train, and work with these kinds of firms. I also know firing people and switching companies is not easy, but that is a cost of doing business when you manage a portfolio of properties several hours from home.
Over the past ten years, I have fired more property management companies than I care to admit, but all of them have enabled me to focus on adding tremendous deals to my portfolio because I have time to focus on the next deal, not the last move-in, eviction, or section 8 inspection.
If you’re like me, I suggest you stop fighting the “should I or shouldn’t I?” question and just go hire a property manager. Be diligent and make a sound pick with the data you have, and then manage your manager — especially in the first 90 days — as that is when the learning begins. I believe you will know in the first 90 days if you made a good choice.
Photo: John Snape