When I Prefer Property Managers over Being a Landlord

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When a thunderstorm hits Atlanta, knocks off siding and parts of the roof of one of my rental properties, and I’m in Nicaragua.

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The Reality

If I didn’t have a property manager looking over this house and I managed it myself, how would this have played out? I would have had to take the call from the tenant about the damage, coordinated with the insurance company’s inspector to meet him out at the property to look over the damage, and then I would have to somehow verify later that the contractor fixing the damage did his job well. Let’s put a little more reality to all of this. I was in Nicaragua when this happened, so I wouldn’t have even been able to receive the tenant’s call in the first place because I don’t have phone service down there. I would have only seen Google’s transcription of her voicemail. Once I sifted through the transcription, which is usually hilariously off, I would have been in half a panic trying to get my voice over IP app on my phone to call her, which would most likely have cut out our call at least five times just while I was trying to tell her I would take care of everything.

While all this was going on, I would have been missing out on surfing time, exploring time, social time, who knows what. Or had I received the call while I was out zip-lining or volcano boarding (yes, totally did both of those out there last week), it would have taken me who knows how long to get back to a wireless signal before I could even try to respond.

Then, once I was back in the states this week I would have called the insurance company to file the claim, only to receive a call from one of their Atlanta inspectors saying he would like to make it out to the property on Friday to do the inspection. Uhhh, I’m in California. Do I hop a flight out to meet with him? I assume so. Yuck! That’s expensive. Plus, nevermind the beach rugby, surfing, rugby tournament, flying and date night I would have missed out on this weekend by having to go to Atlanta! None of this is sounding fun to me. Then the inspector tells my insurance company what they need to pony up for repairs, but then the repairs have to happen. I have to find repair guys now. Where do I find those?

No idea.

Once I do find someone, do I go out there to supervise the work? As much as I’d be pumped for more Waffle House and to see my friends and family out there, I’d yet again be missing out on fun stuff out here in CA to go supervise. Or maybe I trust the contractor and don’t have to go oversee. Do I just request pictures of the fixes? Ask the tenant how it all looks? She wouldn’t know a new roof from a door frame. Or worse, what if all this supervising of the repairs hits in the second half of July when I’ll be in Europe for three weeks? Am I supposed to cancel my trip, or tell the contractor to wait until August to fix holes in the roof? Uhhh, yuck?

The Better Reality

Or, how about the version of this story where I have a rockstar property manager taking care of this house? It’s a lot shorter story. I got a call (voicemail) in Nicaragua saying a storm had damaged the house, I emailed him and asked what I needed to do, went surfing still since that process only took about two minutes, got back to the states and called the insurance company, the inspector called that night and I gave him my property manager’s contact information, they coordinated amongst themselves about a day and time for the inspection, I got a call today from the inspector telling me what he was going to tell the insurance company to pay for, now I just wait for the company to call me with further instructions, my manager calls his contractors and heads up the repairs, and tells me when it’s all done. Maybe even sends pictures, if I even care. Done.

Well?

You’re either thinking now, holy cow I never want to manage my own properties ever again and will only use property managers… or… I never want to buy out of my local area! That’s fine if I just convinced you of the latter, but remember if you go that route you will never get a portfolio of the best returns possible, you will likely not be able to build as large of a portfolio, and you will most definitely have constant headaches to deal with. If that’s your thing and you like the headaches, go for it. But if you do want to think on a bigger scale and stay away from headaches, go the out-of-state route and always use property managers.

The most work I have to do on any property I own is respond to emails from the manager, which are far and few between, and maybe put out a call like I did with the insurance company. I never have to talk to tenants, I never have to see damage, I never have to supervise fixing damage, I don’t have to meet inspectors, I don’t have to meet contractors, and I don’t have to ever visit the property. Financially, I also save a lot of money. A plane ticket from CA to Atlanta, just to meet the inspector, would have cost me at least four months of property management fees. And that’s just the plane ticket. Nevermind travel expenses and lost time working. So to save money and have no headaches, and not miss out on any play time in Nicaragua, is there any question about the worth of a property manager?

I can’t come up any.

The picture is an actual shot from Nicaragua play time.

About Author

Ali Boone

Ali Boone(G+) left her corporate job as an Aeronautical Engineer to work full-time in Real Estate Investing. She began as an investor in 2011 and managed to buy 5 properties in her first 18 months using only creative financing methods. Her focus is on rental properties, specifically turnkey rental properties, and has also invested out of the country in Nicaragua.

40 Comments

  1. Nice toes Ali ! I couldn’t agree more if you really want to grow your business. Recently, I just turned over my last unit to my manager ( She is a great friend, manages over 1000 units, and is a district justice to boot) and I use to be a property manager & contractor who previously managed all mgt. & repairs on my own stuff. After my note co. took off it really came down to what’s your time worth. It never ceases to amaze me that investors never seem to factor in their time & energy when it comes to showing units, writing leases, and standing in line at Home Depot. Now, all I have to do is follow your lead & take some more time off.

    Best,
    Dave

    • I definitely don’t have a problem taking time off Dave! Lol. No worries there. I totally agree with you about people not realizing what their time is worth, and I love the note of even the time it takes to go to Home Depot. So true!

      I have to confess those aren’t my toes, they are my friend’s 🙂

  2. Douglas Dowell on

    Great post Ali! I love to learn best practices in property management.
    The point about need to move beyond your backyard is cash money in the bank.
    It seems the best use of our time is making deals and maintaining our private money partnerships not the day to day.

  3. Excellent article. The general public have no idea the lengths good property managers go to to micro manage their properties. Well done and thank you that you are on the same page as us in Aus.

  4. I feel property managers are worth it, for all the reasons mentioned and more. Just make sure to find a good one… not knowing if repairs have been done, leases have been signed, etc and having to chase down that information can be a big pain!

  5. Killer article Ali!

    The thing that I always come back to is if you look at the most successful and wealthiest of all RE investors, none of them do their own work at their properties. Could you imagine Donald Trump using a plunger to clear a toilet at the top of his newest tower? I don’t think so!!!

    Now I realize most people are not and never will be on the same level as Trump, however even the investors I have read about who own hundreds and sometimes thousands of units hire the work out to a management company. I just don’t see how anyone who is serious about growing a large portfolio could justify not using PMs.

    Question, do you only buy turnkey properties where a management company is already in place and do you do any rehabbing at your properties? I would think doing rehab work when you are 2,000 miles away would be quite a bit more difficult.

    I’m also interested, how does property management work in Nicaragua? Do the same basic principles apply there as do here? Have you documented somewhere your expansion into an international market because I would love to read all about it if you have written posts about it.

    Thanks for sharing this post!

    • Haha Nick. Perfect point with Trump. That’s my thing, I want a large portfolio and I want to be huge, so I assume start now with not landlording myself. That takes away time from me figuring out how to grow. I’d rather learn that than how to tear up flooring.

      I only buy turnkeys. i don’t want to do, or manage, any work myself. I’m totally hands-off.

      In Nicaragua it’s a little different for me because I focus on the beachfront and golf resorts. They have property management but it’s more in the style of being run like a hotel, because it may be nightly rentals, or weekly or maybe long-term. The cost is much more expensive, but the margins are much higher and a lot more work involved.

      I wrote a blog previously about my Nica doings-
      https://www.biggerpockets.com/renewsblog/2013/05/11/overseas-investing-for-real/

  6. Mike McKinzie on

    Ali, I had nearly the same thing happen to me except I was in Russia, and the problem was a failed HUD Section 8 Inspection. With the added “benefit” of the follow up inspection happening before I got back. An email to my adult son and an email to my property manager took care of everything. I had left a few signed checks with my adult son for this very scenario, and my rental passed the follow up inspection while I was in Stockholm, Sweden. Hopefully, this won’t happen again, this is my fourth PM in five years for this property (house is in Fresno, CA), as I demand that my PMs keep my properties up. They have only been managing this house for three months. And they did a great job getting the repairs done so things are looking up for the management of this house.

    Why anyone would want to manage their own properties is beyond me. I have never even seen the house mentioned above. My time is better spent finding new opportunities than unclogging toilets and collecting rent.

  7. karen rittenhouse

    Because I own a property management company, this post is music to my ears.

    🙂

    Because I own a ton of properties and hate management, I own a property management company.

    I had 56 properties that I managed myself when I began relating to and empathizing with those people on the news who had gone postal. That’s when I realized it was time to get away from property management. I interviewed a number of companies and wouldn’t trust any of them with either my properties or my tenants, so I opened my own. I now have 3 people running it so I don’t have to!!!

    I hate property management. Some people love it. Find out who they are and hire them !!!!

    Ali, your post taught me one very important message: I need to do more traveling.

    You rock!

    • Mike McKinzie on

      You are right Karen. Eva and I just got back on Wednesday (6/26/13) from our Baltic Sea Cruise and NOTHING recharges your batteries like a great vacation. And while we are still recovering from our ‘jet lag’ a bit (St. Petersburg, Russia is 11 hours ahead), we made some wonderful memories and got some much needed rest.

      Ali, I did some missionary work in Nicaragua back in the 1970s and the missionary’s house we stayed in had bullet holes in it. I sure hope things are better today!! The country was absolutely beautiful but the government was horrendous.

      • Oh yeah, Mike, Nicaragua is a completely different country now. Extremely safe and the government is doing well. I believe it’s officially safer than Canada, statistically, now? Cool you did work there! Had to be crazy back then.

        Nice Jeep. I have a 1990 Wrangler Islander with no top 🙂 Her name is Jiggly.

  8. We had a similar experience a few years back. We were enjoying our first anniversary while in Baltimore. The PM called, the electrical system shorted out and destroyed all the appliances in one of my Denver rentals. New electrical and all new appliances. Imagine the time, if I would have had to coordinate that. The PM took care of it. He wasn’t even a very good pm.

    I have had my share of bad PM’s. They have certainly cost me a few shiny nickles, but I still wouldn’t manage my rentals myself. Despite what they have cost me, they have saved me much more in lost time and headaches.

    We all share the same 24 hours each day. Time is a perishable commodity that disappears with each ticking second. Wasting one day on this earth dealing with tenant issues is far to high a price to pay. I’ll leverage another person’s time with money that can be much more easily replaced.

    Ali, your perspective is spot on. Why do we invest if not for freedom to enjoy our days?

    Jason

  9. Stephen Anthony on

    A fellow rugger? Awesome!

    Great points. I’m just starting off, so the economies of scale don’t quite work out yet for a PM, but that’s the plan.

  10. Yet another of your posts I totally agree with Ali! When my tenants gave notice because they were buying the house across the street (they really loved the neighborhood!) my PM called me to let me know and on the same call he informed me he would be showing the house the next day. Two days later he called me again to let me know it was rented. I never even went near the house and it is only a five minute drive from where I live. I have an honest PM, he has billed me for two minor repairs in the last year and the rental checks show up in my bank account every month like clockwork. Love, love, love my PM!

    • Michelle:
      How fabulous that you have such a great property manager.

      Be sure to write them a glowing letter and either mail or email it to them so they can use it for their marketing (I hope they use testimonials!).

      We have a spot on our website for them and, on one site, we even use video testimonials. Nothing sells your business like a satisfied customer!

      • I do feel really lucky that my realtor referred me to them, Karen. That’s a great idea about writing them a glowing letter, that would definitely be easy for me to do! They don’t have a place on their website for testimonials but maybe I’ll make that suggestion. 😉

      • It is Cheyenne, WY. We’ve got basically two major property management companies here and one doesn’t have a great reputation from what I’ve heard around town. Thankfully I am with the one who does!!

  11. Ali, Many comments from those who say “I would never”, or “Why would anyone ever”… Well, I have to give you another perspective. I have used a couple of PM’s in the past, and I now manage my own, so I have seen both sides. My property was never properly managed by a PM… now, you can blame me for poor screening and that may be legitimate, but honestly, I do believe that there are few really good ones out there. When you find a good one, keep it! Another option is to use a PM initially, then when you have a good long term tenant in place, transition to self management. By then you should know the contractors that you will have to call on, even if it is an out of town property. I “know” tradesmen I have never met in person and phone call gets the job done. Lastly, by managing yourself, you learn every aspect of the business. If you later decide to go the PM route (like in retirement), you should be well informed on a wide range of issues, costs, resolutions, and acceptable timeframes.

    Thanks for the post… I would love to be on the beach, but the mountains are a nice option as well.

    Steve

    • The mountains are great Steve, for sure! Good perspective on managing your own property. Again, it’s all about your goals. I have no desire to learn anything about the PM side of things, I just want to own cash-flowers. But a lot of people would rather be more hands-on. All just depends on your goals.

  12. Great post Ali! You and Karen totally validate the work I do currently, and at the same time remind me that someday as an investor, that I need to stop micro managing and let someone else handle the day to day! That will be the hardest for me to do because I am so type-A! Maybe I should start a PM company like Karen too!

    Adding another question to this topic- what do most feel is the average mgmt fee for smaller multifamily units?

    Thanks all!

    • Hi Jen:
      No one is more type A than I am. What you come to realize is that managing is not the highest and best use of your income potential. Managing tenants makes you pretty much zero income. I now own a full service real estate company, a property management company, a coaching/training business, we purchase about 80 properties per year, wholesale about 50 of them, and renovate and flip about 2 properties per month. No way I could accomplish all that on my own. And, believe me, there is a lot more money to be made in real estate than the little bit you pay for a property manager to take that burden off your plate.

      Fees? We charge 50% of the first month’s rent to find a tenant and fill a property. After that, 10% of the monthly rent or $50 per month, whichever is greater. That’s standard in our area.

      Here’s wishing you tremendous success!

    • Well Jen if you are interested in starting a PM company, a lot of people would be grateful I’m sure! There is a serious lack of good PM companies out there. Everyone would love to have more, I’m sure.

      10% is the most standard PM fee I know of. Some go lower, some a little higher. But 10% average.

  13. Thanks Karen! I am so motivated to get started as an investor and in the mean time I want to hit every angle of real estate for experience. Your personal story is very inspiring to me! Sometimes I feel like I have so much I want to learn, that I am actually just constantly growing my lists rather than jumping in. Sometimes I try planning so much that I find myself planning to plan. I just need to start dialing up more ACTION- so that I am not a life long property manager, I want to do more! Thank you again for sharing! 🙂

    • Sounds like you might should have tried scrumhalfing Jen instead of propping. The scrumhalf is all planning and watching! Go be the prop of real estate investing. Stand strong, go hard, and chase the you know what out of the ball. Oh, and then tackle it when you get to it. Sounds like that is the only part you are missing from investing, the tackle.

      Ok, reeeeeeally lame rugby analogy. But come on, it works, right? 🙂

  14. Rick Golphin on

    Great Article! I live in California and own a SFR property in Canton GA. I would love to have a Rock Star property manager! I feel as if my Property Management company is just as removed from the property as I am.

    They act on problems with tenants, maintenance, and the HOA, only after the fact. One big point of contention is their refusal to utilize my Home Warranty company. They keep using the “emergency” repair clause in our agreement. After five years, I plan on changing with the next lease renewal.

    • Hi Rick. I love Canton! Great area. Lots of potential there. As far as your manager, why wait until the next lease term? If I learned nothing else about PMs, it was to get rid of a bad one immediately!

  15. Right now I am playing the role of landlord and property manager. It is a stressful job because I own two different rental properties. I am constantly getting calls about repairs that need to be done and it gets rather overwhelming. I am done being the one to handle it all and I can’t wait till I finally find a great property manager.

    Mia

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