6 Advantages to Hiring a Property Manager (& Why I Wish I Did Sooner)

by | BiggerPockets.com

The hardest job to hire for is something you used to do.

For me, as a real estate investor, there were two jobs that were hardest to give up.

One job that was hard to hire out was painting, as I had been a painter myself for 13 years before becoming a contractor for another 10 years. Of course, there’s nothing wrong with working in a trade, but after hurting my back and then entering the world of real estate and note investing, it no longer made sense for me.

The second job I was slow to hire out was property management. In the end, however, I didn’t have much of a choice. I had been a property manager at a ReMax, and we merged with another real estate office that already had a rental department. As a result, they no longer allowed their regular agents to do property management.

After these rules changed in my real estate office, not only did I have to find a property management company for my clients, who were typically investors with multiple properties, but I also had to find a property manager for my own rentals since at this point, I no longer had enough time to do it myself, especially after entering the note business.

Luckily, I knew a couple who had gone into the property management space several years before, and they were managing a lot of units at this point. Plus, I knew the wife from when I first started in the business, and she had a very good reputation. On top of being a real estate broker, she was also a District Justice, which is someone who oversees landlord/tenant complaints at the local court level.

Besides the long track record and the fact she was politically connected, there were many other benefits I quickly enjoyed upon hiring them.

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6 Advantages of Hiring a Property Manager

1. They were affordable.

In fact, they’re much more affordable than I originally thought. When I factored in all the things they did and the time they saved me, it is well worth outsourcing.

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Related: How to Spot a Great (Not Just Good) Property Manager

2. They offered great on-call service.

They had a 24-hour emergency service that covered things like heating, plumbing, or electrical issues. Today, I travel a lot, and this service is invaluable to me. I can still use my contractors if I want to, but sometimes it’s easier just to let them handle most of the little repairs.

  • They maintain great records.

The beauty of using their service is that they track everything from the rents to the repairs, and they even write the checks to cover expenses like utilities and contractors. It’s great to get a nice year-end package that I can just hand over to my accountant.

3. They represent me in court.

Today, I’m a really busy guy. I can focus my time on running my business, or doing the things I’m best at, and they can fill in for me on those unfortunate cases that require a court appearance.

4. They’re compliant.

I especially appreciate their emphasis on compliance when it comes to drawing up leases and screening tenants. I love that they screen for things like credit history, criminal background, evictions, and even Meghan’s Law (history of sex offenses). They also have to stay up-to-date on licensing requirements, local ordinances, and state laws and regulations.

wholesaling-sellers

5. They handle my showings.

Not only do they show properties to prospective tenants until they’re rented, but they also meet various HUD and Township inspectors for yearly rental licenses. This is another area where the property manager saves me a lot of time and aggravation.

Tip: If you own multiple properties, see if you can leverage your total book of business to negotiate a better set of terms with the property manager.

Of course, you should consider any disadvantages too before outsourcing property management.

Disadvantages of Hiring a Property Manager

When it comes to disadvantages of hiring a property manager, I can really only think of two: cost and control.

  • For many real estate investors, the biggest deterrent from hiring a property manager is probably the cost, which definitely cuts into your monthly cash flow. So if you have the time and the skills, and it’s more lucrative for you than other tasks, it may make sense to manage your own units.
  • Another disadvantage could be that once you hire a property manager you’re not in control of everything anymore. Maybe you’re not as dialed-in when it comes to the maintenance and condition of your properties or the choosing of your tenants, especially as you start to rely more and more on the management company. Whether you can accept that is a personal as well as a business decision.

Related: 10 Tasks a Property Manager Will Take Off Your Plate (to Free Up Precious Time!)

Starting Over, What Would I Do?

Considering both the advantages I experienced and the potential disadvantages of hiring a property manager, would I make the decision to hire a property manager again?

My answer is a resounding yes.

If you don’t outsource the job, in a sense, you’re just hiring yourself. Looking back, I think it was a valuable experience doing it myself at first, as it actually taught how to manage a property manager, as well as what to look for when hiring one.

Knowing how much time and effort is required to effectively manage my units today, the only thing I would have done differently is turn my units over to a management company sooner.

My biggest reasons for outsourcing property management are that it allows focus on what I do best (raising private equity and running a company) and that it gives me peace of mind. The focus thing is a really big deal, especially since I love what I do, I’m good at it, and it’s lucrative. So, if you make your money finding deals, flipping deals, or fixing deals, then go do that. Unless property management is your core business, focus on the stuff you do best, and stop trying to save money in the wrong (time-consuming) areas.

Peace of mind has also been more and more important to me and my family as we approach retirement. When I was young (and not so smart), I tried to do everything. But guess what—you can’t take it all with you, right? Heaven forbid something were to happen to me unexpectedly, I don’t want my family having to deal with the property management and maintenance issues. Having this all set up in advance with good people, systems, and processes helps me sleep better knowing I did the best I could for them.

So, personally, my only regret is that I didn’t hire a property manager sooner. But I realize this isn’t the case for everyone.

Do you still manage your own units and do your own maintenance, or do you outsource one or both? What are your reasons?

Leave your thoughts below!

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. - an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for over 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.

23 Comments

  1. JL Hut

    Finding a quality manager is not easy, but you did. If I had what you have, I would turn them over to the manager and go on a world tour. My experience is that most I have hired are short term thinkers. After rehabbing and investing hundreds of hours and $50k in material I want a long term thinker, hard to find. Another thing I have a hard time with is renewing a yearly lease and charging one months rent to do it. But, not giving up control is why I dont go on world tours very often. So, clone your P.M. and send me a copy. I will pay shipping.
    Thanks for the post.

    JL

    • Dave Van Horn

      You’re right JL, it’s definitely not easy! And it is certainly localized to your market but they are out there. I would suggest putting the feelers out on BP in the forums.

      Also, my managers only charge a fee when they find a tenant (otherwise they’re charging a percentage of the monthly rent) – and keep in mind if your lease has an automatic renewal there is no fee for the manager to collect.

      Best,
      Dave

  2. Douglas Skipworth

    Dave, I completely agree with this post.

    Every investor is already paying for property management. They either pay with money or with their time. Like you, I have found that most people would be better paying money and using their time to focus on business building activities. That is the exact reason we stopped self managing and started a professional property management company years ago. It was one of the very best decisions we ever made both for our business and for our properties and residents.

  3. Rick Grubbs

    When I meet people now I don’t tell them I’m a landlord. I tell them i am a real estate investor. My property manager is the landlord. I have to remember that in my daily schedule and not gravitate back toward landlording.

    • Dave Van Horn

      Carol,

      What you describe can unfortunately be a common issue, which is why I think rapport with property managers is key. I’m constantly rewarding my manager and doing whatever I can to set myself apart from other landlords. I do this because I figure if I want my service to stand out I have to stand out as a client as well.

      Best of luck,
      Dave

  4. Robert Steele

    Unless you are buying all cash then that PM represents a rather large percentage of your return. I don’t buy the argument that it saves so much time. How much time do you actually spend managing your rentals each year? Per rental, I could probably count the number of hours on one hand. With 10% of gross, plus a full month rent to re-let, plus this fee and that fee, that adds up to a pretty high dollar amount per hour. If you are a multi-million dollar commercial real estate developer then it probably makes sense to hire it out. Otherwise….

    • Dave Van Horn

      Robert,

      I think it depends on a couple factors. Time being the big one, but I supposed the types of Real Estate you manage could effect this as well. In terms of my portfolio, the majority of my personal properties are older buildings and are located in a temperate climate – i.e. they often require maintenance, repairs, and general seasonal upkeep. My market also lends itself to a lot of turnover as well. All things that are time consuming.

      But I do feel no matter the portfolio or time commitment required (unless it truly is extremely minimal) it really goes back to how valuable your time is. When I all did was own property, it was easy! Especially since the properties I dealt with would tend to be all of the same style, in the same areas, etc. Now that I have added scale into the equation and have formed a business, I’m not so sure my time is best spent trying to manage hard real estate. And I never would have gotten to where I am today if I continually tried to manage everything myself but to each his own.

      One other plus I forgot to mention was, if something were to happen to me, my property management team is already set up so for my family it’s one less thing for them to deal with.

      Best,
      Dave

  5. Mark Pace

    I meet with other landlords on a regular basis. The one common thing I notice is the ones that HATE their properties and the owners that try to do everything. These are the guys that run around with a toilet plunger in their trunk. I’m good at finding deals and I let the property managers manage.

  6. JL Hut

    In some years if your use leverage in an A market your P.M. can make the same $$ in a year as you do after you pay repairs and fees and taxes. I am talking single family and duplexes. If you want to move down the scale to C properties where cash flow and is high, you buy cheap and you carry a gun with you to collect the rent each week you can make a lot more, but that is not my game any more.

    I go AAA and there is not much to manage and keep the $4000. per unit I would have paid the P.M. in my pocket. But I cant manage a 100 doors my self ether, so you have to balance what you want, make a few $$ on a lot of doors or make Big $$ on fewer doors.

    YOU have to choose.

    Another big factor is if you have another full time job that takes you attention away from your rentals. If that is true, you may need a P.M

  7. Nck Capece

    I bought my first investment properties back in October 2016, two of them actually. It was package deal (1-4 unit and 1-3 unit that are neighboring properties) and I thought hiring a PM was bogus after hearing their fee structure. However, my wife and I had our first child at the end of November and I recently took a promotion into senior management at my full time job. I’m also now looking to add a vacant 4-unit property to my portfolio and am finding there just aren’t enough hours in the day to properly take care of all of my competing priorities.

    This article has helped me come to realize that sometimes you just need to bite the bullet and hire a PM. If I want to continue building my investment portfolio I can’t do it by myself. I’m hoping my experience with a PM will be as rosy as Dave’s. Thanks for the article!

    • Dave Van Horn

      Thanks Nick! And a PM is a great key member of your team as you go forward as well. My advice is to do what you’re best at and stick to it. Even though I was good at PM, I was much better at Raising Money and doing other things. So best of luck and keep doing what you’re doing! I wish you much success.

      Best,
      Dave

  8. Bob Norris

    Dave, I really enjoyed the pros and cons of hiring a property manager. I think some of us tend to focus on the out-of-pocket costs of property management rather than the opportunity costs of what else we could be doing with our time.
    Nice piece, thanks!

      • BE VERY CAREFUL OF PROPERTY MANAGEMENT IN ANDERSON, INDIANA. My original post has not been published. DO your due diligence on Property Managers in this area and all areas. My first one has stolen many thousands of dollars, will not give me paperwork, will not give me a balance figure of what she owes me, employed her ex boyfriend as a contractor to do illegal rehaqbs and work not to code. She gouged invoices, she put a 1 in front of a $56 repair and therefore charged me $156 for replacing a window 2 x 3 ft. She allowed several dogs per house, no extra pet deposit. She did not always not security deposits, she allowed tenants to paint without my permission and let them off first months rent, said she had houses insured and charged me $3K, and only 1 house out of 8 was insured. Absolute crook. The 2nd Property Manager I thought would be a great improvement, she was not a crook, but never collected money unless a tenant paid voluntarily. I did get a reference on this PM, and it was fine but the client only had 1 house. If you are going to take on a new PM, ask them for several referees and check them out carefully. Be very, very careful of investing any money in houses in ANDERSON, Indiana – Town is full of crooks as well as many professionals who turn a blind eye, not to say all of them, sadly I have found the good ones too late, after being screwed out of $300K plus and left with nothing but liabilities in houses, that arent worth what I paid for them, and need $20K to bring them up to scratch, let alone saleable.

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