New Investors: Should we get management?

[Bobby Romadka]

I am brand new to BP and my apologies if this has been discussed before:

As a brand new investor, our goal is to buy our first Multi Family property by the end of 2021. We will be using a va loan. We both have full time jobs. When the time comes to purchase, va loan rules say we must live in one unit while renting the others (house hack).

My question is because we are new should we hire a management company to help us with Maintenance and tenants or should we do it ourselves? We know nothing about maintenance and are afraid tenants will need help when we are unavailable. Also, I understand it costs more money to hire a management company, but is it worth spending the extra money for piece of mind or should we bite the bullet and do it ourselves? Thank you

[Julie Hartman]

I know I am biased but I would say it would be worth it to hire a PM, at least to start out. Do you know all the tenant/landlord laws of your state?  If not, you could be asking for trouble when a wise tenant figures out you don't. Who will handle maintenance if you go on a trip? If you don't already have a trusted network of service providers in your area, start gathering that information now. Do you have a tenant screening policy/process in place? If not, write one down and be consistent with it for all applicants. Have you taken any fair housing classes? If not, start taking them and stay up to date. Are you willing to answer the phone all hours of the day/night? Can you be firm with a tenant when they are living in the same building and you see them everyday? This is probably more information than you wanted but it may help you in the long run to fly solo. Hopefully that helps. :) 

[Brittney Peabody]

Welcome to the community @Bobby Romadka! What are your goals and the next step of your plan? 

For me personally I was my own property manager when I bought my first BRRRR. I did this to save as much money as I could for my second. I Youtubed everything, asked friends and made a lot of maintenance mistakes along the way. However, learning these skills not only saved me money, the skills I gained helped me to do a flip and do a lot of work on the flip myself. When the next BRRRR came along, I kept property managing because I like to keep an eye on everything and it gives me a great sense of purpose and pride that I am helping so many people. I am now at a point where I can fix anything that comes my way, and if something comes across that I can't, I know who to ask and where to go to find how to fix it. That is valuable knowledge that I would not have gained otherwise! I work during the day, and haven't gotten requests so urgent that I had to leave my day job during the day to fix anything, Ive never gotten a call in the middle of the night either. It has been very manageable, which I am very grateful for. I am in the middle of refinancing one of them, and when I stopped by with the appraiser this week I brought donuts for the two units. Not because it makes financial sense to spend money on donuts, but because it makes me happy to give back and be so hands on involved in my property. It is fun to see the fruits of my labor up close, it inspires me to keep building and growing my portfolio. I have incredible renters though so I enjoy property management. It definitely has its downsides, but from my experience, the pros have outweighed the cons tenfold.

Since prices in my particular area have increased in Utah, I am now going out of state to invest. Since I had to shift my strategy, I will be screening property managers to manage all out of state properties and not handling them myself. This is okay because when markets change, its important to make sure your strategy can adapt to be successful. You can scale a lot faster by freeing up time by hiring a property manager. For some it causes a peace of mind not having to figure the problem for themselves. There are pros and cons either way. 

So it really depends on what your next steps are and what it is going to take to get you to those next goals. Real Estate is really fluid and you can go either way depending on what you want out of Real Estate. 

[Bobby Romadka]

Thank you both for responding. You both make great points and these are the conversations I want to have now instead of later or too late. Also, this is a dumb question but it won't let me respond to both of your comments. How do I change that?

[Julie Hartman]

Originally posted by @Bobby Romadka:

Thank you both for responding. You both make great points and these are the conversations I want to have now instead of later or too late. Also, this is a dumb question but it won't let me respond to both of your comments. How do I change that?

I am still learning things about the BP site myself so I don't know how to respond to two comments at once other than to do it as you already did. Maybe a long term site user will weigh in on it. 

[Craig Anderson]

In my opinion, on your first property (especially a house hack), you should be the PM.  However, that doesn't mean that you do the repairs and maintenance. It just means that you take care of problems/issues by finding the right person for the job.  This helps you gain experience and knowledge in this realm. 

Also, this helps you to network and make contacts with potential team members as you grow. You will be to find a handyman, contractor, talk with other PMs, etc.  My brother gave me some good advice the other day. He told me to find a great handyman that you pay X-amount per month, he fields all the calls from your tenants, give him authority to fix anything up to $250 (or whatever you feel comfortable), anything over that he needs permission, and pay him X-amount an hour per job. This gives you peace of mind along with creating a great partnership for the present and future. This also saves you some money instead of paying 10% to a management company, you pay way less, and you are building relationships. 

[Shannon Robnett]

@Bobby Romadka I love what @Julie Hartman had to say just about the laws and landlord tenants' responsibilities.  As a 27 year veteran of the RE game, I would highly encourage you to outsource what you do not know until you have enough first-hand knowledge on your own to do the task cost-effectively.  I can't sit here in a position of piety and discourage you from going the route that @Brittney Peabody did because that is the way I have done things in the past, but again 27 years of experience has led me to "stay in my swim lane". 

Look at it this way from a different perspective.

You and your wife currently work.  When you are doing this work you are getting paid and you are a bit of an expert which will garner you a good return on investment instead of getting off from your job and rushing home to put on your property manager coat and handle those issues along with the frustration and inefficiency of being new at the whole PM game.  If you hired someone to be your PM and backfilled that cost by working additional hours at the gig you already have as an expert you get the best of both worlds as far as trading time for money.  Because regardless of how you look at it you are doing just that its just a question of are YOU getting the best deal?

On the job learning is awesome when someone else pays the tab, just remember YOU as that landlord pay that tab!!!

[Shawn Bhatti]

It depends on how busy and demanding your lifestyle is, but I would say save the money and self-manage. I am house-hacking a townhouse on a VA loan currently and self managing has been pretty easy. It is also a good way to learn how to deal with certain problems that could arise. Like others have said, self managing is a great way to learn all the ins and outs of being a PM, and it really is a waste to hire a PM if you are house-hacking in my opinion. Best of luck!

[Amy Verges]

@Julie Hartman gave some awesome advice and questions to ask yourself. I own a property management company as well, but will still sometimes tell property owners that it may be a better fit for them to manage their own property vs using a PM. However, it only makes sense in very specific circumstances: when the owner has a flexible schedule (flexibility/ability to go to the property, answer phone calls, and more, all at the drop of the hat), plus has the right personality, experience, AND desire to deal with landlord tasks (scheduling & conducting showings, knowledge to avoid Fair Housing issues, telling a tenant "no" when necessary, going through the eviction process, etc). 

That being said, as an investor, I totally see the value in self-managing to "learn by doing." It just comes along with the risk/possibility of making some expensive mistakes. Good luck with your first investment!

[Michael Manchester]

Really depends on the scope of the property and the current condition. Of course there are always things that are going to pop up, but consider going it on your own at first, you can always enlist a PM at a later time. Finding a good handyman can handle a lot of the small things that happen, especially if the property is already in good shape.

[Nick Barlow]

@Bobby Romadka this question has been debated tirelessly on these forums: there is more consensus on whether the chicken came before the egg.

All kidding aside, I have heard, and recommend, to outsource management while you scale, then consider “vertically integrating” (making your own pm company) once you’re done growing.

There are countless mistakes a professional, properly vetted management company won’t make that a newbie might.

I think @Nathan G said it best recently: “managing rentals is easy.....until it isn’t”.

Full disclosure, I self managed a duplex for about 15 months, then we acquired a 4 plex and outsourced to a PM company and never looked back. Good luck!

[Benjamin Hedden]

@Bobby Romadka do it yourself if it’s under 10 units, if you can’t handle that put your money into an index fund

[Stephen DeThample]

You can try self management at the start and if you don't enjoy the process, then it's worth the extra $ for the PM.  If you self manage, find a good handyman to call day or night.

Best of Luck!

[Bobby Romadka]

Thank you to all who have responded so far. I really appreciate the different advice. So far the common consensus I am getting is to Do it myself but hire a handyman just in case @shannonrobnett @shawnbhatti @amyverges @juliehartman