Should you let a tenant manage apartments they live in?

[Larry Watson]

I am considering purchasing an apartment with 28 units. When I ask for the expenses under managemnet fees was $0. When I inquired they said they let a tenant manage everything including changing the filters, looking after the property in exchange for the rent. It also has a coin op laundry that he takes care of too. I am kinda leary because if he leaves I am stuck managing it when I can pay a professional management company and not have to worry. Anyone care to share their thoughts or experinces?

[Anthony Chara]

As long as it's not me (you) and the person has a good reputation (ask the rest of the residents), I'm okay with it. However, you still need to add the PM fee into your expense numbers just in case you ever do want to hire a true PM to oversee the complex. Otherwise, you could be over-paying for the property.

You also need to make sure you have a contract in place with the resident manager. I'm assuming that there is no management fee, but they probably also don't pay rent as this is their compensation? If that's the case, I prefer to have them pay rent with a lease in place and pay them for their services. It may be a wash, but the reality is, if you ever do want to get rid of them, its much cleaner this way because they are already paying rent.