Self-Managing vs. Professional Management from Day 1

[Masroor Ahmed]

I think the general consensus is that if you’re looking to scale up and build a large buy/hold portfolio, to hire out professional property managers from day 1. I get it, no one wants to get caught up fixing toilets and dealing with midnight calls regarding the heater going out, etc. I’ve hired out property management for my 7-units and as of now, I “manage the managers” and during the period where I only wanted to spend a few hours a month on my existing portfolio, this worked fine.

More recently, I've decided to dedicate much more time to expand my real estate investment business and as I’m spending more time on “managing the managers” I find myself wanting to hustle more, do more faster, be more creative, etc., but they can’t move as fast as I want to and feel like my hands are tied.

Couple that with the idea that once I get to some scale (say > 40 units) I figured I'd have to revisit the math and it could make sense to self-manage with the right systems in place. E.g., not in the DIY sense, but rather that I run the property management system for my portfolio and ultimately I may be able to run it more efficiently than a 3rd party manager. So then, why not try to act like a professional property manager for my own units from the get go?

Put another way, it was a no brainer for me to hire out 3rd party management and now I’m reconsidering. Just curious if others have grappled with this.

Masroor

[Amber Gonion]

A couple of things. I hear all the time that investors can run the property themselves cheaper and more efficiently. This is not always the case, especially if you are a new investor, I find it insulting actually because it insinuates that a PM has no talent, management skills, training, or experience. Investors usually have made money to invest elsewhere, do you think I could do your job without experience or training as effectively as you? If a pm is not saving you money then you hired the wrong company.
The other point I wanted to make is that it is not a good plan to wait until you have enough properties to hire a full time PM. You need to hire a property management company not a PM. By hiring a PM only you are basically starting your own property management company with no experience.
Do yourself a favor be good at investing. Let property management companies do what they do best. If your properties don't make enough with a property management company then you are not really an investor, you are a property manager with a checkbook.

Property management companies will take your properties before you reach the threshold of a full time manager. Hire a company and pay attention you will learn things if they are good and later you can manage yourself if you want. If you are going to diy I suggest you purchase a duplex you will live in to learn the ropes, you have more leeway with fair housing laws and your mistakes will be less costly.