Exit Strategy for Multi-Family Investor/Landlord

[Mark J.]

Hello All,

I'm a long time member of the site and learned a ton from the forums and podcast during my initial phase of investing in RE about 6 years ago.  I ended up acquiring 5 properties/10 units from 2019-beginning of 2021.  I stopped buying because the market became too expensive and competitive in my area at the time.  I also self manage from about 1.5 hours away and was working a full time job, so it became quite overwhelming especially during turnovers and renovation projects.

Anyhow 5 years later and I'm still self managing from about 1.5 hours away.  I've always considered getting a PM, but it's hard to give up that 8-10% ($1k/month) especially with everything that I hear/read regarding investors' experiences with PM, also there is a lack of options in my area. 

I'm at the point where I'm kind of over dealing with tenants/all of their problems and the constant distraction.  I have other projects and business' I'd like to pursue and the rentals are a constant distraction and time suck.  Not just the landlording part but all the bills, bookeeping and paperwork that come with it and the constant thinking of improvements and issues that need attention.  The cash flow is ok on average.  Factoring mortgage pay down, appreciation and tax benefits make them pretty solid investments. But it is a job and mental drain/distraction- there's always something.

With all of that said I'm trying to formulate an exit strategy. My thought is rather than just selling and being done with it I will try professional property management first. If that works out I'll hold for, maybe another 5 years and then look to exit the properties, ideally 1031 at least 1 to some kind of vacation/STR/retirement property. If putting under PM doesn't work out I'll probably begin to slowly sell them off. I'd love to 1031 into an apartment building, commercial or something that is a little less hands on, but I have not seen anything that would make sense in my area. I think I'd have to go long distance to figure that out and not sure I want to do that.

Anyhow hoping to hear from others who have been at this point in their journey and hear what worked for them.   Whether it's someone who sold and regretted or was elated or finally hired PMs and it went well or didn't or created better systems to self manage, etc.  Kind of just wanting to get some perspective, though I know everyone and their situation is different.

Also I'm will to share more of my journey and info, just let me know. 

[Drew Sygit]

@Mark J. You could also look for a partner/investor to buy you out over time.

Regarding PMC's, most of the horror stories are based on:

1) Selecting the cheapest PMC
2) Unrealistic expectations
3) Lack of engagement by owner with PMC

Below is our advice on screening PMCs:

Recommend exploring as many sources as possible to get referrals AND cross-reference them to get as much accurate information as possible.

Check out NARPM.com, BP’s Property Manager Finder (BiggerPockets: The Real Estate Investing Social Network), etc.

Also, encourage you to learn from the mistakes of others - by reading posts here on BiggerPockets about owners not having their expectations met by their current Property Management Company.

To avoid going through the same poor experience, keep reading.

Even if someone gives you a referral here, do NOT make the mistake of assuming that the PMC will meet your expectations, just because they met the expectations of the referral source.

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – so, they often select the first PMC they call or that calls them back!

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

A well written management contract should clearly spell out what is expected of both the PMC and the owner, to PROTECT both and avoid misunderstandings. Why do you think purchase contracts are so long and have such small print?

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

https://www.biggerpockets.com/member-blogs/3094/91878-how-to-screen-a-pmc-better-than-a-tenant-part-2-communication-and-docum

https://www.biggerpockets.com/member-blogs/3094/91879-how-to-screen-a-pmc-better-than-a-tenant-part-3-the-management-contr