There is NO REASON to Manage your own properties if you have 4+ Units in San Antonio

[Brian Hughes]

I've been in the Property Management industry for around 10 years and it always baffles me when landlords choose to manage their own units. I'm curious to hear reasons why you WOULD want to manage your own units.  Below are my top 5 reasons to hire a Property Manager:

1. Reduced liability - do you want to be sued for a simple mistake, I don't

2. Accurate Rental Rates - Unless you are very closely watching changes in the rental market, it is going to be difficult for you to determine accurate rental rates.  If you are out of state - forget about it - rates change quickly and there are many reasons why one home would be worth 10% more or less. 

3. Free time - Who wants to get a call from a tenant while on vacation or during the holidays?  I'd pay at least $100 a month to just know that I'm not going to receive a call about a toilet, faucet, or anything like that.

4. Accounting and Reporting - Sure you can hire an accountant or invest in/learn specific software that will help, but for my money, I'd rather rely on a professional who gathers this info and provides the docs I can hand over to my CPA instead of spending hundreds/thousands of dollars having a CPA figure it out or stumbling through it on my own.

5. Increased ROI - this is the biggest one - ultimately getting more rent, avoiding mistakes/lawsuits, and the cost of what I value my time at - there is NO REASON I would ever manage my own properties.

What do you think?

[Randall Alan]

Quote from @Brian Hughes:

I've been in the Property Management industry for around 10 years and it always baffles me when landlords choose to manage their own units. I'm curious to hear reasons why you WOULD want to manage your own units.  Below are my top 5 reasons to hire a Property Manager:

1. Reduced liability - do you want to be sued for a simple mistake, I don't

2. Accurate Rental Rates - Unless you are very closely watching changes in the rental market, it is going to be difficult for you to determine accurate rental rates.  If you are out of state - forget about it - rates change quickly and there are many reasons why one home would be worth 10% more or less. 

3. Free time - Who wants to get a call from a tenant while on vacation or during the holidays?  I'd pay at least $100 a month to just know that I'm not going to receive a call about a toilet, faucet, or anything like that.

4. Accounting and Reporting - Sure you can hire an accountant or invest in/learn specific software that will help, but for my money, I'd rather rely on a professional who gathers this info and provides the docs I can hand over to my CPA instead of spending hundreds/thousands of dollars having a CPA figure it out or stumbling through it on my own.

5. Increased ROI - this is the biggest one - ultimately getting more rent, avoiding mistakes/lawsuits, and the cost of what I value my time at - there is NO REASON I would ever manage my own properties.

What do you think?

@Brian Hughes

Well... because you asked....

It's a time versus money proposition in my opinion.  Let's take your example of not paying $100 a month to not get a a phone call.  Almost every typical service call (AC / Plumbing / Etc.) call from a tenant can be handled with one additional 2 minute phone call by me to the AC / Plumbing company we have established relationships with.  I have 37 rental units, and probably average 1-2 calls a week at most from tenants.  My question to you is, "Why am I going to pay $3,700 to you to handle 10 phone calls in a month?  That's $370/phone call (and then I still have to pay for the repair on top of that).  Seems kind of expensive to me!

Let's talk about filling a unit. You are going to charge 1 month's rent - let's say $1,500 to fill one of my units.  I can turn on the advertising on my rental platform (Rentecdirect.com) and it will advertise straight to Zillow (and about 25 other search engines) and within 2 days I can usually receive enough applications to find a tenant.  Yes, I have to screen them (The rental platform does this as well) , and show the unit to them.  All in it probably takes me less than 8 hours of my time there (across several days).  We maybe turn over 3-4 units a year.  So you're talking less than a week's work a year to handle finding new tenants and I would owe you $6,000 for those 4 placements - plus 10% a month (forever!)  

Let's talk about the objective of saving money on property repairs.  Will you call around and get several quotes to try and save me money on a random repair?  The last time my wife had a PM (before we started self managing) the PM quoted $800 to replace a $150 garage door opener.  Did it ourselves in 2 hours and saved $650.  I don't think PM's have an incentive to minimize expenses for a landlord on repairs.

Rental rates aren't rocket science.  Rentometer.com will easily do a scan and tell you the prevailing rate and show you the locations of the reference properties in an about 15 seconds.

Accounting and reporting - Rentecdirect handles that as well - but whether I do it myself or have you do it, it still takes a tax accountant to file the taxes, so I don't see any savings there.  That platform also collects our rent and deposits it into our bank account within 1 day at no additional charge.

At the end of the day, it would cost me over $50,000 a year to have you manage my properties.  Where I'm at in life, I value the $50,000 more than the time and inconvenience of managing the properties.  While it certainly isn't totally passive... it's pretty dang easy - probably 3-4 hours per week (and it's my full time job!!)  Maybe when I hit retirement age, I'll have different thoughts... but for the next 10 years or so I'll keep the extra $50,000 a year!

If you have a typical financed property that nets $300 per month after all expenses, your property management services average 33% of the net monthly profit on that property.  If it turns over in that year, the $1000-1500 you would charge represents over 3-5 months of the total profit for that year!  Free and clear properties start to make more sense on the percentages, but no matter how you slice it, it’s a big chunk of the profits!

All the best!

Randy