Newbie Question: Property Management: Why Not Always Use It?

[Chris M.]

Hey guys, I'm spending these last couple of months of 2016 to really dive deep into my real estate education, but in 2017 I'm taking action. I like the idea of passive income from rental properties, but I hate the idea of non-passive dealings with tenants, repairs and the other worries that come with being a landlord.

I've heard that property management companies take as much as 50% gross rent, which seems insane... but surely there must be other options? I realize that flipping houses isn't as sustainable as building a rental portfolio, and I'm starting to circle around an idea of BRRR'ing my way to financial freedom. But again: I really don't want to deal with tenants.

I'm sure there's some beginner's guide on property management I should read, but if any of you could give a more real-world answer on why property management isn't something you use or is something you use, that would be awesome. Thanks for any thoughts on this guys!

[Thomas S.]

Investors use PMs for many different reasons, some due to location, some are afraid of managing tenants, some lack the skills to be a landlord, some are simply lazy.

Reasons do not matter but what does matter is that you must manage your manager. There is no such thing a passive investing. Ignore your responsibilities to manage your investment and your PM can run you into bankruptcy. They need to be monitored and controlled as much as any tenant.