Self managing, to Using a PM, to Hiring in-house PM

[Owen Dashner]

I started out on the same path that most rental property investors do.  I bought a single family rental while working a full-time job, kept acquiring more rentals over the years while self managing, until I hit about 20 units.  At that point, I decided I wanted to get bigger, and had to swallow the bitter pill of giving up some of my hard earned cashflow to a 3rd party property management company so that I could keep my sanity, my job and my family life while continuing to grow the business.  

I will soon have over 60 units, the majority of them now multifamily. While my life has gotten much easier since hiring a PM, I keep thinking about eventually bringing it back in house and hiring a property manager to work directly for me so that our financial incentives are better aligned and costs can be reduced.  I am at that awkward size where I am not really big enough to hire full-time staff, but too big to handle on my own and do a good job at it.

I would like to hear from others that have been through this transition.  At what point (number of units and/or revenue and/or expense ratio) did you make the decision to hire staff, and is the person full time?  Salaried/hourly?  Benefits?  How do you provide incentives for performance?  What skills and experience did you require?  Do you have the person handle the front end activities (advertising the properties, showings, leasing, customer service, dispatching) as well as back office (collections, bookkeeping, technology/CRM)?  

Lots of questions, obiviously, so I appreciate any veteran feedback.

[Dana Dunford]

@Owen Dashner - When I was looking at management, I asked the BRE (Bureau of Real Estate) this exact question. Here is what I found out for our LLCs -- I can hire an administrative person to become an employee of my LLC. They can help with the day-to-day tasks as long as:

1. They are not holding my rent collection (that goes directly to our bank account).
2. They are not the decision maker. I am the one signing the leases and renewals.

I'm not a lawyer and would love to see a website that clearly outlines this for all 50 States. 

Even the BRE mentioned some "grey" areas and could not give me 100% answers to my questions. For example, I asked if someone who is unlicensed could show my property. They said "as long as that person is just opening a door" but that doesn't help me know whether this person can answer the question of "how many bedrooms are there?"

I would even recommend that you get (in writing) something from your State's department to confirm that you are conforming to regulations. I was able to get that from the States where we operate.

Final point, if you have an admin come in to help with your LLCs, then I recommend he/she takes a class in Fair Housing. It is very important (even if he/she is just picking up phone calls to schedule a showing) for that person to understand fair housing laws.

I hope that helps somewhat.

Dana