SHOULD I HIRE OUT A PROPERTY MANAGEMENT COMPANY

Question

Hello Bigger Pockets

I am new to the world of REI and am currently looking for my first deal.  I am looking for a SFH or a townhouse, preferable townhouse for lower maintenance costs, 3 beds 2 baths, 1800 sq ft, in a neighborhood.  I also prefer these homes be close by in my market.  I hope to have 2 or 3 properties over the course of the next year or 2.  My question is this: Should I secure a property management company to cover the land lording duties on my first couple of deals.  I would need assistance on drafting leasing agreements, vetting tenants, rent collection etc, etc.  Also, I currently work 60+ hours a week at my day job so I may have limited time when it comes to the actual management of the property.  The catch is, after allotting 7% for vacancy, 7% for repairs, and roughly $110/month for property management services - my returns/positive cash flow is next to nothing.  It's also important to note that I am looking for a property that is more turn key.  I would consider a fixer upper if the returns were higher and I could find the deal, but with my time being as limited as it is I would want to turn the property quickly to get a renter in, and that might not be doable for my current situation.  I would be happy to share my numbers if anyone would like to see them and offer a piece of advice. Thanks!!

Brad Larsen · Answer

It comes down to what you feel your time is worth.  If you want to save $20/hour by doing everything yourself in the management side, and you are the do it yourself type because this gives you satisfaction - self manage.  If you want to spend that time chasing deals to make you possibly $20,000 an hour - that is where the gold is.

Mike D'Arrigo · Answer

@Matthew Wright If you don't want to pay the monthly management fee and are ok with dealing with repairs and calls from tenants, you might consider using a PM to just do your leasing. You want to be sure you are in compliance with all local and federal fair housing laws.

Dennis M. · Answer

@Matthew Wright

What’s the point of doing real estate if you make no cash flow ? Might as well put your money in an index fund atleast you won’t run the risk of a tenant destroying the place ! Btw I work close to sixty hours a week and have 3 kids I find the time to manage several apartment buildings and that’s in a much lower class area that’s more hands on as far as management goes . You need to decide if landlording is something your cut out to do or if you want to give all your meager profits away to a property manager . Find a cheaper property class and neighborhood or go out of your local area if you insist on using a pm

Thomas S. · Answer

Investing in real estate without the time available to do it right is going to be difficult. It is a second part time job with or without a PM. Managing a good PM is less time the problem is actually finding a good PM.

If your cash flow is near zero and you are not in a high appreciating market it is not really worth investing in real estate. You could do as well if not better in a income fund or REIT.

Real estate investing is far from passive so if you do not have the time to dedicate to it there may be very little upside. Possibly consider being a money partner with a experienced investor that will do the managining.

SHOULD I HIRE OUT A PROPERTY MANAGEMENT COMPANY

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