Becoming my own Property Manager

General Landlording & Rental Properties
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Becoming my own Property Manager

Shane Short
Real Estate Agent · Portland, OR · Member since 2015 · 70 posts · 24 votes

Good Evening/ Morning, wherever you are on the planet.

I'm currently saving for my first Multi-family investment in December. I've done a few minor flips in the past for profit, but I'm looking to get into Passive income from Rental Properties. I try to practice daily by doing 2 property analyzations. The other day, I was having a discussion with another investor about Turnkey rental properties (he is not a fan of Turnkey companies) and one thing he mentioned was about how Turnkey companies make their money, he was saying they aren't just going to do everything for you and hand you a great deal or else they would just invest themselves, which I believe to a point, but that got me thinking.

No matter how "passive" my future income may be from Real Estate, I have to be doing something. It's impossible that I'll be job free, which I didn't expect anyways, but after he said that it actually really hit me, whether it be Property Management, Deal Analysis, Management of some sort, or accounting, I have to do something or else I won't be making money.

So why aren't more people doing their Property Management? Especially those with Real Estate Licenses like me? The average charge I come across when talking to Property Management companies is 10%, and the average property I analyze at 10% comes in at about 200-300 dollars per month in Property Management, not including the one time, one month rent fee each company seems to charge. So let's say $200 per property, and I accumulate 30 doors. That's 6k a month, or ~72,000 per year that I am paying someone to manage my properties... So why aren't more people just managing their own? If you own an LLC and hate math, couldn't you just hire a booky/ assistant an hourly salary for 20 hours a week to do the math portion and contracting scheduling for all the repairs, and use your license to oversee the company? Better yet, hire a licensed assistant and they can do all the contract work as well. At 72,000 a year you could save yourself from having to accumulate another 20 properties just to make up for the loss that you're paying a property management company? Even if you're paying your assistant 40k a year to work virtually part-time and you'd still be saving 32k plus per year.

I guess I just don't see why more people aren't doing this? What are the downsides other than the obvious basic hassles of dealing with tenants? 

Thanks for all of your responses!

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Peter TverdovBusiness Member
Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
7y

Shane, in short, you don't understand how much your time is worth to you yet. I'm guessing your responsibilities are light at this stage in your life, health is good.

My own personal hourly rate is $50, meaning if I can pay someone less than $50 an hour to do any task in my life, then I am paying them, because my time is more valuable. It's why I laugh at people who change their own oil. Congrats on spending an hour to save $7, below minimum wage.

Managers make the most money when we're resolving emotional landlord/tenant disputes, or going to court, or showing the property, screening people or getting it rent ready. How much is that worth to you?

[email protected]732-289-3823
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  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    7y

    @Shane Short there are plenty of people that self manage, and there are definitely some investors I have met that have built out their own management companies. I believe the point where you get enough scale tends to be right around 100 units from all that I have read. There is one group locally here in the Berwyn/Riverside area that owns hundreds of units and has a fairly substantial management operation at this point. 

    The down sides are probably not obvious, but managing people becomes its own job. So now you have the person to take all the tenant calls and place new tenants. What do you do when that person is on vacation? Or on maternity leave? Or quits? What do you do when your book keeper gets a new job? You have to keep growing the machine just so you have redundancy. 

    0Reply
  • Shane Short
    OP
    Real Estate Agent · Portland, OR · Member since 2015 · 70 posts · 24 votes
    7y

    @John Warren Good Point! I honestly didn't think about that lol 

    0Reply
  • Peter TverdovBusiness Member
    Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
    7y

    Shane, in short, you don't understand how much your time is worth to you yet. I'm guessing your responsibilities are light at this stage in your life, health is good.

    My own personal hourly rate is $50, meaning if I can pay someone less than $50 an hour to do any task in my life, then I am paying them, because my time is more valuable. It's why I laugh at people who change their own oil. Congrats on spending an hour to save $7, below minimum wage.

    Managers make the most money when we're resolving emotional landlord/tenant disputes, or going to court, or showing the property, screening people or getting it rent ready. How much is that worth to you?

    [email protected]732-289-3823
    1Reply
  • Dominik Makaneole
    Investor · Kauai, HI · Member since 2017 · 65 posts · 43 votes
    7y

    @Peter T. Great point on valuing your time. I do the same analysis however I change my oil because it’s fun for me. It reminds me of the times my dad would show me how to work on cars. Try not to laugh at me 😂

    0Reply
  • Kenny Dahill
    Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
    7y

    Hi @Shane Short.

    The vast majority of SFR landlords self-manage; reports vary from 70-80%.

    The majority of landlords who utilize a property manager mostly fall into these categories:

    • Accidental:  They inherited the home or perhaps work moved them and they wanted to keep their homes.  These types of landlords typically don't want to deal with any headaches because they didn't intend to be here in the first place.
    • Pure Investor:  This can break into two key categories: investment firms and wealthy individuals.  Investment firms focus more on finding and managing deals than being a PM.  Wealthy individuals typically use real estate to diversify and view it as a commodity, but don't want to handle any small issues.
    • Out-of-state (OOS):  The challenge about real estate is it's hyper local.  If you're not local then that can make it more challenging.  It's not impossible to self-manage out of town.  Some investors prefer to find more affordable deals out of town and having local set of eyes never hurts.  Whether they're PM's, leasing agents or inspectors.

    For those who believe 'time is money' and you should automatically hire a PM either never waste a second of their life (kudos), over-value themselves or simply don't want to manage.  For somebody like yourself viewing this as passive income, you could replace your time-bandit (i.e. Facebook, ESPN, games, etc.) with the low amount of time to manage!  Unless you have a lot of units (20+) or you work relentlessly for billable hours, you can find the time if you really desired.  Often times there's a great tiny room with a white throne that provides ample opportunity to text tenants, coordinate showings, etc.

    If you're starting out in real estate, how much time does it truly take to manage 1 unit?  If you can't afford the 20 mins per month and 4 hours for leasing then you're probably not ready to invest in real estate.  I understand that life gets in the way but you can always fall back on hiring vendors when the timing or scope is inconvenient to you.

    There are plenty of software companies that provide tools to make your life easier to self-manage now.

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Shane Short:

    Good Evening/ Morning, wherever you are on the planet.

    I'm currently saving for my first Multi-family investment in December. I've done a few minor flips in the past for profit, but I'm looking to get into Passive income from Rental Properties. I try to practice daily by doing 2 property analyzations. The other day, I was having a discussion with another investor about Turnkey rental properties (he is not a fan of Turnkey companies) and one thing he mentioned was about how Turnkey companies make their money, he was saying they aren't just going to do everything for you and hand you a great deal or else they would just invest themselves, which I believe to a point, but that got me thinking.

    No matter how "passive" my future income may be from Real Estate, I have to be doing something. It's impossible that I'll be job free, which I didn't expect anyways, but after he said that it actually really hit me, whether it be Property Management, Deal Analysis, Management of some sort, or accounting, I have to do something or else I won't be making money.

    So why aren't more people doing their Property Management? Especially those with Real Estate Licenses like me? The average charge I come across when talking to Property Management companies is 10%, and the average property I analyze at 10% comes in at about 200-300 dollars per month in Property Management, not including the one time, one month rent fee each company seems to charge. So let's say $200 per property, and I accumulate 30 doors. That's 6k a month, or ~72,000 per year that I am paying someone to manage my properties... So why aren't more people just managing their own? If you own an LLC and hate math, couldn't you just hire a booky/ assistant an hourly salary for 20 hours a week to do the math portion and contracting scheduling for all the repairs, and use your license to oversee the company? Better yet, hire a licensed assistant and they can do all the contract work as well. At 72,000 a year you could save yourself from having to accumulate another 20 properties just to make up for the loss that you're paying a property management company? Even if you're paying your assistant 40k a year to work virtually part-time and you'd still be saving 32k plus per year.

    I guess I just don't see why more people aren't doing this? What are the downsides other than the obvious basic hassles of dealing with tenants? 

    Thanks for all of your responses!

    Takes a special kind of person to thrive in the property management industry. It's savage man. Staffing my company I have seen it break a lot of good people. Not just at my company though industry wide. Real Estate in general has a very high turnover but Property Management adds an extra component of brutality to the game. Putting folks into houses makes a lot more people happy than kicking them out does. Not to mention the endless amount of yelling, complaining, lying, cheating, stealing, poop covering everything & all the other types of nonsense that comes along with it lol............All that said, I dig it. It's added many zeros to my net worth.

    1Reply
  • Shane Short
    OP
    Real Estate Agent · Portland, OR · Member since 2015 · 70 posts · 24 votes
    7y

    Thanks everyone for your responses. This has definitely given me a more positive view on investing in real estate as this makes properties that have only been cash-flowing 100 dollars in my analysis now cash flow upwards of 5-600 dollars. Of course I can make the time, I'm currently working 60+ hours a week as an Engineer on Nights and I work another 15-20 hours a week doing Real Estate Broker work, but ideally I don't want to sell houses, I'd rather be using my license to manage my own properties and find great deals, and by managing my own properties it opens up a LOT more great deals. It just made this so much more exciting.

    Thanks again!

    Regards,

    0Reply
  • Kenny Dahill
    Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
    7y

    @Shane Short, while you may decide to self-manage today, make sure your proforma calculates management fees.  There might be a time when you decide to hire out management; it's best you have that expense budgeted and still determine it as a good opportunity.

    A lot of new investors think short-term.  They fail themselves by running numbers that make an 'eh deal look good because there's no management expenses.  Yet when they need to hire out they find themselves losing money or not happy with the returns.  

    Every deal can be made to look amazing in Excel; then there's reality.

    1Reply
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