Property management company or DIY?

Question

Hello,

I am Zara. I am in MA.

Great to be here.

Should I hire a PM company or rent and manage my out of state house myself?Any thoughts?

Thanks!

Phillip Vera · Answer

Account Closed I think Steve put it perfect in his post.  Alignment is the key and there is a big difference in what I call passive property management companies versus active property management companies.  Passive companies are rent collectors.  However, active companies understand your real estate asset as an investment and think in a way which is always providing value.  From strategic resident placement to inspections and maintenance, they think like an investor in order to save you money and increase your returns, but also protect you, the resident, and your asset.

Also, some disclosure here, I operate an investment based property management company.  However, you as an investor need to focus on investing.  Property management companies are professionals at what they do.  I see this everyday that investors believe they can do a better job managing their own properties.  Just simply the volume of things we see, builds our experience and allows us to have continuously improved processes and procedures versus an investor.  Numerous other benefits as well.

Arguments can be made either way, but if you're OOS, one travel trip to your property if something goes wrong could cost more than a PMs fees.  Find the right PM company and you'll be fine, just factor the expense into your investment purchase.

James Wise · Answer

You should always hire a PM for any long distance rental. Trying to do it on your own is a non starter.

Tim Jacob · Answer

I would break properties into the 3 types based on property management.

Type 1-  Properties that are easy to self manage.  These are the only ones I would self manage OOS unless you are right at the border.  For leasing you can set up an open house or maybe 2.  Get multiple qualified applicants with 700 plus credit scores.  Take your pick.  They stay for years.  Assuming maintenance is not extreme they will probably stay there for a long time and make the pm experience relatively painless.  When they do move out they give common courtesy, don't stiff you the last months rent, and leave the place in fairly good shape with relatively minimal maintenance.  These are usually nice properties that are relatively updated in decent parts of town and will not cash flow a lot if they are turnkey because of the mortgage.  Maybe delegating the property management makes sense if you make enough $ that your time is worth much more than you will pay the pm and you are keeping the property for appreciation.  Because it is relatively easy you have your choice of pms on this type.

Type 2-  Properties where the leasing turnover is more time consuming.  It could be a property in a type 1 area but is a rooming house so turnover is amped up.  It could also be a home thats in a more blue collar area.  The 1% rule is obtainable.  Cash flow is higher but so is workload.  Most pms will take this type of property.  The pm will work harder than the type 1 but not excessively.  These can be very successful investments with the right plan and pm.

Type 3-  Low grade properties where quality property management is not obtainable because it is not profitable for the pm.  These are usually high crime areas where the tenant quality will be very low because of the neighborhood issues.  Good experienced pms know that the hourly wage for them and the safety concerns for the employees or subcontractors that work there do not make it a good business decision even if you offer 15%.  For this type property being OOS will be a nightmare.  The business is not scalable as a result.  Many newbie owners feel the best type property to delegate to the pm is a Type 3.  They think they are getting more bang for your buck kind of like when they bought the house.  That's like going to the plumber that is working on your house to work for half what he is charging you they obviously wouldn't go for it.  As a result the only people who pm the low grade properties do a bad job because no one will take on the responsibility to get paid a disrespectful amount and deal with more drama as well.

Hope this helps

Steve Rozenberg · Answer

Thanks @Stephen J Davis I think when you decide what your strategy is that is the time to decide on creating your team. Just like a realtor, a mortgage broker, appraiser, Tax person, a PM company is a vital part of that team to help get you to success. The challenge is making sure they are aligned with your values and your business model. Make sure you take the time to ask the hard business questions of any PM company you interview to hire.

Here is a good list of questions to use as a base line:

It is very important that you make sure you take the time to interview and have candid conversations with a PM company. Let them know your strategy, your goals and what your business plan is to ensure that your business plan aligns with theirs and you can both work towards the same goal. If they are not aligned then simply keep looking till you find one that is.I would look up NARPM and start with them..Below are some questions I would think would be a good starting point for you to see who really treats their company like a business or a hobby.
Questions to Ask prospective management companies

• What are your average days on market for vacant homes?
• What is your average rent amount for all properties managed?
• What is your average work order cost for the owner?
• What is your average make ready cost for the owner?
• Are all my invoices uploaded to my owner portal?
• How do you advertise your vacant units?
• Do I receive video of my pre and post make ready?
• Do you have a setup fee?
• Do you upcharge on maintenance?
• When do you make owner payments? How often?
• Are you a Certified Property Manager?
• Are you a member of NARPM?
• What is your Guarantee?
• Do you provide move in and move out reports
• How many pictures do you take of the property prior to tenant moves in and after the tenant moves out
• Do you get weekly reports when the property is vacant what prospective tenants are saying about your home
• Do you provide monthly newsletters to your tenants
• Do you hold investor education classes to help me become a better investor
• Do you have single point portfolio based management services?
• How many properties do the owners actually own themselves?
• What do you do to ensure that the tenant is responsible for security deposit disputes since that is the largest reason for owner lawsuits
• How familiar are you with the newly changed laws that can affect you the owner if they are not used correctly?

Joshua Davies · Answer

Account Closed I would advise you to always hire a PM. Self-managing rentals in your own town can be challenging enough, never mind out of state. Hiring a good PM will save you an incredible amount of headaches and is 100% worth the fee. With that being said, make sure you underwrite your deals to include a PM fee or you could be in for a surprise when you look at your financial statements.

Account Closed · Answer

@Tim Jacob Thank you! That's a great way to put it. I have the Type 1 property. Hoping to get a great long term no-hassle tenant.

@PhillipVera Thanks for the input.

Account Closed · Answer

Thank you everyone!

Stephen J Davis · Answer

Hire a PM for out of state. Check out @Steve Rozenberg  He is with www.mynd.co.

Peter Philando · Answer

I invest OOS (FL --> AL) and originally have several properties between 2 management companies. My original intent was to eliminate the part of the business that produces the "tire landlord" syndrome. The reality is no one is going to be more concerned about your bottom line and your properties. The next few properties I will be self-managing with the option that if it becomes too overwhelming I can turn them over to a PM. Its a tougher decision to make when you're OOS. I would really think hard about it. If you put the wrong tenant in your property you can have an extremely frustrating time.

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