Property Management: to outsource or not???

Question

Welp... things didn’t work out with my previous property manager, who was working for me in-house. That is the second one that didn’t work out. I’ve invested in Buildium, got my leases and processes down, a file sharing system, google voice number, etc. We have 15 doors total, 5 of which are under management and out of state. So, all I need is a competent and dedicated person to handle the day-to-day management, right? If only it was that easy.

I’m thinking about posting an ad on Upwork and seeing if I can find someone to handle the repetitive computer and phone work tasks virtually.  Ideally someone in and around Tacoma, wa.  But, it’s easier said then done, there is the time it will take me to train on my system, effort spent finding and interviewing said person, and ultimately I may end up right where I am today; I have other big life projects (opening a restaurant on a 100’ boat called the Island Caper in Bellingham, wa) and not enough time in the day to manage the 10-units.  Six of these units are in Tacoma, 3 hours away, and they are the majority of the turnovers and work.  So, now I’m thinking of biting the bullet and paying a higher price / sacrificing cash flow to not have to deal with it all.

What are your thoughts?   Anyone out there have any recommendations?

Lien Vuong · Answer

High level answer: Do the dph (dollar/hour) calculations on your life and figure out where you highest and best use is. I am certain you will find that your time is better dedication to your business than chasing rents. I love that I have a PM for my properties that I know and trust that is dedicated to that specific profession only. In fact, I don't hire people who wear multiple hats, I want them to be an expert in the field in the same way I am with real estate and my own profession.

Patrick Britton · Answer

@Kenny McCray  I would spend the time and energy trying to outsource the most time-consuming units.  Sounds like your life is rather busy so time would be of greater value and importance than a few tax deductible expenses...

Nathan Gesner · Answer

@Kenny McCray 15 units shouldn't take much time to handle. Except during turnover, your 15 units shouldn't take more than a couple hours a week. Why would you need a full-time, in-house manager?

Here's the truth. If you hire someone in-house, you're paying them peanuts and they have ZERO experience and ZERO incentive to do well.

If you think it's expensive to hire a pro, try hiring an amateur.

Bite the bullet. Do the research and find a competent property manager that can handle things for you. It won't cost you much more than an in-house person and they'll bring tons of experience, stability, etc. If they're really good, they'll bring in higher rent rates that will pay for some of their costs.

Devin D. · Answer

That's a great question Kenny.  I've done both.  Having just a few properties that you own isn't bad but when you start to scale the phone calls always seemed to come at the most inopportune moment.  To combat this I founded a property management company.  It certainly does take a large number of properties for it to be profitable, that profit line also depends on the market you are in.  If you want to focus just on investing, I would hire a property manager.  Find a good one and with 15 properties they will likely will work with you on price.  Piece of mine and protecting your time and asset is often worth more than what a property manager will charge.

Todd Rasmussen · Answer

@Kenny McCray

10 units and 6 are three hours away? I just threw up in my mouth. Outsource now. Tactical micromanagement is the enemy of strategic vision. It doesn't matter how finely tuned the engine is if you drive it into a tree. Get your eyes back on the road, especially with the other business venture you described.

Jeff Copeland · Answer

The real question is do you want to own/operate a property management company?

If so, go for it. But you'll need far more than 15 doors to be profitable with any full or part time staff (most PM companies don't become profitable until around 200 doors). You'll also need some kind of 24-hour coverage for emergency maintenance, legal and accounting support, and compliance (in most states, you have to be real estate broker - which makes you subject to State audits of your escrow accounts, etc -  to manage for other people).

If you prefer to focus instead on building your real estate portfolio, or other things, then you'll eventually need to hire a third party property management company; You may be able to self manage 15 doors but what happens when you get to 50, 75, 100 doors? Once that transition occurs, you can't really dictate that they use your software and processes - you are not their only client, so they cannot be expected to bend everything to your will.

Either path can work. But you have to choose one and go all in.

Soh Tanaka · Answer

I tell people if you have time, knowledge and desire, then go ahead and self-manage. It looks like you don't have time, so just hire a third-party property management company.

Property Management: to outsource or not???

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