Self manage or let someone else handle it?

Question

Hello BP Fam!

Still fairly new to managing my own rentals. Currently I own one rental in Lynnwood, WA and I am about to be renting out my second home in Mesa, AZ. I do self manage the Lynnwood rental because it is easy as there is not much upkeep and everything is new. The Mesa home has a pool and would require regular maintenance by the tenants. I also know there can be some reservations about renting a home with a pool due to liability but I also think it could be an asset. We will be moving out of state and will not be able to check on the home at all. So my question is: would you self manage the Mesa home or would you let a PM company handle it?

Thanks!

Dion McNeeley · Answer

If a property was more than an hour away from me I would probably go the PM route. Unless I lived there and could set up my systems first, it may be hard to self manage from a distance. A pool seems like a liability in Washington but in AZ they are a lot more common. Just make sure insurance is aware and you have signs up around the pool. (Insurance may be a good resource for knowing what you need to post)I self manage all of my units but they are within an hours drive. I am also looking at AZ for more units and plan on having a PM for those. Hope this helped.

Taylor Norris · Answer

@Dion McNeeleySurprisingly enough this guy seems to be good. He actually charges the tenants most of the fees and only charges $85/mo. My mom has used him on her properties and she’s had her tenants now for two years. He had a long conversation with me and explained how he’s focused on long term tenants and little turn over. So I’d say I should probably go with him! Thank you for all your input it was super helpful!

Sherief Elbassuoni · Answer

@Taylor Norris, my criteria is if the property is within an hour of driving, I self manage. For more than one hour, I hire a PM. In the greater Seattle area, many PMs charge the first month as placement fees, then they charge 10% for 1-2 doors. You can negotiate the 10% down if you have multiple doors with the same PM. When you divide the first month placement fee/12 month (8.3%) and add the standard (10%) management fees, the new management fees is actually (18.3%) not (10%). For year two, if the tenants are renewing the contract, PMs around here typically ask for half a month rent (4.16%). If they are getting new tenants in year 2, they will charge a full month rent again (8.3%), so for year 2, your actual management fees ranging between (14.16% and 18.3%) depending on if tenants will renew or not. This is why I self manage my properties within reach. 14-18% of management fees can easily reduce the +ve cash flow I have.Let me know if you got any comments or questions.Thanks,

Bjorn Ahlblad · Answer

@Taylor Norris I agree with the folks saying if you can't get to it easily and quickly you really need a PM. When we lived in Ca we invested in Wa and used a PM; now we live in Wa an hour from our properties so we self-manage. As far as the pool is concerned it is a trade off but in Az you need it. Carry some extra liability ins just in case. Sounds like you are all set!

Dion McNeeley · Answer

Great question. Yes that seems normal. I have heard of many PM's taking a month (or half a month) for placing a tenant. This money is earned. Advertising, screening, showing the property etc. However, while I think the PM earns their money the tenant placement fee is the main reason I do not have a PM. I am okay with the monthly management fee. If you have one or two units this will often be 10%, as you have more and more nits this percentage will go down. I have a couple PM companies offering me 7% since I have 11 units. The problem is having different goals. A landlord wants as little turn over as is possible. (At least that is my goal) With my criteria I have had one turnover, and that is because she inherited a house. A PM company makes money on turn over, so while many say they want no turnover I am hesitant to put my properties in the hands of someone who would benefit from my expenses going up. So while I plan on having a PM in AZ I will be shopping around for a low fixed rate placement fee, even if that means I pay a percent or so more in monthly fees. This way our goals would be more aligned.

Taylor Norris · Answer

@Dion McNeeley I appreciate your input! Follow up question, you might possibly have some insight... I have spoke with a PM already out here that I really like, but they do charge an $860 fee in order to just find a tenant. Is that common among PM's? The monthly fees seem normal that they are charging but for some reason that struck me as expensive.

Theresa Harris · Answer

If you can't get to the property easily (ie a few hours drive), get a PM or someone who can check on it.PMs charge different fees. I've heard some charge one month's rent (ouch) to place a tenant.

James Ma · Answer

It's a very personal question. How much is your time worth essentially and are you happy managing your rentals?I have a handful of properties about a 1 hr drive away from me but if there's any issues I am calling trades to connect with the tenant so the only reason I need to drive there would be for inspections and moveins/moveouts. Most months do not require any action from me so I find paying someone to help assist is not worth it.However for others who are maybe inexperienced in acting as a landlord or would rather not deal with the stress of finding tenants, calling trades or don't have the time etc. it would be a worthwhile expense.

Michael Noto · Answer

As others have said hiring a PM makes sense, and I would hire the best one you can. They have a lot of control over the success/failure.

Warren Swede · Answer

@Taylor NorrisLots of good advice in here. Agree that if you can’t get to it quickly you need to hire a PM company. Especially if something goes wrong and you can’t make it out. If I was in your situation, the peace of mind would be worth it.