What's my next step after firing my current PM?

Question

My husband and I own a STR in Virginia Beach. It's a SFH and has a pretty good track record in revenue and profit. It was managed by a mom-and-pop PM for a while, until last year when Vacasa acquired the PM company. We are very unhappy with Vacasa for many reasons and are planning to fire them after this summer peak season.

We have 3 options: finding another PM, self-managing, or renting it out to a STR arbitrager.

Before I evaluate the pros and cons of the 3 options, a quick introduction on our background: We have been successful in our W-2 jobs, having achieved FI (financial independent) part of the deal and are now entering the RE (retire early) phase. Many people in real estate investment are trying to make money to replace their W2 incomes, so self-managing makes sense because they are basically working a side hustle as a PM. Some other people are just passionate about real estate or hospitality, so they truly enjoy managing their STRs. We don’t fit in either category. This house is more of an asset diversification – half of our money is in the stock market, so the other half has to go somewhere else: it’s either this or a bond ladder or a bunch of gold bullions buried in the backyard. Therefore, we prefer this real estate investment to be as passive as possible. So far, when we have a PM, we still have to do a lot of work managing the PM -- making sure they are doing their job such as billing us correctly, choosing the right subcontractors, maintaining a good rating on the platforms, etc. The most frustrating part is that after all the work we put in to manage the PM, the result was still poor.

Regarding the 3 options, finding another PM is our backup plan. A new PM cannot get any worse than Vacasa, but probably won’t be much better.

Self Managing is an option and most of the regulars on this forum advocate that approach, but there is a “survivor bias” here, since we only hear from the successful ones. It’s no different than professional actors or athletes giving speeches telling graduates “pursue your dream, one day you too can win Oscar/Superbowl/…”. They can say that because they made it, but it doesn’t mean it will work for others. Failed actors don't get invited to do commencement, and failed real estate investors don't hang around Bigger Pockets. Self-managing is not easy. We will have to find a team on the ground, including cleaner, handyman, linen service, lawncare, pool maintenance, emergency contact, … One person may be able to fill multiple roles, but for the very least it will be 2 or 3 different entities and it’s not like I can just order these people from Amazon, with a 30-day free return or refund. What if the initial hire does a bad job? What if the cleaner quits or doesn’t show up and it’s middle of the summer with the new guest arriving in 3 hours, while I am 8 hours away? Even if we manage to get a few decent helpers, we still have to deal with guests and platforms and everything else.

That leads me to the last option – leasing it out to an arbitrager. We will be happy to rent it out for enough money that it will give us about a 4~5% ROI. To use simplistic round numbers, assuming the house is worth $1M, we will be content to rent it out for $5k a month. After paying the property tax, we should net $50k. The house is already fully furnished and ready to go, so the arbitrager doesn't need to do any upfront investment except buying the linens (if they want to do their own laundry) or paying for the first few months' rent before the business picks up. If the arbitrager is any good, they can gross $150k easily. After they pay me $60k and maybe another $30-40k in expenses (utility, maintenance, cleaning, consumables, repairs), they can net $50-60k.

What do you guys think? Convince me I am wrong. Tell me what I missed in my reasoning.

If anybody has had experiences doing arbitrage, either as the property owner or as the arbitrager, I would love to pick your brain. Please dm me. I have a lot of questions about the practical details such as who pays for the insurance, who pays for the repairs, and etc. If anybody has a template on the arbitrage contract, I would love to get a copy.

Luke Carl · Answer

Champagne

Julie Chai · Answer

Hi Lisa, I only have 1 listing also and self manage from another state. I just recently had my worst booking nightmare and my cleaner from TurnoverBnB did not do a very good job. It was a great platform to find cleaners, but they are not the best. I recently hired a cleaning company this week and after they examined my place after my TurnoverBnB cleaner "cleaned", they sent me pictures of dirty baseboards, dirty pots in cabinets, floor vacuumed but not mopped, etc. So... just FYI on TurnoverBnB.

Lisa Marie · Answer

Thanks to all for the replies. I will do a little more research on the feasibility of self managing, as well as evaluating other PMs in the area.I know there are a lot of software options to manage the calendar across platforms and automate guest emails and cleaner reports, but if I have just one property, what's the best option for me? Theoretically we can do everything manually, but as I have mentioned multiple times, we want less work, not more work. Is there a software that provides all the functions but with no or little cost?

Michael Baum · Answer

Hey @Lisa Marie, if I were you I would sell it. Do a 1031 exchange into a multi family or a LTR property. Much more passive and you can get the return (or better) than what you are talking about. Frankly the arbitrage idea could be as big or bigger a headache than Vacasa was/is.

Leslie Anne Morris · Answer

Search Vacasa on here and see what others say. I will say that I would lean towards staying passive in STR, interview local property managers and pick a new one who only focuses on your market. Check metrics like how easy are they to find online, what do their listings look like, how good are the reviews from guests? You should be able to find a good local one if you put in the effort.

Brooklyn McCarty · Answer

TLDR; self manage! BP has an awesome STR boot camp!

Patti Robertson · Answer

Have you spoken to @Dezmon Robertson. (Same last name as me, but no relation.) He manages both short and mid-term furnished rentals. That's who I refer all my clients to who want to explore STR and MTR. I've gotten amazing feedback. If you want his cell, feel free to PM me. BP won't let us put that in a post.

Ryan Moyer · Answer

I don't think your experience with your previous PM was normal. There are a lot of people that use PMs and never do anything other than collect their checks. You could always give the PM route another shot and see if you can find one that's more hands off. You shouldn't have to manage your PM. That's the whole point of a PM!As far as arbitrage goes, you'll have a tough time getting an answer on that on these boards as almost everyone here is a real estate investor and not an arbitrager. Personally I am not as against it as most on this forum are. I know the STRs I manage with cleaners/handymen in there every week are in a lot better shape than most of my friends/family's LTR's when a tenant checks out after doing 2 years of who knows what in there. But you'll run into the same problem with arbitragers as with PMs. You need to find a good one.

John Underwood · Answer

Self managing cam be easy.You get a great Cleaning crew. You handle reservation through Vrbo and Airbnb.There are plenty of apps to hire a local HVAC person or plumber as needed.It doesn't have to be difficult or time consuming.

Andrew Steffens · Answer

Hi! Im not an expert but I imagine there are quite a few PM companies in VA Beach. If you were happy with the process with your previous PM why not just look for a new one? I am not an advocate for arbitrage and I think to be successful in self management you have to be sure it is what you want to do, and it sounds like you have doubts