When to move from self-manage to hiring property management?

Question

Hi!

We currently own 26 doors and in the process of acquiring 17 more. We have been self-managing our units for the past 5 years. Maintenance is getting heavier and management in general is more time consuming with more units on board.

I'd like to know what other investors, that self-manage (or used to), think about the number of doors at which makes more sense to hire the property management instead of self-managing your properties?

Tracy Streich · Answer

@Veronique Leroy   Lots of great answers here.   Really boils down to what you want and how involved you want to be.   The big question I ask our clients is do you want to be a passive investor or a landlord?   There is no right or wrong answer to this.   Depends on the age of your units and how much maintenance is needed.   Don't be scared to do it yourself if you have the time and temperament to deal with tenants... they are not your friends, they are clients and customers.  You get all the calls and schedule all the maintenance and do all the showings.    After 25 years of this collecting rent is about 15% of the job so take that into consideration.   If you want someone else to do all these things great....Just be ready to pay them to do it.  As @Drew Sygit says all the time "cheaper is not always better!"   Decide to do it yourself and be all in or hire a true pro.   Anything in the middle will be a disaster.   Good Luck

Corby Goade · Answer

Woah- congrats on your success! I usually reserve this type of advice for newbies, but I would definitely not consider you inexperienced.

We sort of did things backwards- we bought a bunch of properties and then built a property management company and started hiring people to run the day to day in our PM company, but that's given me a very unique perspective in my opinion. You've already got experience managing tenants and maintenance, so you have that going for you, which is a huge barrier for most new investors.

The biggest fallacy I see with investors who don't want to pay a PM is that they think it will hurt their ROI. The reality is, at least 80% of the self managed contracts we've taken on, we have been able to quickly and painlessly increase rent enough that we AT LEAST pay for ourselves, many times we even put more money in our client's pockets than that.

Second- the freedom of time that is gained can't be measured. If you are operating at the scale that you've implied here- your time is so much more valuable than coordinating maintenance at your properties. Use that time to find and negotiate deals and funding for infinite returns.

Of course- the biggest challenge is finding a PM that offers you meaninful partnership. Find a PM that has their own investment properties- you'd be shocked how many people own property management companies and they are renters themselves, with no clue about real estate or investing. Second- find someone you like and trust, someone that holds themselves accountable and treats your properties like their own, but is still someone you'd want to have a beer with.

Last but not least, within reason, trust them to do their job. So many owners want to manage their property managers, but that defeats the entire purpose. They should already have their own maintenace partners, protocols and procedures. Don't tell them how to do what they do, give them a chance to do their thing and see how and if that improves your quality of life.

Feel free to reach out any time- best of luck out there!

Robb Almy · Answer

Great question and discussion! I have heard a lot of different opinions about this question and think there are pros and cons on each side.

In the end, I think it comes down to the individual investor. The two things I would say that are important in my opinion to consider are time and temperament.

Is your time worth more than you would pay a PM? In terms of number of units an investor can handle that depends in my mind on the type of units and their level of involvement. I started using a PM with my first unit.

For temperament...can you be firm or even what some perceive as "mean" as you run your business? If not, perhaps you should use a PM.

Those were two of the things that helped me decide what to do.

Best of luck and happy investing.

Samuel Eddinger · Answer

@Veronique Leroy - Pay yourself first!  If you would take away the headache for 10%, than higher a property manager.  If you would do it for the 10%, than you are the PM and you should pay yourself for the work you do.

Once your time is worth more than the 10% than you should hire.  Until that comes, you should continue to self manage.

Nathan Gesner · Answer

I'll second what Corby said. Most of the people I manage for are making more money after hiring me because I keep their rents current with the market and I prevent losses through better tenant screening, policies and procedures that nip problems in the bud, and faster turnovers. On top of that, they don't have to answer late-night calls, stress over problems, or all the other issues that come with day-to-day management.

Brad L. · Answer

35 units here. I gave my 14 most time consuming units to property management and continued self-managing the other 21 that I basically have on auto-pilot. Some will say you should go all in one way; either self-manage all or give all to a property manager. This has worked well for me though.

Drew Sygit · Answer

@Veronique Leroy All great suggestions posted!

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, make sure you ask indepth & tough questions if you decide to hire a PMC.

It's no different than screening tenants, if properly done, you avoid a LOT of future problems.

Just don't micro-manage your PMC. Confirm their processes meet your expectations and then let them do their job. Will they do it as well as you? Probably not - at least not all the time. You have to accept that in order to make it work:)

Larry Turowski · Answer

@Veronique Leroy I have 40 units and self manage. I don’t do any of the maintenance and I usually don’t place the tenants. I have 1099 people that do all that for me.  But I like having my finger on the pulse.

When to move from self-manage to hiring property management?

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