PM or let others do arbitration on my properties for MTR

[Nhi Nguyen]

I have a some properties in the Bay Area - CA (Hayward, San Leandro, and Pleasant Hill) that I’m leaning heavily towards MTR instead of LTR. All of them are very close to hospitals (2-10 mins max).

Some are ready right away, some in 3-6 months.

I’ve been self managing my small portfolio of LTR but I’d like to be hand off more so I can scale.

My options are to either let someone arbitrate my properties, or hire PM companies to manage them for me.

Please share your thoughts. I don’t have any experience doing either yet, nor I’ve done any “quick numbers” to compare. It’s in the planning phrase so inputs are highly appreciated.

Thanks.

[Nicole Heasley Beitenman]

Quote from @Dan H.:

Quote from @Nhi Nguyen:

I have a some properties in the Bay Area - CA (Hayward, San Leandro, and Pleasant Hill) that I’m leaning heavily towards MTR instead of LTR. All of them are very close to hospitals (2-10 mins max).

Some are ready right away, some in 3-6 months.

I’ve been self managing my small portfolio of LTR but I’d like to be hand off more so I can scale.

My options are to either let someone arbitrate my properties, or hire PM companies to manage them for me.

Please share your thoughts. I don’t have any experience doing either yet, nor I’ve done any “quick numbers” to compare. It’s in the planning phrase so inputs are highly appreciated.

Thanks.

 I do not understand why you would trust a valued asset to someone that is not licensed, typically uninsured, typically cannot afford to purchase their own RE investment when you can hire a professional PM that has lots of experience, insurance, a license, typically a team of people.  In addition with the PM, the owner and PM both benefit from occupancy growth.  Most arbitrage relationships the person doing the arbitrage benefits from increased revenue (exception is profit sharing situation).

Do you believe the arbitrage will be cheaper?  Do you believe they are likely to be better managers than a professional manager?

Note one mistake and resulting law suit could far surpass any savings.

I recommend you interview a handful of PMs ideally that were referred to you. I recommend you stay away from the national PMs (they typically $uck). Choose the one that best meets your needs. Prioritize service and relationship over PM fees (with in reason). In my market there are STR PMs as low as 15%, but market is 25%. The 15% and 18% are missing something that I value. I am paying 25% STR, 15% MTR (not sure what my market rate is for MTR as I am transitioning a unit to MTR not by choice).

Good luck

I don't disagree, but I also don't totally agree. I wouldn't enter into an arbitrage agreement because I want the increased rents, and I'm willing to exchange my time for that additional profit. I can understand why some wouldn't be. Look at someone like Rob Abasolo. He was an arbitrager for a long time, and he's highly experienced. If I was looking for the more passive route and someone like him came along, I'd be open to a conversation.

A PM can be more or less work depending on who you hire. There's always going to be some degree of involvement with a PM, and depending on your market, that extra 15% could wipe whatever additional profit the MTR is bringing in. I think there are pros and cons regardless of what route you choose.

If you do go the arbitrage route, have a solid lease in place that's reviewed by an attorney. Vet the arbitrager down to their blood type. Get your CPA, attorney, and insurance agent on a call so all 3 are in agreement regarding your lease, coverage, and legal setup. Don't take on a first-timer. I think you can find success whichever direction you go.