Should I use a Property Manager?

I will argue to the death that owning rental properties are the best way for the average person to build wealth. Unless you are freakishly talented in some skill-set that pays a ton of money such as performing surgery on your fellow humans or you can jump over a Kia Optima, you should own rental properties if you want to be rich. The most typical question I get from new investors that agree with my analysis is- should I use a property manager or self-manage. I’m not a wishy washy type of dude so I will just lay it out as cleanly as I can by answering…Yes to both! Don’t worry it will make sense soon.

One of the best pieces of advice that my wife and I got as we were launching our real estate investing was to manage properties ourselves in the beginning. The premise was simple, you won’t know if a property manager is doing a crappy job if you have no frame of reference. If your property takes 4 months to rent, is that normal? Is it normal to have your tenants leaving after 18 months? You are not going to have any way to judge your vendors if you have no idea how property management is supposed to work.

Another benefit of self-managing to start is that you are going to be more particular about the areas that you invest in because you are going to be showing the properties in the evening and you don’t want to be in a sketchy area where you might get stabbed by the neighborhood crackhead. Ask me how I know that, I’m joking, I’ve only had two ex-girlfriends try to stab me and I believe they were clean at the time.

As with any new venture, I highly recommend networking with other landlords in town so that they can give you guidance on what to look for with potential tenants so that you don’t have to make every mistake first hand. You will find that there are very specific patterns to the types of tenants that will be a headache.

I know many landlords that continue to manage their properties for as long as they own them. Frankly, I believe that a single family home will be most effectively managed by the owner of the property the vast majority of the time. I know that I am certainly much pickier than my property managers in terms of the tenants that I am willing to accept into my properties and I do a better job of communicating with tenants and diffusing any possible issues so that we can have a long term relationship and avoid unnecessary turnover/vacancies at the property.

The question must then be asked, if I do a better job managing my properties, why do I no longer do it? I FREAKING HATE IT! After only a few short years and a handful of properties, I had a few “aha moments” that made me realize that I needed to make a change.

First, I realized that I was starting to get sloppy with filling the properties. It is embarrassing to admit, but there were times that I would let applicants with red flags slide because I didn’t want to mess with driving across the city to show the property anymore. This may come as a surprise but the people with a suspect history ended up being a problem! I know, shocking!

Second, I was starting to resent being a property owner. There always seemed to be some issue that needed my attention on a night or a weekend which was draining because I was working a ton of hours on my day job. I remember my wife’s first Mother’s Day being ruined because I had a very volatile tenant that had an AC unit go out. I remember thinking that we owned rental properties to improve our quality of life, but it was starting to monopolize the limited free time that we had.

Finally, there was eviction court. In Mecklenburg county an individual landlord is seen by the magistrate as somewhere between a snake oil salesmen and the village idiot. THEY DON’T LIKE LANDLORDS. I remember one lovely morning watching 4 of the first 9 landlords lose their eviction hearing even though all the tenants either didn’t show up or acknowledged that they had not paid their rent. God Bless America! I felt bad for those landlords and decided to keep them company by losing my case as well! My tenants said that they had lost their job and I wasn’t willing to work with them. First of all, losing your job is not an excuse for non-payment of rent in North Carolina. Second, they had refused to speak with me about a work-out prior to the hearing. As I looked at the remaining landlords in the room I was struck by how beaten up they all look. I remember saying to myself some of these guys might be worth millions of dollars but they look like garbage. At that moment I decided that I needed to hire out a third party to manage these properties so that I could enjoy time with my family.

Do I regret my decision? Mostly I have not. Since I have turned over my properties to a manager, we have more than doubled the size of our portfolio allowing us to create more wealth. If I was still self-managing, I don’t think that I would have purchased anymore properties as each one would’ve just created more work for me. Has a third party manager been perfect? Absolutely not, but every time I get frustrated with mistakes I just think about that Mothers Day and the dreaded eviction court and it helps me gain perspective very quickly.

Do you manage your own properties? Have you ever lost in eviction court? Let me know what you think!

Thanks for Reading!

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