We currently own around 40 multifamily units in Northeast Ohio. They range from a few duplexes, to a few 6-plexes, to a 12 unit apartment. They are all within 1-2 minutes of each-other (walkable distance), and we are about 80% complete with large scale renovations at all properties, including HVAC, windows, roof, siding, common areas, interior apartments, etc. Very solid properties with strong rents in the market.
We self-manage these currently (and have built a brand around this) and initially had thoughts about continuing to build the property management brand to manage exclusively our own multifamily-focused investments as we grow. We like this model, because we are able to manage everything exactly the way we see fit, with high quality standards, and close attention to detail. Building solid residents, stable rent payment history, and low maintenance (especially due to all the updated renovations across the portfolio). That is what we have accomplished so far.
However, the challenge is that we feel somewhat "limited" or stuck in this cold weather market. We have been considering relocating our family to a warmer climate (Florida, Texas, Arizona, South Carolina, etc.) and that would present the challenge of determining the best bath of managing our investments. While we are still unsure about relocating, as we have debated for years--how we'd handle our real estate investments is an important question we'd have to address if we did make the move. There is always the option of selling and then reinvesting in the local market where relocate, however we have also spent a lot of time with the recent renovations of these buildings over the last ~2 years, they are high quality, stable, optimized investments that we don't just want to get rid of, as they are the ideal cashflow investment. So selling is not really something we are interested in as a "solution". Buy and hold was always the goal, and still is ideally.
So the options we are considering is to potentially acquire 20-ish more units (to make the math work with a salary) and hire a full-time property manager in-house and continue to manage "as-is" (so we'd have boots on the ground locally), or we could outsource all management to a 3rd party property management company. Outsourcing to a PM sounds like the path of lease resistance, but not without its own challenges.
PROS of Outsourcing:
- Hands-off management
- Don't have to worry about things like having to manage local staff (1 PM and 1 maintenance person) or possible employee turnover, which could create short to mid-term challenges to manage if we were living in another state and had to handle until a replacement was found
- Ability to focus on growth and acquisitions and not daily management
- Ability to be almost a fully "digital" operation rather than a "brick and mortar" management--although that sounds odd as real estate is very tangible and one of the reasons we initially focused on this asset
CONS of Outsourcing:
- Afraid PM company won't be as cost-conscious with managing expenses and especially repair/maintenance costs
- Overall concern with PM keeping up on the condition and quality of buildings as they are now
- General concern that maintenance, including preventative maintenance items, will be not kept up as we do now
- Obviously the cost incurred to the PM company and mark-up to have them manage maintenance/repairs they generally charge
- Our largest concerns mainly come down to how overall property maintenance, repairs, and larger capital expenses will be managed (i.e. what if there is a large flood on the 3rd floor apartment that floods down to the 1st floor, will a PM company be able to successfully remediate that in as least of time as possible and for the lowest cost?) That happened to us before, and was successfully managed.
We aren't too concerned with managing the administrative part of the business remotely, as we use software for this (Buildium), and are already fully digital as much as we can be with e-leasing, maintenance requests online, emails, all electronic payments from residents, etc. However, making sure the maintenance and overall quality of the apartments are maintained as we do now (or close to) remains our biggest concern. We fear that we could move away, outsource to a PM company, and come back in 3-5 years with properties that seem neglected or run down, or simply not managed anywhere near the quality standards that we maintain today. We would obviously come back at least annually to check-in on the properties--but you get the point.
While all of these are assumptions, and also concerns based on feedback I've read online over the years, I wanted to reach out and see if anyone could help share some of their experiences if you have went through something similar. I know several investors who buy out of state properties (often site-unseen) and outsource PM services (and "love it"), however many times they are not as concerned with the general quality and maintenance concerns, and are more focused on financials/performance. While I agree, bottom line profits are one of the most important aspects to be concerned with, also extremely important are well managed properties, good tenants, and managing the capital improvements/expenses and maintenance of buildings. If maintenance/capex isn't successfully managed, the long term cost of neglected or overlooked maintenance/capex can be equally as detrimental to long term profits.
I'd be curious to see how other's have successfully outsourced to 3rd party property management services, what your experiences have been, and how to go about finding the right PM company. Using 3rd party PM services would allow us to be much more focused on our lifestyle, investing in properties and markets that made the most sense (even if we aren't physically located there), and could set us up to be a true "digital" operation, rather than boots on the ground based company. But quality in management and maintenance is something we don't want to sacrifice in the process.
