SS231: Hire a Property Manager or Self Manage

SS231: Hire a Property Manager or Self Manage

New real estate investors consistently ask whether to hire a property management firm or self-manage. In this episode, Charles discusses the benefits and challenges of hiring a third-party property management firm.

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Talking Points:

  • When you purchase a rental property, one of the first considerations is whether to self-manage the property or hire a third-party property manager. When I began, I self-managed my properties for the first 6 years. Then I moved out of state, so I was forced to hire a property manager or sell my properties. I chose to hire a property manager, which was a great decision, as it freed me up to make more money and purchase additional properties.
  • To put everything into perspective, during these six years, I lived close to my properties, which were all within a half-mile radius, making management very easy. It also made it easy to outsource tasks and eventually outsource property management altogether.
  • What Does a Property Management Company Do?
    • They handle finding tenants, underwriting them, and placing them in your units.
    • They handle all maintenance requests and emergencies and coordinate with handymen and contractors to make repairs.
    • They regularly inspect your property, including units and common areas.
    • They handle rent collection, accounting, and bookkeeping, and take action against tenants who fail to pay rent on time or follow the lease’s terms and conditions.
    • Additionally, when you hire a property manager, you tap into their expertise and network of contacts and contractors, which you most likely would not have access to otherwise.
    • To learn more about what property managers do and what they charge, listen to episodes SS27 and SS43.
  • What are the Advantages of Self-Management?
    • You save money by not paying any property management fees.
    • You can complete tasks yourself, confirming that everything is done to your individual standard.
    • You can select tenants yourself. Individually review and choose tenants.
    • Give your property more attention by ensuring units are turned and rented as quickly as possible, while also ensuring that repairs are completed promptly.
    • Self-management allows investors to learn the real estate investing and landlording business from the inside. Reading books and listening to podcasts will not provide you with the same knowledge or experience as self-managing your own rental property.
  • What are the Disadvantages of Self-Management?
    • It takes time. You are now splitting your time between your primary occupation and property management, which will require you to perform tasks that could have been outsourced for less than what you would earn by working longer at your job.
    • Property management is not a 9-to-5 job; it is a 24/7 operation. You have to ensure that someone is available to handle calls, address issues, and respond to emergencies.
  • What are the Advantages of Hiring a Property Management Company?
    • They understand the market by managing many units near your properties, which assists with understanding the current state of the market, rental rates, and navigating market changes.
    • They create a wall between owner and manager. It is easier to operate a property and manage tenants if you do not own the property.
    • It significantly reduces the time requirements and stress on the owner.
  • What are the Disadvantages of Hiring a Property Management Company?
    • Paying fees is one of the most significant downsides to hiring a property management company. You will typically pay a percentage of the gross rent to them, in addition to fees for leasing, renewals, and other services.
    • Less control over their handymen and third-party contractors. This, for me, is my biggest issue with property managers, especially when their handymen are unable to perform tasks and they call out to expensive third-party contractors. I will discuss this further in a minute.
  • The Hybrid Approaches to Property Management
    • You can also self-manage or hire a property manager in a hybrid fashion. Not that the manager is going to cut their fees, but you can minimize the disadvantages of either route by adopting a hybrid approach.
    • The hybrid approach when hiring a property manager, which is essentially a more hands-on asset management role, involves handling specific tasks while your manager oversees the day-to-day operations. For example, we handle most, if not all, of the marketing for our properties. We have been involved in online marketing for years and have no issue getting potential tenants to our property managers. However, they then handle the rest of the process. Secondly, we select our third-party contractors and require that the manager contacts them first before using one of the contractors they regularly use, unless it is less expensive; however, this is typically not the case. Third, we select contractors and oversee all large capital expenditure (CapEx) projects.
    • The hybrid approach when self-managing revolves around outsourcing everything. Outsource landscaping, snow removal, common area cleaning, bookkeeping, etc. Set up an online portal for collecting rent and for tenants to submit inquiries and repair requests. Set up a phone answering service to handle after-hours calls. The most important thing is finding a reliable handyman whom you trust with the keys to your property and units. When a request comes in, it is sent to you and the handyman immediately. You keep a running list of non-urgent repairs, and they address them regularly.
    • When weighing the value and cost of self-managing versus hiring a professional third-party management firm, ensure your decision aligns not only with your business goals but also with your personal goals, and recognize that this decision is not one you need to live with forever. Maybe you self-manage for 2-3 years before handing it all off. Lastly, make sure to check out episode SS82 to learn how to hire the best property manager for your property.

Transcript:

Charles:
Should you manage your own rental property or hire someone to do it for you? The answer could save you time, money, and stress. Most people think managing yourself means more control, but sometimes that control comes at the cost of your freedom and sanity. And hiring a property manager, it’s not all about handing off the work, it’s about making room to grow as well. But what if there’s a third option, one that gives you the best of both worlds? Welcome to Strategy Saturday, I’m Charles Carillo, and today we’re discussing a big decision every real estate investor faces. Should you hire a property manager or self-manage your rentals? So let’s get started. When you purchase a rental property, one of the first considerations is whether to self-manage the property or hire a third party property manager. When I began, I self-managed my properties for the first six years and then I moved outta state.

Charles:
So I was forced to hire a property manager or sell my properties, and I chose to hire a property manager, which was a great decision as it freed me up to make more money and purchase additional properties. Now, to put everything into perspective, during these six years, I lived close to my properties, which were all within a half mile basis of each other, making management very easy. It also made it easy to outsource tasks and eventually outsource property management altogether. So what does a property management company do? They handle finding tenants, underwriting them, and placing them in your units. They handle all the maintenance requests and emergencies and coordinate with handymen and contractors to make the repairs. They regularly inspect your property, including units and common areas, and they handle rent collection, accounting, and bookkeeping. And they take action against tenants who fail to pay rent on time or follow the leases terms and conditions.

Charles:
Additionally, when you hire a property manager, you tap into their expertise network of contacts and contractors, which you most likely would not have access to otherwise. And just that point alone is worth hiring a property manager. And to learn more about what property managers do and what they charge, listen to episodes SS two seven and SS four three. That’s SS two seven and SS four three. So what are the advantages of self-managing a property? First off, you save money by not paying any property management fees. You can complete tasks yourself confirming that everything is done to your individual standard. You can select tenants yourself individually, review and choose tenants, give your property more attention by ensuring units are turned and rent as quickly as possible. Also ensuring that repairs are done promptly. Now, self-management allows investors to learn the real estate investing and landlording business from the inside.

Charles:
Reading books and listening to podcasts will not provide you with the same knowledge or experience as self-managing your own rental property. So what are some of the disadvantages of self-management? Number one, it takes time. You’re splitting your time between your primary occupation and property management, which will require you to perform tasks that could have been done outsourced for less than what you would earn by working longer at your job. Property management is not a nine to five job. It is a 24 7 operation, and you have to ensure that someone is available to handle calls, address issues, and respond to emergencies at all times. What are the advantages of hiring a property management company? Well, they understand the market by managing many units near your properties, which assist with understanding the current state of the market, rental rates and navigating market changes. They create a wall between the owner and the manager ’cause it’s easier to operate a property and manage tenants if they do not own the property.

Charles:
It significantly reduces the time requirement and the stress on the owner since they’re only brought in on certain tasks that are not time sensitive. What are the disadvantages of hiring a property management company? Now, paying fees is one of the most significant downsides to hiring a property management company. You’ll typically pay a percentage of the gross rent to them in addition to fees for leasing, renewals and other services, you have less control over the handyman and third party contractors. This for me, is my biggest issue with property managers, especially when they’re handyman or unable to perform tasks and they call to expensive third party contractors, and I’ll discuss this further in a minute, but it’s just something that you have to look out for. The next part here is the hybrid approach to property management. So you don’t have to do just one or the other.

Charles:
You can also self-manage or hire a property manager in a hybrid fashion. So not that the manager is going to cut their fees, but you can minimize the disadvantages of either route by adopting a hybrid approach. The hybrid approach when hiring a property manager, which is essentially a more hands-on asset management role, involves handling specific tasks while your manager oversees the day-to-day operations. For example, we handle most, if not all of the marketing of our properties, and we have been involved in online marketing for years and have no issues getting potential tenants to our property managers, however, they then handle what rest of the process. Secondly, we select our third party contractors and require that the manager contacts ’em first before using one of the contractors that they regularly use unless it is less expensive. However, this is typically not the case. Third, we select contractors and oversee all large capital expenditures, CapEx projects.

Charles:
The hybrid approach when self-managing revolves around outsourcing everything, outsourcing, landscaping, snow removal, common area cleaning, bookkeeping, et cetera. Set up an online portal for collecting rent and for tenants to submit inquiries and repair requests. Set up a phone service to handle after hour calls, and the most important thing is finding reliable handyman whom you trust with the keys to your property and units. When a request comes in is sent to you and the handyman, immediately you keep a running list of non-urgent repairs and they address them regularly. Now, when weighing really the value and the cost of self-managing versus hiring a professional and third party management firm, ensure your decision aligns not only with your business goals, but also with your personal goals and you recognize that the decision is not one you need to live with forever. Maybe you self-manage for two or three years before handing it all off. Lastly, make sure to check out episode SS eight two to learn how to hire the best property manager for your property. So I hope you enjoyed. Please remember to rate, review, subscribe to make comments on potential show topics@globalinvestorspodcast.com. If you’re interested in actively investing in real estate, please check out our courses and mentor programs at Syndication superstars. That is syndicationsuperstars.com and look forward to two more episodes next week. See you then.

Links Mentioned In The Episode:

  • SS27: What Does A Property Manager Do? Do I Really Need One?
  • SS43: What Do Multifamily Property Managers Charge?
  • SS82: How to Hire the Right Property Manager for Your Properties

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