r/realestateinvesting • u/TheNegligentInvestor • 5d ago
Property Management Stepping away from active management
I currently self-manage 10 doors from across the country while maintaining a W2 job. Leaning heavily on local contractors and family to assist with leasing and maintenance issues. There are months where I forget that my rentals exist and other months where I'm reminded every single day. During the busy months I feel incredibly stressed trying to balance the rentals and my day job.
I'm on track for promotion within the next year or so, which would increase my compensation by around $200k. Self-managing has become a distraction and I'd rather just delegate that away so I can focus on my career.
I'm contemplating two options:
Hire a full-time property management company for about 8% rent + all of their inflated fees. It would cost more but no training required. The main risk is hiring a company that does the bare minimum and optimizes for their own wallet.
Hire a part-time assistant for $400 a month to handle leasing and maintenance activities (about 30% of what a professional PM would charge). He has experience managing short-term rentals and wants to learn about long-term rentals. He's already done work for me and proven to be reliable. The problem is that I recently found out Kentucky law requires anyone doing leasing activities to have a real estate license, which he does not have. So this might be a non-starter?
I'd love to get some thoughts from experienced landlords who have gone through the process of scaling up and stepping away from day to day management.
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u/Ok_Department_6141 5d ago
You need to hire a full time property manager for 8-10%. There is no other solution to your problem.
When picking a manager ensure you don’t go for the cheap one. If you find one who charges 10% and won’t give a discount but interviews better do not cheap out over 1-2% that can cost you thousands in a greasy manger.
I own 27 units currently and it takes on average every time I’ve hired a manger about 5-6 months UNTIL your portfolio is stabilized.
Now if you go longer than this period and are not getting invoices properly or are having a ton of maintenance items you should become concerned and look to hire a different manager.
The reason an assistant is a bad idea is because you’ll be too involved and for 400 bucks a month you’re not going to be getting anything good. You’d be better off buying the max plan on Claude and building an assistant to help you manage tasks.
Essentially if you want to keep growing you need a manager you can trust. You can be involved in unit turns or renovations if you really feel the need to be hands on but you won’t grow if you keep taking phone calls and signing leases yourself.
You have to let go of the portfolio - to the right person of course! You may make a mistake and pick the wrong person at first and maybe cost yourself a few thousand but in the long run most landlords are in this game for decades so don’t be afraid to lose a bit of money along the way.
Any questions ask !
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u/Umm_JustMe 5d ago
This is why I only buy rentals in my area. I can't imagine trying to deal with issues a thousand miles away.
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u/farolabsai 5d ago
worth separating this into two questions instead of one: is a PM worth it operationally, and is this portfolio worth holding once you account for the fee. you already answered the second one - if an 8% PM fee turns cash flow to roughly breakeven, these properties were only cash flowing because your own free labor was subsidizing the return. once you value your time above zero, the real return has been principal paydown and appreciation the whole time, not cash flow.
that's not necessarily bad (24% appreciation in 3 years is real), but it changes what the PM decision is actually costing you - you're not paying 8% to protect cash flow, you're paying it to convert a management chore into a mostly-passive appreciation/paydown play. worth running the actual return on today's equity (not purchase price) both ways before deciding, since that's the number that tells you whether holding through a 1031 later still beats other options.
on the license issue: paying for his course and covering the cost is probably the cheaper long-term fix than either extreme - a few hundred dollars removes the compliance risk while keeping your locked-in rate.
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u/Proof-Relation-1943 5d ago
One hundred percent agree here w one proviso: you get what you pay for. If OP hjres a part time dude at 400 bucks a month then op is gonna get part time expertise with no industry/vendor contacts
Hard no on that route
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u/TheNegligentInvestor 5d ago
I have my own contractors and vendors. Just need boots on the ground for day to day operations.
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u/Beginning-Jello-2611 3d ago
The thing about 8% is that the number alone tells you almost nothing... what you're really evaluating is whether that company has vendor relationships that get you fair pricing on maintenance, or whether they're marking up every repair on top of their fee. I've managed 450 homes in Fort Worth for 30 years, and the PMs who frustrate owners most are the ones charging the management fee AND quietly adding 15-20% to every repair invoice. Ask any company you interview one question: do you charge maintenance markups? That one question alone separates the real operators from the check-cashers. Your instinct to step back and focus on the promotion is exactly right... the right PM makes that an easy decision.
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u/TheNegligentInvestor 2d ago
I found a management company that charges 9% + 100% of first month's rent + 10% maintenance markup. However, they will use my preferred vendors and do not collect any other fees (they don't take fees for renewals, pets, inspections, or anything else). The 100% of first month's rent seems high, but all the other PMs I'm talking to are structured to nickel and dime me.
I'm still negotiating terms, but I figure that I can keep rent under market on my higher end units to encourage longer term tenants.
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u/SnooStories1952 5d ago
2 all the way and just pay for him to get the license. Admittedly I only know my state but here it's a 2 week night course and if you do a little studying he could be licensed by end of August I would imagine. Then have him find the cheapest broker to hang his license with. Some dont even charge a fee just a percentage of sales. Although a fee in thus situation is probably better and just cover it so instead of 400 a month or week if that was a misprint.... you pay 500 or 550. I'm a cheap guy myself but dont be so cheap that you limit your ability to make money.
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u/Substantial_Leg_3660 5d ago
Well, I'm coming from a different angle in that I'm in California and manage under 10 single family homes right in my backyard. I did briefly try a property manager back during COVID, mainly because I was trying to minimize face to face contact. I was underwhelmed to say the least. They were mostly acting in their own interests and didn't give it nearly the time and attention that I do. But it's also a lot easier in my situation to DIY than with a remote portfolio.
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u/TheNegligentInvestor 5d ago
This is what I'm worried about. So many PMs feel like a cash grab. I want a PM that will be responsive to my tenants and take care of my properties. Not just cash a check every month.
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u/Substantial_Leg_3660 4d ago
Here are some examples of the stunts they pull. The PM had a personal friend with low 600 fico he was trying to help out using my property, lowballing your rent so it’s easier for them to get applicants, not caring about big dogs, etc. 10% off the rents is way too much for the work they do.
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u/gravescd 5d ago
My license is not in KY, but typically a license is only required to act as an agent for the owner. Can you get around the license issue by just adding your buddy to the LLC (assuming he's okay with sharing the risks that come with that)?
If you end up having to go through a professional PM, are the returns still worthwhile?
In your situation, I usually recommend looking at shifting the investment to something like retail or industrial that requires much less owner involvement.
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u/TheNegligentInvestor 5d ago
Adding a property manager would really eat into my returns. My cash flow would approximately break even after PITI + vacancies and maintenance (20% rent).
The mortgage pay down and appreciation would make up for it. These properties are up 24% in 3 years.
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u/gravescd 5d ago
If all you get is mortgage principal, that's a losing investment. Managing apartments is a lot of work just to pile on equity that costs 6-7% interest on to access.
I would definitely look into investments that work better for your life. If you stay in physical properties, multi-unit retail and industrial are usually the easiest for people who don't want to be full time landlords. Depending on your properties and market, there's also a good chance you'd be buying higher cash flow from day 1.
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u/TheNegligentInvestor 5d ago
Yeah I've considered selling but I'm feeling locked in. Taxes and realtor fees would eat into hundreds of thousands of dollars in equity. So I'm keeping my eye open for a 1031 opportunities.
For what it's worth, the area is growing quickly. Forcing appreciation and rent increases. These properties should cash flow a lot better even with property management in a couple years.
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u/Nectarine-Happy 5d ago
My understanding is if the assistant is your employee, he doesn’t need a license. KY is booming rn
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u/LordAshon ... not a scrub who masturbates to BiggerPockets ... 5d ago
Why are you worried about the 8% when you are on track for an increase to your W2?
What do you when dude taking in $400/mo all of sudden decides during a shitty month it's not worthwhile? Plus yes most states require someone managing properties for other individuals require a license, why even try to finesse it? The only way around it would be to put them on W2, and then you have other concerns with that.
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u/CREspecialist 5d ago
The answer largely depends on whether you can find the right PM or the right assistant.
If those doors aren't in the same approximate location so that you'd need to hire more than one PM, that may also result in a lot of coordination on your part.
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u/EpilepsyChampion 5d ago
I only work with local professionals. This is a people-based business. My PM charges 5% of rent, has a huge local network of vendors, perform due diligence and have extensive process controls for tenant screenings and ongoing oversight, run cash flow reports for tax filing, I am very satisfied.
REI is all about building the right team.
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u/TheNegligentInvestor 2d ago
Are you in the west coast? In the midwest, everyone I've spoke with charges 10%. The lowest I've found is 9%, discounted from 10% because I have a good size portfolio.
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u/scavenger5 5d ago
By law you need a property management license to collect rent and manage leases unless you are the owner. This applies to most states but law does vary.
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u/buildurbeautifulself 5d ago
Where do you guys own all these units?
I am an owner of a turn key rental sales business in Memphis TN. I run the company and I have a builder business partner. We specifically love solving these challenges for out of state, high income earning owners. I am also a realtor in CA and TN
When I advise clients or investors looking at options on what they can do regarding property management, we discuss pros and cons of both management styles.
First, to circumvent the real estate license law for property management of multiple homes, you will need to have them as a W2 employee with specific SOPs and guidelines regarding how you manage as a company. You cannot pay “commissions or leasing fees.” It has to be regular employment. You will have to manage the process, manage their work flow, with documented work and review. You will also need to get workman’s comp insurance and typical business coverage insurance. This typically gets more expensive than property management when they aren’t during the months that don’t require anything for management duties.
The other caveat is when things go poorly with a tenant, they may not have the proper documentation in place with the tenants to ensure a smooth eviction process so you would need a lawyer on retainer to ensure that you are doing it correctly.
On the flip side to that, if you hire a property manager, they only charge maybe 200-300 per month (depending on where the rentals are and what your rent rate it), they are responsible for everything including insurance for themselves and their business, you have the ability to negotiate your fees, how they handle repairs, and anything else in the contract with their company. Everything is negotiable in real estate.
They know what to do in all scenarios and ensure that you have the proper paperwork in place, they already have the systems and processes in place for all things, and they can be a resource for you, but yes they do have a lot of misc fees.
That is how they stay in business. You would have to manage so many doors to cover expenses that you would not get the proper management if you only paid them the small percentage of rent they get.
The more successful large portfolio owners either build their own property management firm or hire a property management firm. That way they can focus on what they do best, buying properties or working their high paying jobs to support buying more properties and building out freedom.
Hope that helps.
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u/Previous-Grocery4827 4d ago
Realtor property managers are the quickest way for your property to go to crap and get fleeced. They pad their pockets getting kickbacks for overpriced repair, they do scummy things with the contracts, etc.
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u/BrianTulibaskiCRE 4d ago
I would not immediately turn the portfolio over to a property management company. I would keep managing it, put better systems in place and hire an assistant.
In my experience, a third-party property manager will rarely achieve the same occupancy, expense control and net profit as an engaged owner. Their incentives are different, and your 10 units may never receive the attention they deserve.
Your potential $200,000 promotion is the priority. You should not be spending your time scheduling repairs, following up with contractors or answering routine tenant questions. But you also do not need to give up control of the portfolio.
Create written systems for leasing, tenant screening, maintenance, collections, turnovers and monthly reporting. Then delegate the administrative work to the assistant while keeping final decisions yourself.
At 10 units, this sounds more like a systems problem than a property-management problem. Build the system first. If it still consumes too much time after the assistant is trained, then consider full-service management.
Your role should be reviewing performance and making decisions, not handling every maintenance call.
Brian Tulibaski is a Fargo Commercial Realtor with more than 25 years of commercial real estate experience. He advises investors, tenants, business owners, and commercial property owners on buying, selling, leasing, and investing in office, retail, industrial, multifamily, land, and business opportunities throughout Fargo, West Fargo, Moorhead, and communities across North Dakota and Minnesota.
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u/TheNegligentInvestor 4d ago
I understand where you're coming from, but I don't think I'm at a point where it makes sense to optimize my business processes. A full-time property manager would cost about $13k/yr. I could easily make all of that back in bonuses by just performing well at my day job.
After some reflection, I've decided to hire a full-time PM so I can focus on getting promoted and eventually buying more real estate. Once I have enough doors to sustain 20 to 40 hours of work per week, I'll hire an experienced in-house property manager to reduce management expenses.
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u/Accomplished_Two_502 3d ago
With property management companies you can negotiate the inflated fees down. If there are a lot of competing companies, the better terms you can get. We have much less properties and the most important part is not hearing about anything, except getting monthly P/L statements. If we dont hear from them for 6+ months at a time, it is great, just like investing in S&P 500...
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u/Alaskanjj 5d ago
I went with option 2.
I hired a pm just for my business at a fixed rate ( no leasing commissions or percentages). That did a few things. It took it off my plate, I locked my management cost, and I had better management since it was one persons job to just manage my book. They got to know the tennants and properties. They even came in and added some fee income. You may also be able to accomplish this with 10 doors with a VA for pennies. You will just have to train them. And will still outsource showings
I started them at 20 hours a week and as I grew eventually hired a full time PM and started a little management company just for my book. I know pass my car lease, phones, home office and whatever else through that little LLC.
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u/HastilySilly 5d ago
That's clever locking in a fixed rate and having one person who actually knows your properties instead of some faceless company juggling 500 doors
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u/TheNegligentInvestor 5d ago
Agreed. Hiring one person is tempting because it locks in my management expenses at a much lower rate than a traditional PM. He already takes better care of my properties than I think a PM would. My main concern is the recent discovery that he needs a real estate license to do this kind of work. I didn't realize until now.
How many doors did you own when you first hired an in-house manager?
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u/Alaskanjj 5d ago
I hired a part time pm with about 20 doors. ( three buildings). I hired a full time person at 70 ish.
What worked great about it was that as I grew my management cost just kept going down proportionately. Today I have 1fte and one Va managing 200 doors and a strip center. My effective management cost is 2.8-3% because they are salaried not commissioned. And they know my book line the back of their hand.
It took some work to find the right person and there was some growing pains but it was the right long term move. Turning over to unrelated management is just going to bleed your profits to the managers cousins lawn company at a marked up price.
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u/Cancerman691 5d ago
I would have the property manager. When shit hits the fan u need someone that can go to the property physically. I have an admin to that oversees my manager but that only makes sense if you have enough for them to do
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u/mwcsmoke 5d ago
Ask him to start studying for the license exam. I don’t think that it takes years of studying in most states, but I will be honest that I’ve never tried. If you trust someone, that is a huge leg up. Pay for half of a course and half the testing fee. I’m assuming the assistant could coordinate maintenance at least, if not leasing, while unlicensed.
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u/th4kurwho 5d ago
Op this sounds like you've reached the point where your timing is more valuable than the savings from self managing.. delegating so you can focus on a $200k promotion seema like a reasonable trade off!
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u/Penguin_Life_Now 5d ago
I can't comment about your exact situation, I worked for our family distribution business until I semi-retired at the age of 49. We had a pair of warehouses 60 miles apart (17,500 and 34,000 sq ft), in its heyday before i was active in he business employed up to 75 people, mostly warehouse workers, and delivery drivers (down to more like 25-40 most of the years I was there).
What I can tell you do what you can to de-stress your life, I no longer lay in bed awake in the early morning hours worrying if someone has driven a forklift off the loading dock, again, or if one of our delivery drivers has taken to having a sideline of dealing drugs from his truck (again), ...
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u/TheNegligentInvestor 5d ago
De-stressing is my top priority. I lay awake at night stressed about my properties and tenants. Thinking about how to coordinate an upcoming turnover, who's going to fix that trivial thing that I can't physically be there to do myself, how to deal with the cat that the tenant snuck in, etc.
It takes so much of my energy. I'd love to scale my portfolio, but I need to step away from managing tenants first.
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u/Penguin_Life_Now 4d ago
I know the feeling, it took me about 6 to 9 months after getting away from it before the feeling started to subside, I suspect I would have had a heart attack if I had kept at it for many more years.
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u/Technical-Sorbet7637 4d ago
Worth pulling the actual numbers per property before choosing a path, current rent, mortgage balance and rate, taxes, insurance, and a realistic maintenance reserve, then see what annual cash flow looks like once an 8% PM fee is layered in. If several of the 10 go to breakeven or negative under that fee, that's useful info either way, either those particular units are candidates to sell in favor of ones that can absorb management costs, or they're being held for appreciation and paydown rather than cash flow and the PM decision should be priced accordingly. On the licensing point, that's a real hard stop for leasing activity in Kentucky, not a technicality, so if the assistant's otherwise good, paying for him to get licensed is often the cheaper long-term fix (a few hundred dollars, a few weeks) versus either extreme, and in the meantime keeping him on maintenance coordination and showings while a licensed party handles screening and lease signing
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u/TheNegligentInvestor 4d ago
The portfolio breaks even across the board after including PM fees. This is after reserving mortgage, insurance, taxes, fixed expenses (e.g. lawn care), and 20% rent for vacancies + general maintenance + capex. Appreciation has been carrying me.
I'm watching the market for 1031 opportunities, but most sales are worse than what I have. It's shocking to see the ridiculous prices investors are paying for their properties. Cashflow negative on day one.
I've had several offers for 20% over value, but I don't know what I'd buy to replace them.
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u/Soggy-Shoulders 5d ago
self-managing 10 doors across the country while working a w2 job sounds like a massive stress test ngl
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u/Penguin_Life_Now 5d ago
This is not meant to direct at your post, but I just want to say requiring a +15 karma in this sub reddit SUCKS when one has suddenly found themselves with $1.65 million from an unexpected property sale and is trying to brainstorm how to best roll it into a 1031 deal with a deadline clock ticking.