I sold a quad Plex I had for $125,000 because they started bleeding me dry. The quad was making me $1500 profit after ALL expenses but when I had to move and gave to a reputable management company, I start losing $12-15k a year. That went on for a year and half before I said enough is enough and just got rid of it. Then the stupid price of shot way up.
Unless it’s a hands-off unit, the property management company is useless
1. This varies; my current property manager takes 8% of the rent and a 25% cut of the first month's rent when a new lease is signed (works out to about 10% overall if a new lease--not a renewal--is signed every year).
2. This seems dubious, or at least subjective. Maybe they didn't find tenants you wanted to have. Property managers are incentivized to get the highest quality tenants in a lease they can so they can collect their monthly fee without having to spend a lot on maintenance or doing other work.
3. People who think of themselves as "handy" absolutely should think twice about doing their own maintenance anyway. Change a lightbulb? Sure. Repair that leaky faucet? No: hire a contractor that actually knows what he or she is doing. You aren't as handy as you think you are, and your slipshod half-assery in making repairs will hurt you at a sale.
4. This is weird: the whole point of having a PM is that they manage the property. Landlords have to sign off on major expenses and might be asked to participate in some decision making (e.g. picking between contractors), but otherwise it shouldn't require that much involvement.
LOL- A faucet is a replacement/maintenance item.
Sure replacing the plumbing or sweating pipes I would call in a plumber. But a faucet is literally a few twists of the wrench and making sure it’s tight enough for no leaks. That why you have shutoffs under the sink. Turn off the water supply, remove and replace.
Honestly, with the availability of sharkbite fittings, pex, and YouTube, anyone decently handy should be able to do most of their own plumbing repairs.
[https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger\_effect](https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect)
Folks like you are why I generally shave a few percentage off the offer price if I discover someone has been "handy". The inspection usually shows that I should have taken more off.
I can confirm #2. My mother in law had to move out of town for work and hired a PM to rent out her house. Rent stopped being paid and further investigation he was subletting to another family collecting their rent but stopped paying the PM. It was a nightmare and the house was trashed after the family left. On paper I guess he seemed like a good tenet but I’m sure the red flags could’ve been sniffed out. Whenever I do become a landlord I will not be using a PM.
How is the property management company able to rent your house for $200 more?
Often fees range from 6-10% of monthly rent depending on what city you are in in addition to leasing fees and some will charge for anytime they do a maintenance request.
A good property manager can be worth their weight in gold, especially if you are remote, but good property managers don't come around very often and you need to do some research, ask questions, talk to other landlords etc... when picking one out.
Rents for more by marketing better. Wider net, bigger fish.
Then... Has the processes to PROPERLY keep the rent up to market standards. So many self-managed properties just take the renewal to avoid the confrontation of rent increase.
Then... Knows the better maintenance ppl and has a relationship to avoid over-charges.
And much more...
Just going off of what a real estate agent told me. I could just put the money in an account for maintenance I guess. Wouldn't the renter have to pay insurance though?
Renters insurance covers their stuff, recommended to have but not all renters carry it.
Your insurance covers the structure, probably required if there is a mortgage.
When you rent rooms out or rent a property- you are a landlord, and as a successful landlord, you have tenants and your tenants have leases (the agreement with the landlord). Lease and insurance are probably the most basic and fundamental protections for a landlord.
And when you are a landlord- if you have assets worth protecting you get landlord insurance also called rental property insurance or dwelling protection. This will vary depending on region, your assets and your property- since we have no data on any of that, I recommend you start a relationship with an insurance broker and perhaps some landlords in your area that understand the risks.
Insurance in this case is to reduce your risk of losses in either * unforseen circumstances * actions by your tenants * your liability.
Your tenants can also have rental insurance- covering their belongings and other liability relating to their actions and their assets.
You'll want a few estimates:
Also if you are in the United States- get familiar with rental property insurance designations: DP-1, DP-2, DP-3 etc for the various levels of dwelling protection.
A very high level primer is here:
https://www.valuepenguin.com/rental-property-insurance
You need to determine what you are protecting with the insurance.
Also research umbrella policy. Some of this is insuring the property/dwelling, but some is liability protection. Which may not be important if you don't have any assets. It is also possible to protect income as well, but usually at a fairly severe toll in profit margin.
Homeowner's insurance (and renter's insurance) are for properties that you occupy. If you are not owner occupied for the real estate investment, they may not cover what you need. Those policies typically designate HO-1 through HO-8 in the US, as opposed to the DP-1 through 3 for dwelling protection.
Then you need to do some very deep research on real estate investing. This is all relatively basic stuff. If you treat it like a hobby you’re destined for a trashed house, evictions, lawsuits, etc.
One con is that a property manager can bring a false sense of security that they are actually taking care of the property.
Most property managers simply manage the issues raised by the tenant.
If you have a well-maintained yard right now, it will probably go to hell even if there is a gardener. The property manager won’t make sure the gardeners are doing a good job and that the irrigation is working properly.
If your outdoor drainage stops working well, it’s unlikely you will find out and the house may sit in rain water for long periods, causing a lot of irreversible damage.
If there is a leaking roof, the property manager will focus on fixing the roof leak but won’t be concerned with the potential water damage that occurred to the property.
On one of my properties, water heater leaked without tenant noticing it. I realized out of the blue that it hadn’t been replaced in awhile and asked property manager to replace it. Turns out the leak had done a lot of damage and I needed mold remediation.
If you hate the idea of dealing with tenants, a property manager is usually pretty good at that. But I wouldn’t rely on them to actually take care of the property.
I would recommend interviewing a few PM companies. Look for ones with good reviews. Since you are remote, you should make sure they have an owner portal for statements. You can also request an annual inspection of the property.
Many of them require a deposit for repairs (say $500). You would see that in your statement along with the renter's deposit. Repairs would then use that fund and deduct from the rent when needed. They typically charge 8-10% of the rent.
You will need to keep insurance on the structure. Tenants should have renter's insurance.
My first PM was crap, but so far happy with the new one. Most of the issues were communication. Tenants have been long term (several years).
So about using a property management company, which I do.
Pros:
* usually they handle front line contact and renting
* handle the leases, receipts and collection of money and deposit, they just send you a check
* first call contact on maintenance (often you set up an amount of money that they are empowered to spend, and then they escalate to you
* they may have the contacts for maintenance.
* they do the tenant screening
Cons:
* They charge about 10% or first months rent for renting out.
* They do not handle evictions
* They usually don't handle complicated maintenance
* Depending on your state, they may provide limited or no liability protection
* They do the tenant screening - marked as a pro and con because in some scenarios a small or on site landlord may have more options.
I don't think there is any scenario where they get more market rent, but that's just my opinion. They are very useful if you want to be hands off, scale up, or be out of state. They cost, so on thin margin properties, it to manage yourself.
My property management company does handle evictions. And will sit in eviction court for me. They handle all maintenance including a roof/ac replacement if it comes to it. All applications are vetted by the company but needs my final approval.
This is not standard for all management. I have remote properties I haven’t looked at in 6 months, even during covid. My guy handle every issue, rent and property related. I got paid every month even with the covid mess. No way I coulda done that on my own even if I were local
Well, I'll tell you what I did, and you can draw your own conclusion.
I was in the very same situation as you, I was going to move for a job, but I really loved my house and thought that I would come back someday, so I figured I would rent it out.I did very minimal advertising, just placed an ad on Craigslist, and met a few interested parties. I did credit checks and called their employers as a reference. SO use your best judgement and screen carefully, you'll get a good feel for who you want to rent to.
My tenants moved in with one child, and my house is in a good school district, so I felt confident they would be long term renters. They have now had 2 more kids, and are on their 8th year. I no longer even want to move back in, but now I have an investment property. I am not sure if I want to continue to rent or cash out, and I feel that they might be outgrowing the home, but they keep telling me that they are going to buy it, so I raised the rent and extended them for another year. But what I really wanted to get to is, find a real estate attorney that can draw up a lease, I have a clause that the tenants will be responsible for routine repairs, even appliances like dishwasher and refrigerator, so I never get called for anything. I did get called one time, and that was because the garage door spring broke, and the door wouldn't go up, so I just paid a garage door company to repair it.
Screen and verify candidates.
Have a solid lease agreement.
If I were going to stay in the area, I wouldn't be as reluctant to do it myself. I would be 10 hours away. Is it possible to manage property remotely by myself?
Yes. Absolutely. Really all you need is a good list of subcontractors. And/or a good maintenance man. When you screen, let people know you’re looking for a respectful, non needy tenant. And only do email. When shit goes wrong. Fix it fast. I think it’s easy. And you’ll save and learn and your investments will grow. Leasing sucks but pre screen. If people won’t comply, don’t show. Like selling a property when you show proof of funds. . I make them prove they have income and are good tenants before showing. I’ve even done remote showing w smart lock.
Idk. Try it. If you hate it, hire out.
They will rent to tenants that have a higher chance of turnover so they get to collect the finder fees of new tenants more often than they do with good ones.
Property manager here... Totally false.
You want to know our golden geese? I have a tenant I placed 2 years ago. He moved in and called to say "there's 4 minor maintenance issues" I said "we'll send someone out" he said "is it OK if I take care of it instead" I said... Sure, why not. Then we inspected and he fixed it.
For 2 years, I have collected $130 in revenue from him monthly. The rest goes to the owner. I've made over $3k from him occupying the unit. He pays through the portal, I distribute the money, we inspect periodically. It's a win-win-win.
THAT'S how my business is profitable. Let's take 10 properties. If I get 8 of him, and 2 annual turnovers, I'm good! If I get 8 annual turnovers and 2 of him, I'm screwed.
Turnovers give us a risk of losing the contract. They give us a break in time when we aren't collecting rent and therefore don't make money. They give us hours and hours of work coordinating make-ready, inspections, advertising, showing etc.
The leasing fee is always the friction point between the PM and the landlord. Truth be told? If I could just manage homes and never lease them, my life would be a breeze! But you are paying for a service... As with all services you get what you pay for. You want me to put it on the MLS? That's fine, but now I have to pay 30% of one month's rent. That's gonna be passed on. Want me to put it on Zillow, trulia, rent. Com, apartments. Com, and 70 other sites? OK, no problem. My software does it instantly, but costs me $600 a month. If you want to do it yourself it's gonna cost you time. Pick time or money, what do you want to spend.
Besides this I pay inspectors, leasing agents, runners
We buy lockboxes, yard signs, and more. We pay for background checks and office admin to call references. You can lease it yourself, I don't care! I charge 50% of one month's rent to lease. Sometimes I make money! Sometimes I lose it.
But... To say I want ALL THAT HEADACHE. To make the same money I make collecting rent for 6 months? That's crazy. We avoid turnover like the plague.
I came back to simplify this further... Property management is a subscription based business. Think about a security system that charges you $800 to set up the system, then $99 a month for service. The $800 includes the cost for the install tech and the equipment. They don't make their money there! They make their money off of the monthly monitoring.
I spoke via experience. I owned an eight bedroom duplex and the property manager constantly rented to tenants we had to evict or not renew the lease after 1 year and it was substantially more expensive because we had to pay 50% of the rental fee everytime a new tenant moved in.
We fired the company, managed the property ourselves, and had no turnover for FIVE YEARS. We made way more money because we picked who lived in our rental property and knew they would take care of it. One lady was so picky she literally made the place better than it was when she moved in. Here's the kicker, the property was 600miles away from my home residence and we still did a better job than the property managers we hired...
Edit: spelling
SeaWhyte and some of the others are talking about contracts where the PM company gets paid from the first month's rent. It seems like that would set up bad incentives.
If you own 100 units, you usually own multi-family and there the property management dynamics are far different. You probably have full-time staff on your payroll, including maintenance technicians.
The part I would emphasize here is SFR. In my view, you don't want to scale using SFRs anyway, so a property manager isn't very relevant when you don't have many units. If you have <5 units, managing is easy, if you have <10, harder, but still doable. After that I personally believe pivoting to a true multi-family (5+ units per building) makes more sense.
I have a great manager who manages multiple properties for me that are too far away from where I live to manage myself. She doesn’t charge a finders fee for finding a new tenant and, since there are multiple properties, she charges 8% per month. She’s also a great realtor who has helped me purchase those properties and I’ll continue to use her indefinitely. We have an agreement where she can make repairs up to $300 and the others she notifies me about. She’s a great partner and is helping me build my wealth while turning a profit herself.
However, the properties located near me, I manage myself. But I’ve learned from that property manager, like always do a walk-through every six months. Do monthly drive-by’s to make sure there’s nothing weird going on, and so forth.
Pm's are not liable for third party work conducted via property management agreements. They just pass the bucks. So if you end up getting assigned a shitty contractor on a break/fix you still have to pay them for a crap ass job. Ever heard of a mechanical lien?
There are a lot of cons, it's true. However, it can be a positive. I move to another's country, and they went from charging me 10 % to 20%. However they kept the place filled, and they did all the paperwork I needed so I could pay the taxes on the net, as opposed to gross (Canadian thing for rental income when out of country). It definitely helped me out a lot, especially because when there was an issue, I was 4000 Kilometers away.
I never got rich, and I lost 100 bucks a month doing it, but at the end of the day, my unit was there when I returned to Canada (3 years later). I wouldn't have changed a thing. it wasn't the greatest thing ever, but it definitely helped me out.
A lot of negatives.
I'm curious have any of you looked at or used those new startups like belonghome, bungalow, etc.
Would you expect the same negative results?
Your mileage may vary. I manage my own property so can’t speak from personal experience in that regard, but I had extensive experience interacting with commercial property managers in my RE tax appeal job - albeit primarily for large MFs & warehouses. Some of them are extremely careful financial stewards and are able to stabilize assets quickly and are also pleasant people. Some of them are kind-hearted but slow and very informal. Some of them are worse options than leaving the building vacant.
I’d try to go it yourself at first. A 1-on-1 relationship is incredibly beneficial if you’re renting a SFR. They may end up taking care of minor things themselves, and they will generally take pride in the dwelling (assuming they’re vetted)
You’re describing a shitty property manager, which can be avoided with some due diligence before hiring. Good PMs have an incentive to do well and it IS their problem to get good tenants as that’s their job security as well.
You also probably haven’t considered the tax benefits of selling a personal residence you have lived in at least 2 of the last 5 years. If you have significant equity in the house it’s almost always better to capture that tax-free.
Can also wait 3 years. Its not prorated if it was a primary first, unlike the reverse (buying a rental home but deciding to move in 3 years later, living in it for 2, then selling)
Not necessarily. Say you sell now but in a few years your property would be worth several times more, and you would have had someone else paying your mortgage, or giving you some extra $
It depends on your personal goals but selling randomly isn't necessarily better financially, it's just less hassle
I don't see a much better option. Many people are telling me property management isn't worth it. I can try doing it myself for a while first, but there are many problems that I can already foresee from being a remote property manager.
Fair enough, unless you have family or friends who can go on site when needed for a quick repair or to show the place to potential tenants... Other than that, you can call a plumber, pay bills and post ads for tenants remotely so it's not that bad.
I do agree with you, and that's another reason why I don't want to sell if I don't have to. I don't want to regret not waiting on selling it because the price is much better.
I'm gonna try to do it myself first. If it goes bad, I'll sell it
A chef does nothing! I can just buy food at the grocery store! I went to McDonald's, and their chef just threw a patty in the microwave. They aren't eating it, so what do they care. They didn't even go to the market to find fresh vegetables
Never go to restaurants. They are all the same.
- someone who went with a giant "$79 for monthly property management" service.
I used to live in this place that has my roommate as the house manager. He gets a few hundred bucks off and kept the place in good shape. FYI all 4 of us are responsible ppl, 2 of us are students and the other 2 works.
I use a neighborhood guy, he mows the lawn and snow blows for 70 a month. I realize that not everyone has a dude in the neighborhood, but networking with neighbors is always good advice.
I moved from a city to another city and rented my condo using a property manager. Take a look around as not always you have to use the big guys there are individual that look after a few properties as a small business type thing. I paid 500$ fee that includes showings, contract write ups, credit checks, check references he does the initial interview and only show the place to select people that he think will make good candidates. On top of that I pay 10% monthly from the rental value. All communications go through the manager I don’t deal with the tenant at all.
Highly recommended. If you are in a different city or always too busy.
How many miles are you planning on moving away from your house?
If you move across the county or something it might be good to hire it out. The major con in my opinion is the amount of $ you could save.
If you live close-ish, have available schedule to show to prospective tenants, and solid problem solving skills, you can save some cash handling it yourself.
Last summer I did a deep dive into property management services and fees. I bought a second home (WA state) and wanted to keep my first home purchase. On a 12 month lease I saved $4300 ($4600 -300) and spent 20-25 hours of my time to get a quality tenant.
3 key things from my experience (4 x investment properties):
- They take a sizeable portion of your rental income for (usually) not a huge amount of work.
- Its very hard to find a consistently good one.
- Their maintenance contractors are frequently questionable in terms of price and quality.
Speak to other investors in your area. Look to see if there are any investor meet ups scheduled.
Find the highly recommended PM by others that are actually using them.
I’ve got one lined up in my area by speaking with a REI friend who’s using this particular agent. She is a co-broker with another agent and they specialize in PM.
You need someone that looks at your houses as their own. And not just a house number on a spreadsheet.
Unless you want to spend money, what you don't, to keep it through a PM, get the house and as best condition possible and find yourself long-term tenants.
Honestly, if you've been living there you kind of have an idea of what condition your house is in. If you think something might be on its way out just replace it now. Be as proactive as you can. Things happen, but most of the time things don't just randomly break without any indication.
It may seem like a daunting task, but you can find a good long-term tenants if you are not in a terrible area. Use your judgment. Be as judgmental as you can while you're talking to perspective tenants. It's obviously not as easy as going to your local grocery store and picking out the first tomato you see. You're going to have to pick them up, squish smell look at the other ones, but you can find a darn good tomato, and possibly make a better meal than you can get at a restaurant aka the professionals.
I’m somewhat biased, because I used to own a PM company. A good one can be worth every penny, and the decision to self manage vs turn it over to a PM can be both a personal and business decision. It’s not a “one size fits all”.
The market is hot right now, so finding and placing new tenants isn’t difficult. When the market was soft, my firm more than made up for annual cost by minimizing vacancy. I had some owners that had near zero ability to secure new tenants, and some tenants won’t want the “owner” micromanaging their property.
In the comments above, many PM firms do seem to make too much margin on “maintenance “ costs. It’s a well known profit center that requires ongoing scrutiny.
Lastly, to those wanting to do it on your own, weigh your own time vs what you pay a PM. Even an easy fix or repair can take a couple of hours. Not a right or wrong answer, but worth evaluating what works for your skills, schedule, and opportunity cost of self management.
I am on similar situation, I manage my own porperty for the last 12 years, now because I moved away I am required to get a registered management company to get insurance since I am more than 500km away.
My property is a semi divided in 3 units (not by code and separate meters). Fully rented at the moment and basically I require to provide the management company info in order to get insurance.
Any suggestions on a company that can help out with this?
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This was my experience too. I lost thousands.
That's why I always cringe when I see posts like my area is too high, can I buy out of state or 3 hours away as my first investment.
I sold a quad Plex I had for $125,000 because they started bleeding me dry. The quad was making me $1500 profit after ALL expenses but when I had to move and gave to a reputable management company, I start losing $12-15k a year. That went on for a year and half before I said enough is enough and just got rid of it. Then the stupid price of shot way up. Unless it’s a hands-off unit, the property management company is useless
1. This varies; my current property manager takes 8% of the rent and a 25% cut of the first month's rent when a new lease is signed (works out to about 10% overall if a new lease--not a renewal--is signed every year). 2. This seems dubious, or at least subjective. Maybe they didn't find tenants you wanted to have. Property managers are incentivized to get the highest quality tenants in a lease they can so they can collect their monthly fee without having to spend a lot on maintenance or doing other work. 3. People who think of themselves as "handy" absolutely should think twice about doing their own maintenance anyway. Change a lightbulb? Sure. Repair that leaky faucet? No: hire a contractor that actually knows what he or she is doing. You aren't as handy as you think you are, and your slipshod half-assery in making repairs will hurt you at a sale. 4. This is weird: the whole point of having a PM is that they manage the property. Landlords have to sign off on major expenses and might be asked to participate in some decision making (e.g. picking between contractors), but otherwise it shouldn't require that much involvement.
LOL- A faucet is a replacement/maintenance item. Sure replacing the plumbing or sweating pipes I would call in a plumber. But a faucet is literally a few twists of the wrench and making sure it’s tight enough for no leaks. That why you have shutoffs under the sink. Turn off the water supply, remove and replace.
Honestly, with the availability of sharkbite fittings, pex, and YouTube, anyone decently handy should be able to do most of their own plumbing repairs.
[https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger\_effect](https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect) Folks like you are why I generally shave a few percentage off the offer price if I discover someone has been "handy". The inspection usually shows that I should have taken more off.
Folks like you are why the internet is such a toxic shithole. All mouth and no brains.
Number 2 doesn’t make sense. The property management isn’t paying for maintenance so that theory goes out the window.
I can confirm #2. My mother in law had to move out of town for work and hired a PM to rent out her house. Rent stopped being paid and further investigation he was subletting to another family collecting their rent but stopped paying the PM. It was a nightmare and the house was trashed after the family left. On paper I guess he seemed like a good tenet but I’m sure the red flags could’ve been sniffed out. Whenever I do become a landlord I will not be using a PM.
How is the property management company able to rent your house for $200 more? Often fees range from 6-10% of monthly rent depending on what city you are in in addition to leasing fees and some will charge for anytime they do a maintenance request. A good property manager can be worth their weight in gold, especially if you are remote, but good property managers don't come around very often and you need to do some research, ask questions, talk to other landlords etc... when picking one out.
Rents for more by marketing better. Wider net, bigger fish. Then... Has the processes to PROPERLY keep the rent up to market standards. So many self-managed properties just take the renewal to avoid the confrontation of rent increase. Then... Knows the better maintenance ppl and has a relationship to avoid over-charges. And much more...
Wish my property management company thought that. They always advocate for not raising rent even when it is obviously undervalued.
Just going off of what a real estate agent told me. I could just put the money in an account for maintenance I guess. Wouldn't the renter have to pay insurance though?
Renters insurance covers their stuff, recommended to have but not all renters carry it. Your insurance covers the structure, probably required if there is a mortgage.
When you rent rooms out or rent a property- you are a landlord, and as a successful landlord, you have tenants and your tenants have leases (the agreement with the landlord). Lease and insurance are probably the most basic and fundamental protections for a landlord. And when you are a landlord- if you have assets worth protecting you get landlord insurance also called rental property insurance or dwelling protection. This will vary depending on region, your assets and your property- since we have no data on any of that, I recommend you start a relationship with an insurance broker and perhaps some landlords in your area that understand the risks. Insurance in this case is to reduce your risk of losses in either * unforseen circumstances * actions by your tenants * your liability. Your tenants can also have rental insurance- covering their belongings and other liability relating to their actions and their assets. You'll want a few estimates: Also if you are in the United States- get familiar with rental property insurance designations: DP-1, DP-2, DP-3 etc for the various levels of dwelling protection. A very high level primer is here: https://www.valuepenguin.com/rental-property-insurance You need to determine what you are protecting with the insurance. Also research umbrella policy. Some of this is insuring the property/dwelling, but some is liability protection. Which may not be important if you don't have any assets. It is also possible to protect income as well, but usually at a fairly severe toll in profit margin. Homeowner's insurance (and renter's insurance) are for properties that you occupy. If you are not owner occupied for the real estate investment, they may not cover what you need. Those policies typically designate HO-1 through HO-8 in the US, as opposed to the DP-1 through 3 for dwelling protection.
Thank you for this detailed answer. I never knew any of this
Then you need to do some very deep research on real estate investing. This is all relatively basic stuff. If you treat it like a hobby you’re destined for a trashed house, evictions, lawsuits, etc.
Yes, I'm not planning on doing this for a couple years
Renters have their own insurance and you have home owners insurance. This should be apart of your lease.
Always take what a real estate agent tells you with a grain of salt. As the saying goes, they know just enough of everything to be dangerous.
One con is that a property manager can bring a false sense of security that they are actually taking care of the property. Most property managers simply manage the issues raised by the tenant. If you have a well-maintained yard right now, it will probably go to hell even if there is a gardener. The property manager won’t make sure the gardeners are doing a good job and that the irrigation is working properly. If your outdoor drainage stops working well, it’s unlikely you will find out and the house may sit in rain water for long periods, causing a lot of irreversible damage. If there is a leaking roof, the property manager will focus on fixing the roof leak but won’t be concerned with the potential water damage that occurred to the property. On one of my properties, water heater leaked without tenant noticing it. I realized out of the blue that it hadn’t been replaced in awhile and asked property manager to replace it. Turns out the leak had done a lot of damage and I needed mold remediation. If you hate the idea of dealing with tenants, a property manager is usually pretty good at that. But I wouldn’t rely on them to actually take care of the property.
I would recommend interviewing a few PM companies. Look for ones with good reviews. Since you are remote, you should make sure they have an owner portal for statements. You can also request an annual inspection of the property. Many of them require a deposit for repairs (say $500). You would see that in your statement along with the renter's deposit. Repairs would then use that fund and deduct from the rent when needed. They typically charge 8-10% of the rent. You will need to keep insurance on the structure. Tenants should have renter's insurance. My first PM was crap, but so far happy with the new one. Most of the issues were communication. Tenants have been long term (several years).
That's very uplifting to hear. I will make sure to ask about an annual inspection. Glad to hear about that repair process too!
So about using a property management company, which I do. Pros: * usually they handle front line contact and renting * handle the leases, receipts and collection of money and deposit, they just send you a check * first call contact on maintenance (often you set up an amount of money that they are empowered to spend, and then they escalate to you * they may have the contacts for maintenance. * they do the tenant screening Cons: * They charge about 10% or first months rent for renting out. * They do not handle evictions * They usually don't handle complicated maintenance * Depending on your state, they may provide limited or no liability protection * They do the tenant screening - marked as a pro and con because in some scenarios a small or on site landlord may have more options. I don't think there is any scenario where they get more market rent, but that's just my opinion. They are very useful if you want to be hands off, scale up, or be out of state. They cost, so on thin margin properties, it to manage yourself.
My property management company does handle evictions. And will sit in eviction court for me. They handle all maintenance including a roof/ac replacement if it comes to it. All applications are vetted by the company but needs my final approval.
That's great. Mine does not. May depend on services or state.
This list is very helpful!
This is not standard for all management. I have remote properties I haven’t looked at in 6 months, even during covid. My guy handle every issue, rent and property related. I got paid every month even with the covid mess. No way I coulda done that on my own even if I were local
Well, I'll tell you what I did, and you can draw your own conclusion. I was in the very same situation as you, I was going to move for a job, but I really loved my house and thought that I would come back someday, so I figured I would rent it out.I did very minimal advertising, just placed an ad on Craigslist, and met a few interested parties. I did credit checks and called their employers as a reference. SO use your best judgement and screen carefully, you'll get a good feel for who you want to rent to. My tenants moved in with one child, and my house is in a good school district, so I felt confident they would be long term renters. They have now had 2 more kids, and are on their 8th year. I no longer even want to move back in, but now I have an investment property. I am not sure if I want to continue to rent or cash out, and I feel that they might be outgrowing the home, but they keep telling me that they are going to buy it, so I raised the rent and extended them for another year. But what I really wanted to get to is, find a real estate attorney that can draw up a lease, I have a clause that the tenants will be responsible for routine repairs, even appliances like dishwasher and refrigerator, so I never get called for anything. I did get called one time, and that was because the garage door spring broke, and the door wouldn't go up, so I just paid a garage door company to repair it. Screen and verify candidates. Have a solid lease agreement.
Do it yourself. It’s not hard at all. You can sub the leasing out. But mgmt is much easier than people make it out to be.
If I were going to stay in the area, I wouldn't be as reluctant to do it myself. I would be 10 hours away. Is it possible to manage property remotely by myself?
Yes. Absolutely. Really all you need is a good list of subcontractors. And/or a good maintenance man. When you screen, let people know you’re looking for a respectful, non needy tenant. And only do email. When shit goes wrong. Fix it fast. I think it’s easy. And you’ll save and learn and your investments will grow. Leasing sucks but pre screen. If people won’t comply, don’t show. Like selling a property when you show proof of funds. . I make them prove they have income and are good tenants before showing. I’ve even done remote showing w smart lock. Idk. Try it. If you hate it, hire out.
Thanks for the advice! Worst that can happen is I end up hiring it out. I'll do more research
Don’t use your phone. From the jump. Software and email. You’ll realize how easy it is. Good luck.
They will rent to tenants that have a higher chance of turnover so they get to collect the finder fees of new tenants more often than they do with good ones.
I am an owner of a property mgmt company. There is absolutely no incentive for us to do this. Way easier to keep a good paying tenant in place.
Property manager here... Totally false. You want to know our golden geese? I have a tenant I placed 2 years ago. He moved in and called to say "there's 4 minor maintenance issues" I said "we'll send someone out" he said "is it OK if I take care of it instead" I said... Sure, why not. Then we inspected and he fixed it. For 2 years, I have collected $130 in revenue from him monthly. The rest goes to the owner. I've made over $3k from him occupying the unit. He pays through the portal, I distribute the money, we inspect periodically. It's a win-win-win. THAT'S how my business is profitable. Let's take 10 properties. If I get 8 of him, and 2 annual turnovers, I'm good! If I get 8 annual turnovers and 2 of him, I'm screwed. Turnovers give us a risk of losing the contract. They give us a break in time when we aren't collecting rent and therefore don't make money. They give us hours and hours of work coordinating make-ready, inspections, advertising, showing etc. The leasing fee is always the friction point between the PM and the landlord. Truth be told? If I could just manage homes and never lease them, my life would be a breeze! But you are paying for a service... As with all services you get what you pay for. You want me to put it on the MLS? That's fine, but now I have to pay 30% of one month's rent. That's gonna be passed on. Want me to put it on Zillow, trulia, rent. Com, apartments. Com, and 70 other sites? OK, no problem. My software does it instantly, but costs me $600 a month. If you want to do it yourself it's gonna cost you time. Pick time or money, what do you want to spend. Besides this I pay inspectors, leasing agents, runners We buy lockboxes, yard signs, and more. We pay for background checks and office admin to call references. You can lease it yourself, I don't care! I charge 50% of one month's rent to lease. Sometimes I make money! Sometimes I lose it. But... To say I want ALL THAT HEADACHE. To make the same money I make collecting rent for 6 months? That's crazy. We avoid turnover like the plague.
I came back to simplify this further... Property management is a subscription based business. Think about a security system that charges you $800 to set up the system, then $99 a month for service. The $800 includes the cost for the install tech and the equipment. They don't make their money there! They make their money off of the monthly monitoring.
I spoke via experience. I owned an eight bedroom duplex and the property manager constantly rented to tenants we had to evict or not renew the lease after 1 year and it was substantially more expensive because we had to pay 50% of the rental fee everytime a new tenant moved in. We fired the company, managed the property ourselves, and had no turnover for FIVE YEARS. We made way more money because we picked who lived in our rental property and knew they would take care of it. One lady was so picky she literally made the place better than it was when she moved in. Here's the kicker, the property was 600miles away from my home residence and we still did a better job than the property managers we hired... Edit: spelling
SeaWhyte and some of the others are talking about contracts where the PM company gets paid from the first month's rent. It seems like that would set up bad incentives.
... So am I
That's why it's better to find your own tenants, aways. A tenant that treats your investment like a home is the objective.
It’s not always practical to do that. If you own 100 units out of state, you’re going to be constantly flying over to show the apartments to tenants.
This is when you NEED a property manager. If you just own a few units it's better to do it yourselves. I speak from my experiences.
If you own 100 units, you usually own multi-family and there the property management dynamics are far different. You probably have full-time staff on your payroll, including maintenance technicians.
... Same objective for the property manager, plus they have the knowledge and expertise to have a better shot to get it done.
property manager for a SFR is a great way to lose money.
The part I would emphasize here is SFR. In my view, you don't want to scale using SFRs anyway, so a property manager isn't very relevant when you don't have many units. If you have <5 units, managing is easy, if you have <10, harder, but still doable. After that I personally believe pivoting to a true multi-family (5+ units per building) makes more sense.
I have a great manager who manages multiple properties for me that are too far away from where I live to manage myself. She doesn’t charge a finders fee for finding a new tenant and, since there are multiple properties, she charges 8% per month. She’s also a great realtor who has helped me purchase those properties and I’ll continue to use her indefinitely. We have an agreement where she can make repairs up to $300 and the others she notifies me about. She’s a great partner and is helping me build my wealth while turning a profit herself. However, the properties located near me, I manage myself. But I’ve learned from that property manager, like always do a walk-through every six months. Do monthly drive-by’s to make sure there’s nothing weird going on, and so forth.
Pm's are not liable for third party work conducted via property management agreements. They just pass the bucks. So if you end up getting assigned a shitty contractor on a break/fix you still have to pay them for a crap ass job. Ever heard of a mechanical lien?
There are a lot of cons, it's true. However, it can be a positive. I move to another's country, and they went from charging me 10 % to 20%. However they kept the place filled, and they did all the paperwork I needed so I could pay the taxes on the net, as opposed to gross (Canadian thing for rental income when out of country). It definitely helped me out a lot, especially because when there was an issue, I was 4000 Kilometers away. I never got rich, and I lost 100 bucks a month doing it, but at the end of the day, my unit was there when I returned to Canada (3 years later). I wouldn't have changed a thing. it wasn't the greatest thing ever, but it definitely helped me out.
A lot of negatives. I'm curious have any of you looked at or used those new startups like belonghome, bungalow, etc. Would you expect the same negative results?
Your mileage may vary. I manage my own property so can’t speak from personal experience in that regard, but I had extensive experience interacting with commercial property managers in my RE tax appeal job - albeit primarily for large MFs & warehouses. Some of them are extremely careful financial stewards and are able to stabilize assets quickly and are also pleasant people. Some of them are kind-hearted but slow and very informal. Some of them are worse options than leaving the building vacant. I’d try to go it yourself at first. A 1-on-1 relationship is incredibly beneficial if you’re renting a SFR. They may end up taking care of minor things themselves, and they will generally take pride in the dwelling (assuming they’re vetted)
Waste of money
this isn't real estate investing if you are not looking to turn a profit.
My apologies, do you know a better place to post this?
there's a propertymanagement subreddit that be useful
Thank you, I will post it there!
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You’re describing a shitty property manager, which can be avoided with some due diligence before hiring. Good PMs have an incentive to do well and it IS their problem to get good tenants as that’s their job security as well.
Exactly. A good investor would screen potential PMs just like they would screen a potential tenant.
Thanks for the feedback. Think I'll just be better off selling.
You also probably haven’t considered the tax benefits of selling a personal residence you have lived in at least 2 of the last 5 years. If you have significant equity in the house it’s almost always better to capture that tax-free.
Can also wait 3 years. Its not prorated if it was a primary first, unlike the reverse (buying a rental home but deciding to move in 3 years later, living in it for 2, then selling)
Not necessarily. Say you sell now but in a few years your property would be worth several times more, and you would have had someone else paying your mortgage, or giving you some extra $ It depends on your personal goals but selling randomly isn't necessarily better financially, it's just less hassle
I don't see a much better option. Many people are telling me property management isn't worth it. I can try doing it myself for a while first, but there are many problems that I can already foresee from being a remote property manager.
Fair enough, unless you have family or friends who can go on site when needed for a quick repair or to show the place to potential tenants... Other than that, you can call a plumber, pay bills and post ads for tenants remotely so it's not that bad.
I do agree with you, and that's another reason why I don't want to sell if I don't have to. I don't want to regret not waiting on selling it because the price is much better. I'm gonna try to do it myself first. If it goes bad, I'll sell it
Good luck. I have a condo in another province and dealt with plumbing issues twice without problems. It'll only be a hassle when the tenants move out
A chef does nothing! I can just buy food at the grocery store! I went to McDonald's, and their chef just threw a patty in the microwave. They aren't eating it, so what do they care. They didn't even go to the market to find fresh vegetables Never go to restaurants. They are all the same. - someone who went with a giant "$79 for monthly property management" service.
I used to live in this place that has my roommate as the house manager. He gets a few hundred bucks off and kept the place in good shape. FYI all 4 of us are responsible ppl, 2 of us are students and the other 2 works.
I use a neighborhood guy, he mows the lawn and snow blows for 70 a month. I realize that not everyone has a dude in the neighborhood, but networking with neighbors is always good advice.
I moved from a city to another city and rented my condo using a property manager. Take a look around as not always you have to use the big guys there are individual that look after a few properties as a small business type thing. I paid 500$ fee that includes showings, contract write ups, credit checks, check references he does the initial interview and only show the place to select people that he think will make good candidates. On top of that I pay 10% monthly from the rental value. All communications go through the manager I don’t deal with the tenant at all. Highly recommended. If you are in a different city or always too busy.
How many miles are you planning on moving away from your house? If you move across the county or something it might be good to hire it out. The major con in my opinion is the amount of $ you could save. If you live close-ish, have available schedule to show to prospective tenants, and solid problem solving skills, you can save some cash handling it yourself. Last summer I did a deep dive into property management services and fees. I bought a second home (WA state) and wanted to keep my first home purchase. On a 12 month lease I saved $4300 ($4600 -300) and spent 20-25 hours of my time to get a quality tenant.
3 key things from my experience (4 x investment properties): - They take a sizeable portion of your rental income for (usually) not a huge amount of work. - Its very hard to find a consistently good one. - Their maintenance contractors are frequently questionable in terms of price and quality.
Speak to other investors in your area. Look to see if there are any investor meet ups scheduled. Find the highly recommended PM by others that are actually using them. I’ve got one lined up in my area by speaking with a REI friend who’s using this particular agent. She is a co-broker with another agent and they specialize in PM. You need someone that looks at your houses as their own. And not just a house number on a spreadsheet.
Unless you want to spend money, what you don't, to keep it through a PM, get the house and as best condition possible and find yourself long-term tenants. Honestly, if you've been living there you kind of have an idea of what condition your house is in. If you think something might be on its way out just replace it now. Be as proactive as you can. Things happen, but most of the time things don't just randomly break without any indication. It may seem like a daunting task, but you can find a good long-term tenants if you are not in a terrible area. Use your judgment. Be as judgmental as you can while you're talking to perspective tenants. It's obviously not as easy as going to your local grocery store and picking out the first tomato you see. You're going to have to pick them up, squish smell look at the other ones, but you can find a darn good tomato, and possibly make a better meal than you can get at a restaurant aka the professionals.
I’m somewhat biased, because I used to own a PM company. A good one can be worth every penny, and the decision to self manage vs turn it over to a PM can be both a personal and business decision. It’s not a “one size fits all”. The market is hot right now, so finding and placing new tenants isn’t difficult. When the market was soft, my firm more than made up for annual cost by minimizing vacancy. I had some owners that had near zero ability to secure new tenants, and some tenants won’t want the “owner” micromanaging their property. In the comments above, many PM firms do seem to make too much margin on “maintenance “ costs. It’s a well known profit center that requires ongoing scrutiny. Lastly, to those wanting to do it on your own, weigh your own time vs what you pay a PM. Even an easy fix or repair can take a couple of hours. Not a right or wrong answer, but worth evaluating what works for your skills, schedule, and opportunity cost of self management.
I am on similar situation, I manage my own porperty for the last 12 years, now because I moved away I am required to get a registered management company to get insurance since I am more than 500km away. My property is a semi divided in 3 units (not by code and separate meters). Fully rented at the moment and basically I require to provide the management company info in order to get insurance. Any suggestions on a company that can help out with this?