Property Managers

It’s hard to put a price tag on personal time and happiness. With 17 rental units at 10 different properties in two states, my spouse and I are about at the threshold we can manage while juggling a career and getting two teenage sons through high school and into college. We self-manage 11 of the units and hire a property manager for the 6 out of state units. I know there are folks who may be able to handle 20 or more properties while working a day job. I am not ashamed to admit I can’t! At points in my life, I’ve gotten work-life balance out of whack by focusing too much on earning a buck rather than what is truly important in life. At this stage, I’m not looking to repeat my mistakes!  

But what if the real estate bug bites us, opportunity knocks and it’s a great time to add a half dozen or so additional units to our portfolio? While I would be perfectly content to quit my day job and manage real estate full time, that would introduce a lot of risk in our personal finance while trying to put two kids through college and make that final savings push for retirement. A more logical solution to enable rental portfolio growth is to hire a property manager for some or all of our properties. Someone to share the burden of labor for this so called “passive income” real estate business!

For the past ten years, we’ve had a very positive experience partnering with a property manager who manages our units located 900 miles away. The key is staying in constant communication and watching maintenance dollars very carefully. Question anything that isn’t clear and understand enough about repairs to know if someone is trying to pull wool over your eyes. Fortunately, our property manager selects good vendors who charge fairly. Even if everyone is on the up and up, the additional maintenance and management costs when not doing it yourself may make the math untenable for a particular property at some point.

While a property manager may be a no brainer for out of state properties, how would we feel having someone to manage a property for us that is right down the street? In our business dealings, we’ve always tried take emotion out of the equation and look at the numbers. The math can still work on a local property while using a property manager. Case in point, our top performing duplex that we self-manage here locally, on average, nets only about $200 more per month than our top performer out of state. This is despite higher property taxes and of course a 9% monthly management fee at the out of state property.  $200 profit may seem like a lot to give up every month, but what is personal time worth? At the end of the day, hiring a property manager to enable growth is the price of doing business and of success.

It all goes back to a fundamental step when beginning the rental property investing journey. Set goals and develop a plan. It’s not intuitive, but certainly advisable to determine how big to grow a real estate portfolio before purchasing that first property! This will ultimately drive how many units to self-manage and how many to turn over to a property manager. When we set about making our initial real estate investment goals back in 2007, I recall estimating that acquiring a dozen units over the course of our journey would be about right to realize our financial goals. I never imagined we would grow to 17 rental units in just 10 years! Our portfolio grew faster than we anticipated, and we could have certainly managed the growth more efficiently.

Growing a real estate investment portfolio may require some big decisions including quitting a day job or establishing a good relationship with a property manager. Rentals can still be profitable when using a property manager, there is just more math to consider. Condition of the property, current rents and of course capabilities of the property manager all have to be factored into the calculus…but it can be done. Managing growth is a common (and good) problem to have in the rental business!  

Want to learn more about the lessons we’ve learned from investing in rental properties, check out my book Collect Rent, Don’t Pay It! A Beginner’s Guide to Rental Property Investing, for sale now on Amazon!

Want to learn more about the financial truths that have helped our average American family achieve success? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truths to Build Wealth on sale now at Amazon!

The commentary provided in this blog is for informational purposes only and is not intended to be a source of financial or investing advice.

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