Custom Search





Home
Site Map: START HERE
Rental Property Intro
Investment Strategy
Property Values 101
Find a Property
Financing Property
Cash Flow Analysis
Landlord 101
FREE Landlord Forms
Landlord Insurance
Tenant/Property Law
Rental Property Tax
Foreclosure Property
Commercial Property
Retirement Savings
Sell Property
Property Definitions
Rental Property Blog
Property News
Real Estate Videos
About

Follow Me!
Bookmark and Share

"Read My Lips; You Can’t Afford to Hire a Property Manager"


Show Your Love


If you think you can hire a real property management company for your multifamily properties, think again. A real estate property manager is an example of an expense that you simply can't afford. Sorry.


DOWNSIDES OF HIRING A REAL ESTATE PROPERTY MANAGER


Yes, conceptually this sounds appealing. I mean, who really wants to deal with tenants anyway? Unfortunately, the concept is not appropriate for us "small time" investors because:

  • Property managers are expensive, often charging up to 10% of your gross property income. Especially in the beginning, you may not even have the 10% to spare.
  • Good property managers are hard to find.
  • Property managers may not be as focused on keeping repair bills / rental property costs down as you would be.
  • Property managers may not focus on property maintenance tasks as much as you would like.
  • You will miss out on a valuable learning opportunity.


WHEN TO HIRE A PROPERTY MANAGER


Having a property manager is appropriate for a larger commercial apartment building (say, 20 or more units), but not 2-4-unit multifamily rental properties. At 10% of gross rents on average, you must first have the scale necessary to afford the added expense of hiring out your real property management function.


BOTTOM LINE


Again, the largest drawback of hiring a property manager is the added cost. In addition to the flat management fee, you will also incur higher repair expenses because the management company will not be overly concerned with price shopping to help keep your costs down.

Aside from the obvious cost-related problems, I think it's important for new investors to manage their first property for at least 2 years. Your odds of success will diminish if you essentially "outsource" your real property management function from the get-go.

I strongly believe that you must learn the ropes in terms of finding and managing tenants – they are your customers. By giving this duty up to a rental manager, you are foregoing this learning experience, which may come back to haunt you at some point down the road.




Return to Managing Rental Property


Return from Rental Property Manager to Homepage



5 Responses to Read My Lips; You Can’t Afford to Hire a Property Manager

  1. Jenni says:

    This is good stuff here. I have a couple of investment properties and I tried to hire a rental manager, but all the ones I found were either overpriced or questionable (or both). So I bit the bullet and decided to manage my own properties, and it has worked out well. Being the property manager is actually easier than I expected!

  2. Prop guy says:

    Completely agree. When I first started buying property (about 10 years ago…) my idea was to make the business somewhat passive by hiring a rental property manager. And I actually tried 3 different property mangagers. But the thing is, they all totally sucked. I spent more time auditing / fixing their work than I would have if I’d have simply done everything myself from the get-go. Maybe there are some good rental property managers out there but they certainly seem few and far between.

  3. Arie David says:

    hello Alan . first, let me congratulate you for your superb helpful guide .im living in Israel and study my way to be a landlord in USA .NO LOANS NEEDED . My preference – multi family house up to 4 units. The only fear i have is the part of managing the property which surely must be done by local comp .It is the only issue to make me not completly confident . Is my fear justified ? Your pro opinion is vry significant for me .
    Thank you . Arie

    • alank856 says:

      Hello,

      Thank you for your kind words. Yes I think in your situation, you’ll need a local property manager to oversee your US-based properties. Since you have the cash to fund the purchase outright, you’ll definitely be able to afford the property manager by virtue of your monthly cash flow. But, good property managers are hard to find, so you’ll have to do a bunch of research to find a good one. You could also ask your agent for a referral, and in fact some real estate offices even offer this service to clients. So, your agent would be the best person to start with in your search for a good property manager. Good luck!

      Alan

  4. George says:

    This is very depressing! The idea of having a property manager in order to get basically passive income is romantic indeed. It’s a downer that it’s not really feasible for most small time landlords.

Leave a Reply

Your email address will not be published. Required fields are marked *

Name *
Email *
Website
Comment

footer for rental property investing page