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"Read My Lips; You Can’t Afford to Hire a Property Manager"
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 MANAGERYes, 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:
WHEN TO HIRE A PROPERTY MANAGERHaving 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 LINEAgain, 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.
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Return from Rental Property Manager to Homepage 5 Responses to Read My Lips; You Can’t Afford to Hire a Property ManagerLeave a ReplyYour email address will not be published. Required fields are marked *
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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!
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.
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
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
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.