I have flirted with the idea of this article for quite some time now because I do truly believe in the use of Property Management from the investor standpoint. However, my hesitation in publishing this topic has been countered by the idea of the negative feedback I may receive for my comments below.
To head off some of those comments I will start by saying there are plenty of poorly run Property Management companies across the globe that do make the really good ones look bad. There are also many examples you can provide as a rubbuttle of why a Property Manager is not needed to be successful and I would agree with many of them.
My business partners hate when I say this, but I firmly believe that Property Management is not for everyone. I stand up in front of large rooms of investors when I speak at events and local REIAs and say “When possible you should self manage your investments if you have the time and are within an easy commute to your property.” This is especially true on your first couple of properties. In order to understand what you need to expect from a Property Manager it takes you knowing the process of being a Landlord. Let me break down the barriers of self management down for you.
Time/Highest & Best Use - We all know we have a limited amount of time in the day and what you do with that time has a direct correlation with your success and happiness in life. I know a lot of investors in their 20’s and single who began self managing but now years later they are married, have kids, and focused on building either their career or portfolio. This means something needs to give so outsourcing lower level activities like management is a good option.
What is your hourly value you calculate for yourself? I calculate mine at above $150.00 per hour so when I need to delegate something I figure what can I pay someone to do for less where I can use my time to complete higher level activities. Leveraging time is tough for many to do, as easy as the concept might seem, but look at the most successful people you have ever read about and they make this leverage of time decision many times per day in all aspects of their life.
Location/Distance - I do know of many successful real estate investors that are able to manage their property from a distance but there is a level of stress you have to be able to overcome with that type of management. Many people are not built like that. I see many owners that are able to manage an occupied property from many states away but once the tenant starts to talk about a move out then they call someone like us.
Also here in the Chicago suburbs the local rental license ordinance of many cities require an owner or manager to be located within 30 miles of the property. There are loopholes or grey areas to handle this but also fines for being caught for using the side steps.
“Price is what you pay and value is what you get.” As a service provider, this is a slogan you have to live by to prevent yourself from becoming commoditized. That is not a sales gimmick because no matter what you counter this article with, there are investors out there that need Property Management and it is a Property Manager’s job to create a service that has value that exceeds the cost of the service.
We all know the day to day activities a Property Manager should provide. However, over the years as an investor and Property Manager client, there is more value in the fees you pay your manager that you should recognize or take advantage of if you are not already.
Anonymity - The ability for a Landlord to not be known to the tenant(s) is becoming a larger value as the ability to find people is becoming easier. As an investor, I want my leases to have the Property Manager’s name on there as my manager, and then my LLC has a mailing address that goes to my Property Manager. This means when tenants try to go around my Property Manager’s decision, they still cannot find me because all roads point back to the Property Manager.
Leverage PM in Negotiations - I also feel there is a larger value in this when it comes to playing the middleman. A Property Manager has a unique negotiating platform and can make the tenant feel like as their Property Manager, they are on their side. There is a bond built directly between the Property Manager. This can be tough to establish as a direct owner who would talk to a resident directly.
Leverage Your Time - I spoke about it above but what is your time worth? When you break down your management costs on an annual basis, it may end up costing you $50.00 per month per unit to handle all Property Management activities. This means that you, as the owner, do not need to be involved and you have saved 18-22 hours per year to do what you like with. As I write this, I am 39 years old with the monumental 40 year mark just about 6 months away... and time to me is on my mind more than ever.
Our business and any business is not the right fit for everyone, just as Property Management is not the right fit for every investor. There is also the caveat that you have to have a quality Property Management company that will maintain your investment property professionally.
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