Whether it’s a long-term rental or a short-term rental a lot of real estate investors hire property management companies. They’re making a huge mistake. We both self manage all of our properties and we believe that’s a huge part of our success. Here are the 5 reasons why we self-manage, and why we think you should too.
First, we get way higher rents. Property management companies are spread thin! They have a ton of units to manage! Usually all their properties are in the same general area and they’re trying to fill them up at the exact same time. What makes your unit any more special than their other clients? Nothing.
No one is more motivated to get your unit filled up than you are. Filling vacancies isn’t too hard, but it would be a lot harder if you had 100 units to fill in the same area. To reduce their vacancies overall and just to make life easier, property management companies never charge top dollar for their units.
Most of the properties we’ve bought were professionally managed before we bought them. They’re always underrated. Taking over from a property management company usually means you can increase rents by at least $100 a month on every door right away with no problem.
The property Dallas recently bought in Logan back in October 2021 was professionally managed and he increased rents by over $400 per unit! That’s $1,600 in additional income that the previous owner was missing out on because they used a property management company.
Now, raising rents by that much caused 3 of the tenants to move out creating vacancies that needed to be filled. Guess what, they filled up super fast! We’ll go over this more in another post, but simple things like following up with people, reviewing applications quickly, and using a few salesmanship tricks make it easy to get your units filled faster and for higher rents.
Second, as owner’s we are way better at reducing expenses. Property managers aren’t spending their money, they’re spending your money. They have no incentive to keep costs down. Actually, more often than not, they charge a premium on top of what the work actually costs, meaning they want you to be spending even more on repairs!
In our course we teach you how to find affordable help and how to get your tenants to fix things by themselves. Plus, by doing our own bookkeeping, We’re always aware of exactly how much money we’re spending and we know where we can cut costs.
In addition to keeping the normal repair and maintenance expenses down by self-managing you also eliminate the 8-12% fee of gross monthly income that a property management company will charge you to manage your property. Plus property management companies also usually charge a large 1-time fee each time they get a unit rented, usually half of the first month’s rent! That can quickly eat into and eliminate your cash flow.
In the situation we described above on Dallas’s unit in Logan where he had 3 vacancies to fill at once that would cost him about $3,000 a month just in management fees! Since we only spend about 15-20 hours a month managing, that means Dallas is making about $150 to $200 per hour of his time. Not a bad hourly rate.
Third, we have more control. We like being the one who picks who lives in our units. A bad tenant can cause a ton of damage and cost a lot of money. We want to be able to control which tenants we have. Sometimes you’ll just have a good feeling about someone who otherwise seems like a risky situation, and you might decide to let them rent with a larger deposit or an added monthly cost.
We also like choosing who to hire for repairs and when it’s actually worth hiring them. One of the unique perks to real estate is that if it’s not performing as well as you want it to, you can actually do something about it. If you hire a property manager, you give most of that control away.
Fourth, it doesn’t take very much time. Before technology, managing was probably a much larger headache. Advertising units, meeting with tenants for walkthroughs, having paper leases to sign and file in an organized way, collecting and depositing rent checks, and finding a handyman to help you with repairs are just some of the things that would take a ton of time, intricate systems, and a lot of experience.
With modern technology, all of these things are either automated, or only take a couple of clicks. Once your systems are set up, on average, you should only be spending about 1 hour per month per unit. I own 5 units and spend maybe 1-2 hours a week managing my properties. Dallas owns 32 units and spends 3-5 hours a week managing his properties.
In all reality, most weeks we spend no time. Once a month we’ll spend about 1-2 hours doing the accounting for all my properties. A few times a month we’ll text our handyman about a repair. Once every 2 or 3 months we’ll spend an hour or so looking for a good deal on an appliance, or shopping around for a specialist for a unique repair. And once a year we’ll spend a few hours running reports, preparing numbers for taxes, and calculating my annual return.
You will have to spend more time when you have turnover. Each turnover takes about 2-4 hours. Posting the listing, reviewing applications, calling references, and setting up the new tenant on your software all take a little bit of time. None of these things are difficult, and they are all flexible and work around your schedule, but they do take time.
Right now I only have 1-2 units turnover a year. Dallas has about 10-15. The good news is that we make about $300 extra every time we have a turnover! That increase comes from higher rent and other one time fees. Even if it takes 4 hours, We’re still making $75 an hour for that time.
If you plan on spending 1 hour per month per unit on average, that is for everything, including turnover. You might spend more time than, especially for your first rental or if you decide to save money by doing some of the repairs or upgrades yourself, but that is entirely up to you.
Fifth, we honestly like doing it. I studied Economics and Dallas studied Information Systems in college and we both really like being organized. We enjoy running reports and putting the numbers into spreadsheets that calculate our return. We like building those spreadsheets too (although Dallas definitely enjoys that more than I do).
We are both also professional salesmen, so we like people and enjoy having friendly relationships with our tenants. We like calling potential tenants and getting to know them and hearing their story. We feel happy when we get to help people, especially when they really enjoyed working with us.
Now, we understand that everyone is different and if your personality and interests don’t align with these kinds of tasks, you might not love self-managing it. But people generally like doing things they’re good at, and after this course and a little bit of practice, you will be good at managing, so we bet you’ll end up liking it too. Even If you don’t love it, you should still be making at least $200 an hour for the time you spend. Unless you have a really high paying job, it’s probably still worth it.
And those are the 5 reasons why we self manage. We get higher rents, have less expenses, have more control, it doesn’t take very much time, and we genuinely enjoy it. At some point we’ll get too many units and it will start to take away from our lifestyle. At that point, we’ll either hire a property manager to deal with our least favorite units, or hire an in-house employee and train them to do exactly what we do.
Even if you think self-management is not for you, we encourage you to push through it for at least a few months. If you can, push through that first year. Self-managing is the hardest right at the beginning, but once you get the systems in place it gets so much easier. Once you’ve self-managed, if you do decide to hire a professional property management company you’ll have a much better understanding of what to expect from them and you’ll be better at catching things that need improvement. Hopefully you’ll love managing your properties as much as we do. It honestly feels more like a hobby than a job, and we hope it feels that way for you too.
Your real estate coaches,
Dallas & Greg
