Is it better to hire a property manager or mange your own properties?

Feb 24

The answer to this question might sound simple, but in fact it is a very difficult question to answer.

Most important is that you have to know what your goals are regarding your real estate investments.

Of course, there is no one right answer to this question because if you’re a small investor it’s often easier to delegate property management to someone or a company that has experience in the marketplace. At the same time, you may want to save money and not hire a property manager because the property manager might be more expensive than if you handle it yourself.

Let’s start with accounting

The most important thing a property manager does for a real estate investor is to collect rents, prepare monthly financial statements and pay bills for properties. This makes it easier for an owner to have annual statements and to see patterns on how their properties operate. On the other hand, if you’re a CPA or a bookkeeper or you like working with computers and collecting rent you may want that control, and you will do the accounting yourself and maybe everything else for that matter.

As your investment portfolio grows this workload gets more and more complicated and takes up more time. If you are a very busy person making money to fund your real estate investing goals, you’ll either use software supplied by a company like Stratafolio who has developed a tool for commercial property owners, that manages both operations finance and asset management, or you might use property management software like Rent Manager, Yardi, Appfolio, or Buildium that is easy to use.

There are steppingstones to consider as your investment portfolio grows. There’s a difference between you being a Ma and Pa investor or if you have a family office and have employees working for you to take care of your portfolio.

Recently I had an interaction with a property manager who worked for a family. They had approximately 80 tenants in a portfolio who then decided to transition their portfolio to a property management company because they didn’t want to supervise the property manager on a day-to-day basis. Additionally, the laws changed significantly in that submarket, and they had trouble keeping up with all the changes. It was just easier for them to make the transition to a property management company, rather than keep managing the properties themselves.

The other driver in making this decision is the cost

Costs to consider include:

Software
Maintenance
Marketing
Tenant screening
Advertising
Leasing

Comparing the cost of doing your own property management versus hiring a property manager is typically the key to making this decision.

The other important consideration is the age of the investor. As investors make a transition from being in their 40s and 50s to being in their 70s and 80s there is usually more of a need to hire a property manager. Sometimes children will step up and help their parents manage property and real estate investments, but unfortunately more often than not the children have no interest in real estate and don’t want to be tied down painting apartments reading financial statements or collecting rent for that matter. They would prefer to just get a check in the mail, wouldn’t we all.

Choosing a property manager is not easy

It takes a series of interviews with different companies to find the most experienced, thoughtful and cost-conscious property manager. Communication is key, and it’s helpful to have regular communication with your property manager to understand what’s going on with the property.

A good example is a recent meeting I had with a property manager regarding some small properties. I had a new manager because an existing employee quit, and it was a breath of fresh air. We took the time to review the properties carefully and the process confirmed that some bills had not been paid on time, that vendors had been chosen that were too expensive and property inspections had not been followed up on.

The new property manager, in a period of two weeks, had bids for repairs, sorted out late bill payments, and had found less expensive vendors to replace the more expensive ones. She was much more aligned to paying attention to the bottom line rather than just to go through the motions.

In addition, the new property manager was willing to have somebody investigate the water bills. Unfortunately, the water bills were 40% higher than they should have been. The previous employee had no time and no interest in solving those problems. Being detail oriented also helps manage properties profitably.

Having the right people in place

As you can see having the right people in place is as important as having time to supervise those people. It doesn’t really make a difference if you’re managing the property yourself, or a property manager is managing the property, the same bottom line applies. You must take the time to read your financial statements, inspect your property and find the right vendors to take care of your property.

What drives successful real estate investment is attention to detail. If you don’t have that skill you need to find somebody you trust to pay attention to your investments while you are making money to buy more. The bottom line is detail-oriented staff will make your job easier and will result in successful investments. If you find the right company with the right people to help, you will be making the best decision for yourself and your partners.

Clifford A. Hockley, CPM, CCIM, MBA

Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.

He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.

Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that help investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses. He can be reached at 503-267-1909, Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.