In the start of any business you'll need to bootstrap things. You'll want to save money whenever possible to reinvest back into the company. This gives you the best chance at long term success and growth. Side note - if you have real estate properties, or want to, it is important to treat it as a business.
Wrong! Having 4 units I felt someone was always moving out which meant I needed to rehab a unit, lease a unit, or call someone to repair something. Since I know how important it is to keep my tenants happy this was often my main concern. This took priority over my real job as a speech language pathologist which is how I keep the lights on around here. The moment of ease never seemed to come and I was tired of waiting for that magical day.
The longer I self managed the more it weighed on me. It was the little things like being on a date and having to take a 10 minute call about a plumbing issue or driving 20 minutes there and back to flick a breaker switch. It wasn't one thing, just an accumulation of small rocks in my shoe that annoyed me.
When I came back from a month long trip to Asia in late July of 2019 I thought I would hire a property manager. I was closing on deal 3 on August 1st (Yes, I did 90% of my closing procedures out of the country) which meant I'd have another renter and extra income to pay a property manager. I started researching companies but chickened out.
I was okay with the delayed gratification of hiring a property manager, I'm in the bootstrapping phase. Plus, I heard property managers charge 10% of total rent and want one month's rent for each lease they get signed. If they took 10% of rents I'd be paying them $5,000 a year PLUS the leasing fees of one months rent. That could end up being like $9,000 a year. That kind of money was for sure still worth my time!
So what happened? What made me change my mind?
The longer I self managed the heavier it felt to me. I had moved off the property so anytime I went down there it was a 20 minute drive each way. I didn't like dealing with the tenants, doing the yard work, showing a unit, or making phone calls during my work day to repair companies. I also had two tenants leave in the middle of a month to month lease, one in November 2019 and the other February 2020.
Of course they left the units in terrible condition and without paying rent.
Things were slowly building up and then it happened. A tenant of mine locked herself out and I had to drive 20 minutes to unlock her door and drive back. As I was driving there it finally hit me that my hour of time was worth more to me.
I finally reached out to see what it would cost or if I liked any of the companies I researched last year. I was prepared to negotiate their 10% management fee to 7.5% since I had 4 units. But there was no need! They offered to manage it at $50 a door which is 5% of my total monthly rental income. The leasing fee, depending on the unit, was either going to be around 50% or 33% of the first months rental income. It was waaayyy cheaper than I thought. This was something I could get on board with, but, I'm a bootstrapper - I still debated whether to do it.
The more I thought about it when I was contracting in the hospitals I was lucky enough to be able to make $49 an hour. Someone put an hourly rate on my time and that was it. Hiring a property manager for $50 a door made the math simple. I knew I spent close to, or more than, 4 hours a month dealing with issues. IT WAS TIME!
Hidden reason for wanting to hire a property manager - The past two years were the first time I owed when it was tax time. I'm hoping this will increase my expenses which will reduce my taxable income. Not managing the property while hopefully paying less in taxes and still benefitting from appreciation, depreciation write offs, and loan pay down. That all sounds good to me! Obviously, consult a tax expert.
In the end I was glad I started out as a property manager. It allowed me to bootstrap the start of my real estate investing career which I needed. I also thought it was a great experience and when it came time to interview a property manager I knew what to ask or what I wanted out of a company.
I finally hit the point that my time was worth more to me than the cost per door. Self managing began to bleed into other parts of my life like my full time job, personal life, travel, or even fixing up my primary residence. I also had other things I wanted to focus more time on like this blog.
It was time to work on my business and not in it!
HELLO AND WELCOME!
I'm Jake, a dude interested in personal finance and travel creating the life I choose.
In 5 years I went from living in a basement with Craigslist roommates to paying off 90k of debt, backpacking 3 continents, getting a house for myself and 5 rental units.
Read my story in the about me section.
All photos on the blog are from my travels
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