Thoughts on buying a rental and hiring a property management company

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Lynx310650
Posts: 136
Joined: Fri Sep 15, 2017 1:33 pm

Thoughts on buying a rental and hiring a property management company

Post by Lynx310650 » Fri Jul 31, 2020 6:36 pm

I don't own and don't plan to while living in the SF Bay Area. But I do want to diversify a bit into real estate mostly as an inflation hedge.

I was thinking of committing about 5-10% of my net worth into a down payment on a house and then just letting a property management company deal with everything.

Primarily looking in the Sacramento area as it's close enough that I can actually go view homes I may be interested in and even check in on my property once in a while if need be. Plus prices there still seem reasonable.

User avatar
Sandtrap
Posts: 11328
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Thoughts on buying a rental and hiring a property management company

Post by Sandtrap » Sat Aug 01, 2020 6:55 pm

Lynx310650 wrote:
Fri Jul 31, 2020 6:36 pm
I don't own and don't plan to while living in the SF Bay Area. But I do want to diversify a bit into real estate mostly as an inflation hedge.

I was thinking of committing about 5-10% of my net worth into a down payment on a house and then just letting a property management company deal with everything.

Primarily looking in the Sacramento area as it's close enough that I can actually go view homes I may be interested in and even check in on my property once in a while if need be. Plus prices there still seem reasonable.
1. Search the forum archives for "buying rental property", etc. Tons by some great folks.
2. SF Bay Area, other HCOL areas can have high appreciative value "if purchased wisely".
3. Consider a duplex/triplex/fourplex to reduce SPF (single point of failure) and absorb vacancy periods of no cash flow.
4. If the property is vacant for 6 months, are you willing to pay expenses out of pocket?
5. Much of R/E in the country in prime areas is over-valued or "on paws", can you absorb long term costs if R/E values drop and rents have to be lowered?
6. R/E is a business, even with a property management company. You have to know as much or more than the property mgt. co. even if you use one. Can you do this? That means, landlord tenant code, laws, local practices, HOA rules/regs, CCR's, etc. The more you know, the better you will do. Can you do this?
7. How long are you planning to keep the property?
8. What are your net profit expectations? (or is zero profit and tax benefits the goal?)
9. Property management companies have different setups and practices, and contracts. Have you spoken with a bunch of them?
10. Realtor companies also do property management as do individual realtors/brokers. Have you spoken with a bunch of them?
11. ". . deal with everything. . ." Define what you want to and don't want to deal with while owning your rental?

Many do well using property management companies and individual realtors to manage their rental properties, but it depends.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

flaccidsteele
Posts: 601
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Thoughts on buying a rental and hiring a property management company

Post by flaccidsteele » Sun Aug 02, 2020 12:10 am

Lynx310650 wrote:
Fri Jul 31, 2020 6:36 pm
I don't own and don't plan to while living in the SF Bay Area. But I do want to diversify a bit into real estate mostly as an inflation hedge.

I was thinking of committing about 5-10% of my net worth into a down payment on a house and then just letting a property management company deal with everything.

Primarily looking in the Sacramento area as it's close enough that I can actually go view homes I may be interested in and even check in on my property once in a while if need be. Plus prices there still seem reasonable.
Depends on the numbers and your goals

What are the numbers associated with what you have in mind?
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

CurlyDave
Posts: 1832
Joined: Thu Jul 28, 2016 11:37 am

Re: Thoughts on buying a rental and hiring a property management company

Post by CurlyDave » Sun Aug 02, 2020 1:19 am

Lynx310650 wrote:
Fri Jul 31, 2020 6:36 pm
I don't own and don't plan to while living in the SF Bay Area. But I do want to diversify a bit into real estate mostly as an inflation hedge.

I was thinking of committing about 5-10% of my net worth into a down payment on a house and then just letting a property management company deal with everything.

Primarily looking in the Sacramento area as it's close enough that I can actually go view homes I may be interested in and even check in on my property once in a while if need be. Plus prices there still seem reasonable.
As a long time RE investor, I have dealt with several property management companies in my life.

After I weeded out the obviously bad ones and the guys who wanted to make more on my money than I did, the ones I hired started out OK. OK, but not great. This rapidly devolved to the point where every last one of them would eat my lunch for me and ask for desert.

There may be exceptions, but I haven't found any.

Just one example. I was having carpet replaced in a vacant unit in a 4-plex. The carpet company got there late one day and started, but had to leave and come back the next day to finish. One of their workers left the outside porch light on. A tenant called the management company who sent a guy out to turn the light off. BUT they charged me $50 plus a $10 fuel surcharge for this "service". As building owner, if they had called me before doing this I would have said that the bulb will use $0.25 worth of electricity overnight -- just let it stay on. I know the layout of the building and it was not shining in the window of the complaining tenant. If it was, it is an outside light fixture, they could have told him to go over and unscrew the bulb. And the concept of charging this cost to the carpet company never crossed their mind. Worst of all, is that in their own minds, they did exactly the right thing...

Every single time there is a choice or a decision to make on a course of action they will make the choice that leads to the most profit for them, not the one that leads to the most profit for you. And, if they own any buildings (very common), their vacancy rate rate will be close to zero, while their customers' will be substantially higher. Plus the potential renters with high credit ratings will look at every single unit they own before they ever get to see yours.

DW and I have done very well by managing our own properties, and have gone from cash flow positive to cash flow negative every time we used a property manager.

toocold
Posts: 74
Joined: Sun Jul 23, 2017 9:17 am

Re: Thoughts on buying a rental and hiring a property management company

Post by toocold » Sun Aug 02, 2020 6:35 am

We have rentals that have done fairly well. Our philosophy was to learn alot about the business, prior to moving it over to a property management company. This way, we know how to value a property, do some small repairs, market the property, sign a lease, understand terms of the lease and local laws, how to manage contractors, bookkeeping, taxes, and turnover. We still self manage some of our properties (because the tenants are great) and we've turned over the rest to a property management company. The property management we use is good, but we do push back on estimated contractor costs. We try to under price the rent slight below market to make sure we have quality tenants in a fabulous school district.

If you don't have this knowledge, pray that you have a competent and honest property management company. Otherwise, you won't like the experience.

WJW
Posts: 310
Joined: Fri May 23, 2014 10:07 am

Re: Thoughts on buying a rental and hiring a property management company

Post by WJW » Sun Aug 02, 2020 6:39 am

As a landlord, I self-manage my properties. I avoid the 8-10% haircut of my gross rents plus all the additional fees for repairs, etc... And after dealing with people for so many years, there is no-one that I trust to manage and maintain my properties the way I do.

User avatar
Sandtrap
Posts: 11328
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Thoughts on buying a rental and hiring a property management company

Post by Sandtrap » Sun Aug 02, 2020 7:46 am

CurlyDave wrote:
Sun Aug 02, 2020 1:19 am
Lynx310650 wrote:
Fri Jul 31, 2020 6:36 pm
I don't own and don't plan to while living in the SF Bay Area. But I do want to diversify a bit into real estate mostly as an inflation hedge.

I was thinking of committing about 5-10% of my net worth into a down payment on a house and then just letting a property management company deal with everything.

Primarily looking in the Sacramento area as it's close enough that I can actually go view homes I may be interested in and even check in on my property once in a while if need be. Plus prices there still seem reasonable.
As a long time RE investor, I have dealt with several property management companies in my life.

After I weeded out the obviously bad ones and the guys who wanted to make more on my money than I did, the ones I hired started out OK. OK, but not great. This rapidly devolved to the point where every last one of them would eat my lunch for me and ask for desert.

There may be exceptions, but I haven't found any.

Just one example. I was having carpet replaced in a vacant unit in a 4-plex. The carpet company got there late one day and started, but had to leave and come back the next day to finish. One of their workers left the outside porch light on. A tenant called the management company who sent a guy out to turn the light off. BUT they charged me $50 plus a $10 fuel surcharge for this "service". As building owner, if they had called me before doing this I would have said that the bulb will use $0.25 worth of electricity overnight -- just let it stay on. I know the layout of the building and it was not shining in the window of the complaining tenant. If it was, it is an outside light fixture, they could have told him to go over and unscrew the bulb. And the concept of charging this cost to the carpet company never crossed their mind. Worst of all, is that in their own minds, they did exactly the right thing...

Every single time there is a choice or a decision to make on a course of action they will make the choice that leads to the most profit for them, not the one that leads to the most profit for you. And, if they own any buildings (very common), their vacancy rate rate will be close to zero, while their customers' will be substantially higher. Plus the potential renters with high credit ratings will look at every single unit they own before they ever get to see yours.

DW and I have done very well by managing our own properties, and have gone from cash flow positive to cash flow negative every time we used a property manager.
+1000000
Great points.
Well said.

The only property management company that had my best interest in mind was my own.

From large corporate to mid level to single realtor property management, I have yet to see a property owner with optimal results in 4 decades. I have seen quite a number of single realtor close relationships do “okay” for awhile as you mentioned, though there’s still some skimming and waste.

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know

User avatar
Sandtrap
Posts: 11328
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Thoughts on buying a rental and hiring a property management company

Post by Sandtrap » Sun Aug 02, 2020 7:49 am

WJW wrote:
Sun Aug 02, 2020 6:39 am
As a landlord, I self-manage my properties. I avoid the 8-10% haircut of my gross rents plus all the additional fees for repairs, etc... And after dealing with people for so many years, there is no-one that I trust to manage and maintain my properties the way I do.
+1
Could not have said it better.

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know

Topic Author
Lynx310650
Posts: 136
Joined: Fri Sep 15, 2017 1:33 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by Lynx310650 » Sun Aug 02, 2020 9:52 pm

Thank you to all your responses. It's disheartening to hear mostly negative experiences with property management companies.

I wanted to purchase a rental (real estate) mostly as a hedge against inflation and I can't afford anything in the Bay Area otherwise I'd just buy a home to live in. So I'd have to be an absentee landlord if I want to buy a rental.

User avatar
Sandtrap
Posts: 11328
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Thoughts on buying a rental and hiring a property management company

Post by Sandtrap » Sun Aug 02, 2020 9:53 pm

Lynx310650 wrote:
Sun Aug 02, 2020 9:52 pm
Thank you to all your responses. It's disheartening to hear mostly negative experiences with property management companies.

I wanted to purchase a rental (real estate) mostly as a hedge against inflation and I can't afford anything in the Bay Area otherwise I'd just buy a home to live in. So I'd have to be an absentee landlord if I want to buy a rental.
Living in a home in an area of high appreciative value is one of the best hedges against inflation.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

MikeZ
Posts: 313
Joined: Sun Dec 07, 2014 9:17 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by MikeZ » Sun Aug 02, 2020 11:41 pm

I have had negative experiences with management companies.

In generally, investing in real estate is a all about what your goals are.

If you shoot for lower end properties, you will make more cash flow but likely not a lot of appreciation and more active management of the tenants.

Self-managing vs. professional management is really more about the what ifs

*If the tenant does not pay, can you post the required notices to start the eviction process on the right timeline?
*Can you meet repair people to enter the property to fix things?
*Can you be there when something happens?
*If there is a major repair that needs to be done (e.g., structural issues) can commit the time to deal with it?

My suggestion is if you want to self manage, buy where you are prepared to visit on a few days notice (drive or LCC flights). This assumes you have a job that allows this flexibility. Make sure you have some connections in the area so have some people you can trust to do things.

I would consider purchasing a nice property in good shape in a nicer area that attaches a higher income tenant. They are much less likely to require your involvement.

One thing I would mention is that the IRS guidelines for allowable travel may play to your favor if the rental house is in an area where you visit frequently.

User avatar
Watty
Posts: 20049
Joined: Wed Oct 10, 2007 3:55 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by Watty » Mon Aug 03, 2020 12:06 am

Thoughts on buying a rental and hiring a property management company

That would more or less just be a one property REIT.

How would this be any better than just buying a REIT?

flaccidsteele
Posts: 601
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Thoughts on buying a rental and hiring a property management company

Post by flaccidsteele » Mon Aug 03, 2020 12:13 am

Watty wrote:
Mon Aug 03, 2020 12:06 am
Thoughts on buying a rental and hiring a property management company
That would more or less just be a one property REIT.

How would this be any better than just buying a REIT?
Cash flowing real estate > REITs

REIT is not real estate. It’s paper

Dividends taxed as ordinary income

No depreciation

No cash out refi/HELOC/blanket

No 1031

Not even close
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

flaccidsteele
Posts: 601
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Thoughts on buying a rental and hiring a property management company

Post by flaccidsteele » Mon Aug 03, 2020 12:15 am

Lynx310650 wrote:
Sun Aug 02, 2020 9:52 pm
Thank you to all your responses. It's disheartening to hear mostly negative experiences with property management companies.

I wanted to purchase a rental (real estate) mostly as a hedge against inflation and I can't afford anything in the Bay Area otherwise I'd just buy a home to live in. So I'd have to be an absentee landlord if I want to buy a rental.
My experience with PM has been amazing. The people who had bad experiences gave up

You think investors who have hundreds or thousands of units manage the doors themselves?

All the properties I purchased during the Great Recession are handled by PM companies

I do nothing except collect money every month

It all depends on the numbers. What are the numbers for your prospective RE investment?
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

michadoh
Posts: 5
Joined: Tue Jul 28, 2020 8:50 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by michadoh » Mon Aug 03, 2020 12:32 am

Great Idea, If your property is the only one you may want to manage this on your own it will be much cheaper.

Topic Author
Lynx310650
Posts: 136
Joined: Fri Sep 15, 2017 1:33 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by Lynx310650 » Tue Aug 04, 2020 5:37 pm

flaccidsteele wrote:
Mon Aug 03, 2020 12:15 am
Lynx310650 wrote:
Sun Aug 02, 2020 9:52 pm
Thank you to all your responses. It's disheartening to hear mostly negative experiences with property management companies.

I wanted to purchase a rental (real estate) mostly as a hedge against inflation and I can't afford anything in the Bay Area otherwise I'd just buy a home to live in. So I'd have to be an absentee landlord if I want to buy a rental.
My experience with PM has been amazing. The people who had bad experiences gave up

You think investors who have hundreds or thousands of units manage the doors themselves?

All the properties I purchased during the Great Recession are handled by PM companies

I do nothing except collect money every month

It all depends on the numbers. What are the numbers for your prospective RE investment?
Haven't really looked at numbers that hard as I'm still new to this process (if I even go for it). In fact I got the idea because I stumbled upon a website called roofstock that seems like they sell homes with tenants already in them and will also hook you up with a local property management company.

Topic Author
Lynx310650
Posts: 136
Joined: Fri Sep 15, 2017 1:33 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by Lynx310650 » Tue Aug 04, 2020 5:37 pm

Sandtrap wrote:
Sun Aug 02, 2020 9:53 pm
Lynx310650 wrote:
Sun Aug 02, 2020 9:52 pm
Thank you to all your responses. It's disheartening to hear mostly negative experiences with property management companies.

I wanted to purchase a rental (real estate) mostly as a hedge against inflation and I can't afford anything in the Bay Area otherwise I'd just buy a home to live in. So I'd have to be an absentee landlord if I want to buy a rental.
Living in a home in an area of high appreciative value is one of the best hedges against inflation.
j :happy
Yes, even if I have to stretch a bit and go for a smaller condo I'm really starting to consider just purchasing property here and live in it.

User avatar
Sandtrap
Posts: 11328
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Thoughts on buying a rental and hiring a property management company

Post by Sandtrap » Tue Aug 04, 2020 5:42 pm

Lynx310650 wrote:
Tue Aug 04, 2020 5:37 pm
Sandtrap wrote:
Sun Aug 02, 2020 9:53 pm
Lynx310650 wrote:
Sun Aug 02, 2020 9:52 pm
Thank you to all your responses. It's disheartening to hear mostly negative experiences with property management companies.

I wanted to purchase a rental (real estate) mostly as a hedge against inflation and I can't afford anything in the Bay Area otherwise I'd just buy a home to live in. So I'd have to be an absentee landlord if I want to buy a rental.
Living in a home in an area of high appreciative value is one of the best hedges against inflation.
j :happy
Yes, even if I have to stretch a bit and go for a smaller condo I'm really starting to consider just purchasing property here and live in it.
Good idea!
Find a nice place that you really like, too.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

flaccidsteele
Posts: 601
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Thoughts on buying a rental and hiring a property management company

Post by flaccidsteele » Tue Aug 04, 2020 5:47 pm

Living in a high appreciation home is not a hedge against inflation at all

The only hedge against inflation are productive assets

Shelter is an expense. Whether I rent or own, shelter is always an expense

Buying a home that has high appreciation is correlated with high cost appreciation

Living in this kind of home is a good way to go nowhere fast

The home will either need to be liquidated, or the equity changed into debt, and put into productive assets, to escape this black hole to nowhere
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

goos_news
Posts: 10
Joined: Mon Jun 10, 2019 7:14 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by goos_news » Wed Aug 05, 2020 12:08 am

I don't disagree with any of the wise advice given. I have experience from the local perspective. I have two rentals managed by professional firms. One was the type that will nickel and dime you a bit, but I have no choice as the property is overseas. Locally, the SF property manager takes care of things so I don't have to. It's an exchange of my time. I've self managed for a while and it took a lot of time, because we cared a lot and we were doing the short term game (we were approaching 20% returns). So now I accept lower returns but have peace of mind, except during turnover. The rental firm is actually very good, but they will find ways to charge you. But there are cost avoidance strategies -- like I just save 1500 on painting by hiring an out of town painting contractor.

Note on Sac -- choose carefully as the neighborhood attractiveness can vary by street. I still regret not buying condos at 40 to 60K a piece post-Great Recessison, that are now selling for 300 to 400K. The only issue back then was you were bidding against hedge funds who scooped up properties in huge chunks. The real estate market in Sacramento is still doing pretty OK, despite the pandemic. Some parts of the rental market will begin to feel the pain from the industries most impacted. The SF rental market is soft right now, even if the rents still would make many gasp.

flaccidsteele
Posts: 601
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Thoughts on buying a rental and hiring a property management company

Post by flaccidsteele » Wed Aug 05, 2020 12:11 am

goos_news wrote:
Wed Aug 05, 2020 12:08 am
I still regret not buying condos at 40 to 60K a piece post-Great Recessison, that are now selling for 300 to 400K. The only issue back then was you were bidding against hedge funds who scooped up properties in huge chunks.
Personally I didn’t notice the hedge funds when I bought from 2009 to the end of 2011

They got involved heavily after that. But there was a 3 year window when everything was up for grabs
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

knightrider
Posts: 856
Joined: Fri Jun 06, 2014 11:20 am

Re: Thoughts on buying a rental and hiring a property management company

Post by knightrider » Wed Aug 05, 2020 8:31 am

Lynx310650 wrote:
Tue Aug 04, 2020 5:37 pm

Haven't really looked at numbers that hard as I'm still new to this process (if I even go for it). In fact I got the idea because I stumbled upon a website called roofstock that seems like they sell homes with tenants already in them and will also hook you up with a local property management company.
Sounds like something targeting uninformed amateurs. Nobody sells a home with good tenants in it. Plenty sell places with bad tenants in them.

tibbitts
Posts: 11162
Joined: Tue Feb 27, 2007 6:50 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by tibbitts » Wed Aug 05, 2020 8:43 am

flaccidsteele wrote:
Mon Aug 03, 2020 12:15 am
You think investors who have hundreds or thousands of units manage the doors themselves?
I would guess they operate their own property management company.

User avatar
unclescrooge
Posts: 5067
Joined: Thu Jun 07, 2012 7:00 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by unclescrooge » Wed Aug 05, 2020 8:51 am

Lynx310650 wrote:
Sun Aug 02, 2020 9:52 pm
Thank you to all your responses. It's disheartening to hear mostly negative experiences with property management companies.

I wanted to purchase a rental (real estate) mostly as a hedge against inflation and I can't afford anything in the Bay Area otherwise I'd just buy a home to live in. So I'd have to be an absentee landlord if I want to buy a rental.
After the first property, I have always used property management regardless of cost.

Their 10% fee, 10% vacancies, 1% property cost as maintenance, are all baked into the model that's determines whether it's a good investment or not.

After 15 years, the 2 rentals I have left are over a thousand miles away in a state I've never visited. If you buy right, that overcomes a lot of mistakes.

User avatar
AerialWombat
Posts: 1600
Joined: Tue May 29, 2018 1:07 pm
Location: Cash Canyon / Cashville

Re: Thoughts on buying a rental and hiring a property management company

Post by AerialWombat » Wed Aug 05, 2020 9:08 am

I self-managed my first two units for a couple years, then hired PM.

Property management is a brutal game to be in. The PM gets screamed at by both landlords and tenants. It’s high touch, low margin. High liability. Not a business I would ever start.

But I’m glad they are there. There aren’t many industries where you can start a company and just hire a management team to run your company for you. REI is one.

I have 3 PM’s, one in each state I invest in. One is mediocre, one is decent, one is great.

When hiring PM, it’s usually a hunt for the one that sucks the least, and then you carefully monitor and manage them. My mediocre one? I treat them kinda like children. Experience has proven that I have to micro-manage them.

It’s really a business. You are the CEO. PM is middle management.

If you go into absentee ownership with this structural mindset, you’re better prepared to deal with it.

tibbitts
Posts: 11162
Joined: Tue Feb 27, 2007 6:50 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by tibbitts » Wed Aug 05, 2020 10:51 am

unclescrooge wrote:
Wed Aug 05, 2020 8:51 am
...1% property cost as maintenance...
I know this 1% is a standard in the industry but for myself with just my own home I can't see not going over 1%. And I don't think I spend more due to living her; in fact renting my house at all with my blue-carpeted master bath with matching blue formica countertops might be challenging. Maybe if you d-i-y everything but not if you pay retail for labor.

toocold
Posts: 74
Joined: Sun Jul 23, 2017 9:17 am

Re: Thoughts on buying a rental and hiring a property management company

Post by toocold » Wed Aug 05, 2020 11:11 am

I would purchase 1 and see how it goes. I would focus on a SFH to start so that you can exit without too much trouble.

My property management company was born out of the owner's need to handle his own properties, and they decided to serve other investors. There are good ones out there.

I would also go to biggerpockets and ask the same question. I'm curious why you chose bogleheads, where most people focus on index investing. Similarly, I would not necessarily go to biggerpockets and ask what's the optimal AA.

User avatar
unclescrooge
Posts: 5067
Joined: Thu Jun 07, 2012 7:00 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by unclescrooge » Wed Aug 05, 2020 12:22 pm

tibbitts wrote:
Wed Aug 05, 2020 10:51 am
unclescrooge wrote:
Wed Aug 05, 2020 8:51 am
...1% property cost as maintenance...
I know this 1% is a standard in the industry but for myself with just my own home I can't see not going over 1%. And I don't think I spend more due to living her; in fact renting my house at all with my blue-carpeted master bath with matching blue formica countertops might be challenging. Maybe if you d-i-y everything but not if you pay retail for labor.
It depends where you live. Some places, land is cheap and weather is extreme, so you might see 2%.
Other places, 90% is the cost of land, so you might be 0.75%.

User avatar
unclescrooge
Posts: 5067
Joined: Thu Jun 07, 2012 7:00 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by unclescrooge » Wed Aug 05, 2020 12:23 pm

toocold wrote:
Wed Aug 05, 2020 11:11 am

I would also go to biggerpockets and ask the same question. I'm curious why you chose bogleheads, where most people focus on index investing. Similarly, I would not necessarily go to biggerpockets and ask what's the optimal AA.
Because this forum is awesome and filled with the smartest and best-looking people on the internet.

User avatar
8foot7
Posts: 2168
Joined: Mon Jan 05, 2015 7:29 pm

Re: Thoughts on buying a rental and hiring a property management company

Post by 8foot7 » Wed Aug 05, 2020 12:39 pm

Whatever you ultimately choose to do, build your model and make your buy decisions based on having the overhead of a management company. Don't buy a marginal property assuming you'll manage it yourself and then let it turn unprofitable if you have it managed. Just bake it in from the beginning, along with a proper maintenance budget, assumption of vacancy, turnover costs, etc. Be super conservative so that when you come across a potential property that satisfies your model, you know you're making money.

Post Reply