Yes, you need a third-party property management team. Hiring a third party property manager will free up your time, focus, and energy so that you can dedicate yourself (the business owner and entrepreneur) to growing your business. Although you can most likely handle managing your multifamily property, is that really the highest and best use of your time?
Let’s face it, property management is not a glamorous vocation, nor is it very lucrative. But it is essential for the property to run efficiently and to maximize your NOI. Getting this right can save a ton of headaches and can make you wealthy, but getting it wrong can be very costly.
You don’t want to mess this up, it is a very important part of your business and if you are inexperienced, or not wholly committed to being a property manager, it’s best to leave it to the pros.
Don’t let your pride get in the way; think about the opportunities you will gain from using a third-party property management team. Yes, hiring a team will cost you, but what about the missed opportunity cost involved with spending your time managing units to save a few bucks when you could be actively seeking new deals?
So in most cases, your time is probably better spent working on growing your business and overseeing operations. That being said, self-managing does have it’s place in some cases.
When should you manage your own property?
- When your plan is to own just a few units, and you live near the properties.
- When your plan is to learn the process before you pass the torch to a professional property manager. This technique will give you insight and knowledge for managing the manager in the future.
- When the property isn’t earning enough income to pay for property management.
- At the beginning of your journey and you want to maximize revenue to perhaps buy your next property.
- If you are house hacking.
Yet if your goal is to create a profitable and thriving business, and acquire as many units as possible so that you can quit your day job and create generational wealth, you need a property manager. Accept this fact.
You will need to step back and oversee all operations of your business. You will not, and should not have time to manage your own properties.
It’s really important to wrap your head around this concept – you are building a business. Look, I totally understand, I am a very hands-on kinda guy, and I pride myself on being able to fix things, learn new and challenging skills, and be able to handle basically anything. But it’s impossible to become a pro at everything. And for your business to be what you truly envision it can be, you will want pros working for you.
♦Time spent on learning a new skill to a level of mediocrity is time lost on building your business. Leave it to the professional property management team.
Should I create a vertically integrated company?
This is a question for a separate article, but if your planning on creating a vertically integrated company you have some options. You can either merge with an existing property management company, acquire one, or start one from the ground up.
Either way, someone on your team should have extensive knowledge about property management and can work closely with that branch of your business. Just keep in mind, you are not doing the day to day property management tasks. Someone on your team is handling it, and you oversee those operations.
Choosing a property management team
This process should actually begin long before you have a property in place. You want to begin interviewing potential management teams as soon as you narrow down your market. It doesn’t have to be a formal interview, rather, you can start by contacting different management teams and building a relationship with them. Let them know what you do and what you are looking for.
The goal at first is to build rapport and get to know their systems and procedures, their personalities, and their work ethic. Building rapport and keeping in touch with them will give you a sense of how well they communicate as well as how professional they are.
Interestingly, by communicating regularly with property managers, they may be able to provide you with leads for your next acquisition. They could have insider information about which owners are considering selling, and you could snag a potential deal before it hits the market.
Ask about the properties they manage as far as location, size, type, age, etc. Let them share with you the good, the bad, and the ugly about neighborhoods and things to look out for with certain styles and ages of buildings. They can also provide the best data for how high you can really push rents at a specific apartment complex.
Of course, you will also need to find out their fees. What do they charge as a percentage of rents collected? Leasing up a unit? Turns? Etc. Here, you will have the possibility of negotiating a bit. You can share your long term strategy, and that you plan on hiring them for future acquisitions which may help at the bargaining table.
Ask about how many offices they have, where they are located, and how they would handle managing properties that may be a little out of their way.
A great way to get a grasp on how a management team operates is to “mystery shop” a property. Call the property manager as if you were looking for an apartment to rent.
How do they answer the phone? Are they respectful? Kind? Excited? Helpful?
Do they listen to you and your needs?
Maybe you had to leave a message. If so, how long did it take to follow up?
Did they offer for you to view a unit ASAP, and make the process easy for you?
How to manage the manager
Once hired, it’s time to manage the manager. Start by clearly communicating your business plan for the property to be managed. Next, I recommend setting up systems, clear guidelines, and communication expectations from the onset.
If you use a CRM system like Asana, monday.com, or HubSpot, make sure your property managers are provided access and assigned meaningful tasks right away. It’s best to begin a relationship with very high expectations and frequent communication. Set a good precedent of how you operate right out of the gate, if they can’t handle it, then I implore you to find a team that can.
For some of us, myself included, it’s difficult to relinquish control of jobs to others. You may really want to be involved at a hands-on level with the day to day tasks at your property, but this will hinder your growth. Get good at managing the manager, and learn to enjoy it. You may come to find the same satisfaction of doing it yourself.
Conclusion
If you plan on creating a multifamily real estate business, you need to staff a professional property management team. If you are planning to own no more than a few units, keep your day job, and be a landlord; you may not need a property management team. In my opinion, and in either scenario; it is more beneficial to pay a professional property management team to manage your properties.
