Property Management

What it is

Property management is the day-to-day operation of a rental: finding and screening tenants, collecting rental income, handling maintenance requests, managing turnovers, enforcing leases, filing evictions when needed, and keeping the property in rentable condition year over year.

You do it one of two ways. Self-manage: you hold the leases, answer the calls, coordinate repairs, collect the rent. Hire a PM company: they handle everything for typically 8-10% of monthly rent plus turnover and maintenance markups. Both work.

My first rental — a house I bought in 2011 for $150K — I hired a property management company when my job moved me to a different city. They put a renter in it, I moved on. That’s the situation where hiring a PM is the clear answer: you’re not local, you don’t know the market yet, and having professionals handle it is the right move.

Why it matters

Rentals are where real estate builds wealth. They run all four wealth engines at once: market appreciation, cash flow, tax advantages through depreciation, and tenant buydown on the mortgage. None of that matters if the property isn’t managed. An unmanaged rental becomes a vacancy problem, a maintenance-debt problem, or a tenant problem that quietly eats the numbers that looked so good at acquisition.

The thing I say is: property management is a real business. Price it into your rental math from day one whether you do it yourself or pay someone else. Self-managing isn’t free. Your time has a value.

In a tough market, in times when interest rates are high and deals are tight, you might not be hiring a property manager. Managing yourself saves that 8-10% and you probably get lower vacancy because you’re handling things yourself. I’ve had deals where the numbers worked for self-management and didn’t work with a PM fee on top. If that’s the case, self-manage, but be honest about what you’re signing up for.

In my cash flow calculator, I build in a line for property management, along with vacancy, maintenance, and capex. Those deductions come out of gross rent before you see what you actually net. If you run the math honestly with all four of those factored in, you know whether the deal actually works.

How it shows up

Real estate has turned into other business opportunities for me over the years. I started investing, and over time you start taking those hands out of your pocket by starting the companies you were hiring. That’s how I ended up with a property management company (Doorby — now managing 600-plus doors). But that’s after 15 years and hundreds of deals. For somebody starting out, hire a PM until you understand the business well enough to decide whether self-managing makes sense.

Picking a PM is itself a skill. Good PMs are aligned with your buy box and your tenant profile. Bad PMs are optimizing for their own maintenance markup. Ask any landlord in your market for horror stories and you’ll get the shortlist of who not to hire.

One more thing: flipping and renting are pretty much the same thing. When you finish a flip, you sell it to the open market. Or you sell it to the bank — meaning you refinance it and put a renter in there, and the renter pays you rent which you use to pay the monthly mortgage. Put the flip on the shelf. Either way, a property management decision is waiting for you at the end.

Related

tenants, 31 percent rule, wealth engines, turnovers, vacancy, landlording, cash flow, refinance