Should I fire my property manager and self-manage?

Question

I have 23-units, some houses, and some apartments.  My business partner wants to fire our property manager and take over management. Until now, we’ve always had a manager. What are the pros and cons of self-management?  

Asked by: BT – Massachusetts
Answer

The question doesn’t mention anything about the current manager or the reason for taking over management.  Too often, owners make decisions like this out of boredom or flawed logic (justification) rather than operational or financial necessity.  I am assuming this is a stabilized portfolio of assets. See my recommendations below. 

If the motivation to self-manage is exclusively money or reducing expenses, the outcome will be disappointing.  The time, energy, and effort of self-management, as compared to retaining a 3rd-party manager, will not play out favorably.  Eventually, resentment, frustration, or a lack of skills will usurp the small savings generated by self-management: the time it takes to provide quality management services is always greater than expected if you are the one providing the services. 

For an owner/operator thinking about self-managing, the matter at hand is all about two things; opportunity costs and expertise.  

  • The most significant opportunity costs are time.  Is your time better spent pursuing another opportunity or acquisition versus devoting this same amount of time to your existing portfolio?  Consider that managing your assets could lead to poor outcomes (less net income) if there is a learning curve.  Then what? 
  • Is there a measurable benefit to making this change? What is it?   

I suggest the following: 

  • Assess the current property management and determine if they should stay or go.  If the manager should be dismissed for cause, consider other property management options and the opportunity to self-manage.
  • Outline the skills of the soon-to-be owner/manager versus the current manager.  Are there clear benefits offered by a change?  
  • Complete a simple pro and con list for the owner/manager that will be taking over in advance of making a final decision. 
  • Estimated the amount of time devoted weekly to the task – then add 50% to the number of estimated hours required. Is it still worth doing? 

This is a simple question with not-so-simple implementation.  It’s important to know what you are signing up for and recognize that property management will be an ongoing task in your daily life (daily, not once a week when it’s convenient). I ask you to add to the time commitment because property management is a 24-hour business, seven days a week.  Rental property never closes or takes a vacation.  

Recognize also that, at some point, you will have to fire yourself, be it age, a health reason, or some other life change.  Have a contingency plan in place for a planned and unplanned exit by you – the manager.  Life happens.  

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