Real Estate… Answered

For the average landlord, trusting a property manager with governing their real estate investments is like a parent trusting a new babysitter with their children. It’s agonizing. You’ll will worry about them finding the right tenants, maintaining the property, and keeping up cash flow. Can a property manager really do it as well as you, the original landlord?

On the flip side, the life of a landlord is tough. Give your rentals a little leeway and they’ll take over your life. You’ll get phone calls in the middle of the night from angry tenants, start answering calls from prospective winners during dinner, and wake up one morning to realize that you haven’t been on a vacation in three years.

Obviously, at some point, it’s worth taking the risk, and like any other risk in real estate investing, you have to think through it objectively. Here are a few criteria to help you decide:

As a Landlord, What Do You Lack: Time or Money?

You’ll have to choose. If you want to manage all of your properties, you’ll have more satisfied tenants, less vacancies, and more overall money. But you also have to realize that managing any real estate investment takes time. Rentals are no different. So, you will earn more money, but you’ll be too busy to take five vacations a year, watch a movie with your spouse, or sleep in two hours every morning (that is why you got into real estate investing, right?)

Is it worth the trade? Many landlords say no. The whole idea behind cash flow and rentals is to give you freedom from a 9-to-5 job, and if you’re doing all the work, that’s exactly what you create. One solution is to hire a property manager. For a percentage of your revenue, they’ll do all the work for you. You can buy a house, hand it over to your property manager, and start collecting monthly checks. You’ll give up a piece of the pie, but you’ll have time to take two-hour lunches or analyze and purchase another real estate investment.

Let me clarify something here.

The better choice is obvious: pay someone else to do the work for you. Unfortunately, it’s not that simple. When you’re a beginning landlord, for example, you’re strapped for cash. An extra $100 per month might mean the difference between comfort and starvation. You might also have hours of free time every day, so working hard on your real estate investments doesn’t bother you. In either of those cases, you would rather have more money than time, so you would choose to manage the property yourself.

Do You Prefer Quality or Quantity?

Some landlords are artists. Their landscaping, lease agreement, and customer service are flawless. For them, real estate investing is not about the money; it’s about craftsmanship. Where some landlords would throw a few flower pots in the front yard and call it landscaped, these investors will spend hours designing and implementing a landscaping masterpiece. The property becomes a work of art. It’s so magnificent that tenants are overjoyed to rent the property. As a result, this particular type of landlord can charge higher rent and has very few vacancies.

But they also have very few properties. Because they manage every detail themselves, they can’t afford to spend hours every day analyzing and closing on new real estate investments. The artistic landlord wouldn’t dream of hiring a property manager. That would be like Michelangelo hiring a cartoonist to paint the ceiling of the Sistine Chapel.

The opposite of the artist is the systematic landlord. They’re willing to accept less-than-perfect quality, if they can build a scalable business model. Where the artist has no employees, the systematic landlord "leverages" people to their fullest, delegating every conceivable task and focusing on growing their business. The typical model is to buy a great real estate investment, hire a property manager to take care of it, and move on to the next property. It’s about speed.

So, which type of landlord are you? If buying and managing rental properties is the joy of your life, then forget the property manager. Do what you love and let no one make you feel guilty about it. Similarly, if you’re a real estate investing machine, and you want to own half of the United States, then find a great property manager and keep them busy. You’ll grow a huge business and they’ll be happy to help you.