Investor Owner of Property Management Company

[MooseHead]

Hi everyone, I was just curious if there was anyone here who runs their own property management company as well as being a real estate investor. If one could successfully do so, you could effectively turn a cost (property management) into profit by owning your own company. By taking care of your own properties, you will not have to pay for that service. Also, if you get contracts with other buildings, it could certainly work out to bring in some nice cash flow.

It could also open a lot of doors for possible JV partnerships, or being the first to find out that the landlord for a building you manage wants to sell.

I haven`t put much thought into this, just came across my mind last night and wanted to know if there was anyone here who actually runs their own PM company and invests in real estate or has possibly thought of doing it.

Cheers,

Chris

 

[housingrental]

I do
There is work involved ....
You could also start your own cleaning business to save money and bring in extra cash. Do you want to? Do you have the skills to?
You could also start your own general contracting business to save money and bring in extra cash. Do you want to? Do you have the skills to?
You could also start your own realtor brokerage to save money and bring in extra cash. Do you want to? Do you have the skills to?

 

[MonteDobson]

QUOTE (MooseHead @ Sep 19 2010, 08:55 AM) Hi everyone, I was just curious if there was anyone here who runs their own property management company as well as being a real estate investor. If one could successfully do so, you could effectively turn a cost (property management) into profit by owning your own company. By taking care of your own properties, you will not have to pay for that service. Also, if you get contracts with other buildings, it could certainly work out to bring in some nice cash flow.

It could also open a lot of doors for possible JV partnerships, or being the first to find out that the landlord for a building you manage wants to sell.

I haven`t put much thought into this, just came across my mind last night and wanted to know if there was anyone here who actually runs their own PM company and invests in real estate or has possibly thought of doing it.

Cheers,

Chris
I would suggest that you talk to an existing property mgt company and then decide. Most would likely say "have you lost your mind" as PM is not the most desirable area of real estate investing. Not to say that there is not huge opportunity in this area for the right person, but do some extensive homework on this one before you choose to proceed or not.

 

[MooseHead]

QUOTE (MonteDobson @ Sep 19 2010, 01:01 PM) Most would likely say "have you lost your mind"

Lol. Although I`m interested in the idea I`m not planning on starting a company any time soon. It was more speculation than anything. I`m just curious if anyone here has gone that route before.

Thanks for the reply!

MH

 

[RebeccaBryan]

Chris,

Do you own any rental property?

 

[RebeccaBryan]

Chris,

I just read your profile. The ownership of property is how you are going to make the REAL money because you actually own an asset. Property management is just a JOB. The only reason I property manage is to have income to pay my bills. Once I get in the position where I don`t need a JOB, I will be training someone else to do it. You seem to have some experience. Is it what you want to do?

 

[Thomas Beyer]

QUOTE (MooseHead @ Sep 19 2010, 07:55 AM) Hi everyone, I was just curious if there was anyone here who runs their own property management company as well as being a real estate investor. ..

There are really only four reasons to do property management yourself:
a) you like it .. and have nothing better to do .. say you are retired or truly love it
b) you can`t find anyone else competent (because it is a small town for example, or you have unrealistically high expectations that even in Calgary or Edmonton no one can do it as well as you do)
c) you like to learn it, or
d) you want to make money at it

We do it today because of b) initially and d) later on.

We started 5 years ago in 2005 when we bought a 100 suiter in Edmonton. Plus we added 3 other buildings then managed by 3rd parties. So we started with about 250 doors. A profitable cake walk .. or so I thought !!

We lost significant money for THREE years .. until we managed about 500 doors when we broke even (still no income !!) in 2008. Today we manage 800 (of our 1200 PrestProp owned) doors "in-house" plus 700 of a 3rd parties we bought .. so about 1500 units. [btw: The firm is called "Fireside Property Group", based in Calgary, managed by Keith McMullen who used to work for Transglobe, Realstar and Gateway .. and is also the President of the Calgary Apartment Association. He is an owner too. He bought in and has a big base salary and an even bigger bonus. I am just one of the owners now, and the board`s president.]

Do not underestimate startup costs and reserves !! Do not start unless you have ONE YEAR SALARIES CASH in the bank, i.e. can survive one year without any income whatsoever !

One firm run by a REIN member is now out of business as they managed too many 20 suiters in Edmonton @ $800/month (5% of $16,000/month rent roll) ... and there are 3 or 4 firms I know of that folded !

you need:
a) an office - say $1000/month
b) a license - a few hundred bucks a year to maintain but more to get initially.
c) a PM who ants to make 35 to 60K/year or more if larger
d) an accountant .. $20/h or 40K to 50K/year
e) telephones .. hundreds of dollars per month
f) PCs
g) accounting / PM software
h) office furniture

I do not know where the break even is for single family houses .. but I`d say somewhere north of 60 !

Another way to start is to BUY a firm or merge 3 or 4 smaller ones.

[btw: If you know of a firm with several multi-family properties under management that wishes to sell, let me know.]

 

[Thomas Beyer]

QUOTE (MonteDobson @ Sep 19 2010, 11:01 AM) ..Most would likely say "have you lost your mind" as PM is not the most desirable area of real estate investing. Not to say that there is not huge opportunity in this area for the right person, ..
Our property manager in Dallas, TX manages over 25,000 doors .. and had his best year in 2009 when all the banks threw foreclosed properties at him to manage. The owners lost money, the banks lost money, but the PM makes money EVERY MONTH once above a certain size if well managed .. INdependent of property values !!!

He drives a VERY nice Mercedes whenever I meet him ... and he does a good job.

Have you ever thought why Hilton or Marriott or Sheraton own very few of their hotels these days ? Because they can make MORE money managing them.

It is another profit center in real estate. Not necessarily better .. just different .. more steady .. independent of valuations and interest rates .. after an initial hump that costs time or $s to overcome !

 

[Rickson9]

QUOTE (ThomasBeyer @ Sep 19 2010, 07:08 PM) He drives a VERY nice Mercedes whenever I meet him ... and he does a good job.

Not even Warren Buffett drives a very nice Mercedes so this fellow must be doing very well!

"At the meeting`s end, Obama presented Buffett, one of the world`s richest men, with a tie. A senior White House said the gift was `not pre-planned` but a gesture from the president `at the end of the meeting because his [Buffett`s] tie was frayed.`"
http://www.cnn.com/2010/POLITICS/07/14/oba...ings/index.html

What a silly fellow!

 

[MooseHead]

QUOTE (RebeccaBryan @ Sep 19 2010, 05:00 PM) Chris,

I just read your profile. The ownership of property is how you are going to make the REAL money because you actually own an asset. Property management is just a JOB. The only reason I property manage is to have income to pay my bills. Once I get in the position where I don`t need a JOB, I will be training someone else to do it. You seem to have some experience. Is it what you want to do?


I do not own any investment properties as of yet. I was in negotiations for a triplex but walked when it wasn`t working out the way I was hoping for. I intend and hope build a portfolio of multifamily houses/buildings in the near future. The whole property management thing was more speculative than anything. It was just a thought I had, it isn`t anything I`ve thoroughly thought about.

I certainly plan to manage my properties myself while starting out but running a large property management company is not part of the plan towards my personal belize. However, once my portfolio is big enough, hiring a worker or two to help me manage my properties is something I`ve considered.

Who knows, at this point acquiring positive cashflow assets is my main focus!

 

[Thomas Beyer]

QUOTE (MooseHead @ Sep 19 2010, 06:08 PM) ..

I certainly plan to manage my properties myself while starting out ..
Why ? Are you better than most firms you can hire ? Or because you wish to learn ?

Your TOW main goals of investing are: finding great assets/deals .. and finding investors !

Rest is detail !

Don`t major in minors !!

QUOTE (MooseHead @ Sep 19 2010, 06:08 PM) .. but running a large property management company is not part of .. .. positive cashflow assets is my main focus!
don`t confuse OWNING with RUNNING !

A well run property management firm (or a restaurant or a car dealership or ..) is a cashflow positive asset !!!!

 

[bizaro86]

QUOTE (ThomasBeyer @ Sep 19 2010, 04:54 PM) [btw: If you know of a firm with several multi-family properties under management that wishes to sell, let me know.]

Thomas: Are you mainly interested in the contracts for managing buildings, or are you looking to add capacity for managing buildings?

 

[Thomas Beyer]

QUOTE (bizaro86 @ Sep 19 2010, 08:36 PM) Thomas: Are you mainly interested in the contracts for managing buildings, or are you looking to add capacity for managing buildings?
both .. organic growth and purchase of smaller firms !

 

[RedlineBrett]

QUOTE (ThomasBeyer @ Sep 19 2010, 04:54 PM) There are really only four reasons to do property management yourself:
a) you like it .. and have nothing better to do .. say you are retired or truly love it
b) you can`t find anyone else competent (because it is a small town for example, or you have unrealistically high expectations that even in Calgary or Edmonton no one can do it as well as you do)
c) you like to learn it, or
d) you want to make money at it


We self managed our own portfolio of 10-15 doors between 2005 and 2008 for reasons `B` and `C` above. Then once we had made it to 25 in 2009 we decided we were getting to the `tipping point` where we needed staff and would make the jump once I got my broker`s license. We`ve been `passively` building the business for a year now and currently manage 42 doors for clients as well as the 27 of our own portfolio. We take all the stuff guys like Thomas stay away from - so our niche are smaller properties - fourplexes and under. We are very selective about the areas we work in and the type of clients we take on. We feel pretty proud of the business as the business seems to find us... It has also been a nice hedge for our sales division because when people can`t sell houses they often turn to the rental market.

Like Thomas we lost money for the first year. The business barely breaks even now but my money partners and I get our 27 doors managed for free. The systems we have put in place have us on track for a good 2010 but this is a facet of real estate we are going to take our time with. We are hoping to do it for reason `D` after the addition of a bit more infrastructure. It is not a glamorous business and most of your reasons for contacting people is to bug them for something so you need the right kind of mindset to make it work.

We have success though because we were property owners before we were a management company - so we know how the shoe feels on the other foot. If you don`t own anything yet I would reccomend you make that step first. It has helped us secure business.

Best of luck!

 

[MooseHead]

QUOTE (RedlineBrett @ Sep 20 2010, 07:42 PM) We self managed our own portfolio of 10-15 doors between 2005 and 2008 for reasons `B` and `C` above. Then once we had made it to 25 in 2009 we decided we were getting to the `tipping point` where we needed staff and would make the jump once I got my broker`s license. We`ve been `passively` building the business for a year now and currently manage 42 doors for clients as well as the 27 of our own portfolio. We take all the stuff guys like Thomas stay away from - so our niche are smaller properties - fourplexes and under. We are very selective about the areas we work in and the type of clients we take on. We feel pretty proud of the business as the business seems to find us... It has also been a nice hedge for our sales division because when people can`t sell houses they often turn to the rental market.

Like Thomas we lost money for the first year. The business barely breaks even now but my money partners and I get our 27 doors managed for free. The systems we have put in place have us on track for a good 2010 but this is a facet of real estate we are going to take our time with. We are hoping to do it for reason `D` after the addition of a bit more infrastructure. It is not a glamorous business and most of your reasons for contacting people is to bug them for something so you need the right kind of mindset to make it work.

We have success though because we were property owners before we were a management company - so we know how the shoe feels on the other foot. If you don`t own anything yet I would reccomend you make that step first. It has helped us secure business.

Best of luck!

Thanks for the words of advice Brett. My thinking is similar to your business model in terms of property management. Once I`ve got enough assets that I am no longer able to effectively manage myself, I would then look to hire on some helpers and expand to manage other rentals outside of my portfolio to cover the cost of my new employees.

I also wanted to say congrats on the success of your business. I checked out your website which is very professional and well done. Your business is also very revolutionary by incorporating so many services into one company.

Cheers,

Chris

 

[RedlineBrett]

QUOTE (MooseHead @ Sep 22 2010, 12:05 PM) I also wanted to say congrats on the success of your business. I checked out your website which is very professional and well done. Your business is also very revolutionary by incorporating so many services into one company.

Thanks Chris, we like to think so too

 

[Thomas Beyer]

QUOTE (RedlineBrett @ Sep 20 2010, 05:42 PM) ...but my money partners and I get our 27 doors managed for free. ..
Please elaborate !

You work for free ? Every property should be charged a management fee .. even if it justify shuffles money from the left top the right pocket.

How much do you charge to manage a duplex or 4-plex ?

 

[MooseHead]

QUOTE (RedlineBrett @ Sep 22 2010, 01:54 PM) Thanks Chris, we like to think so too

The only recommendation I can make is to change that picture of the Calgary Flames to the Toronto Maple Leafs.

Go Leafs Go!

 

[harland]

QUOTE (RedlineBrett @ Sep 22 2010, 01:54 PM) Thanks Chris, we like to think so too

I often think that if you are having your property managed by a company that owns property themselves, their properties won`t be the ones that are ever vacant. Has anyone else ever considered this?

Delanee

 

[housingrental]

Not true. A good property management company will ensure all properties are treated equal - clients properties as well as there own - and filled with quality renters

QUOTE (harland @ Sep 25 2010, 02:50 AM) I often think that if you are having your property managed by a company that owns property themselves, their properties won`t be the ones that are ever vacant. Has anyone else ever considered this?

Delanee