To Manage or Not to Manage?, that is the Question
Last month I wrote asking "What is your time worth?". To summarize, if you can pay someone else to do a job or task that will free your time to work on more important responsibilities to grow your business and increase your income by working more efficiently.
One of the biggest questions I was asked when I first started to rehab homes from people was, "Do you do the work yourself?" I am not sure why that was such a popular question. Maybe they watched Bob Villa or HGTV. My answer was "No, I am not handy and it would take me way too long." However, for the first few renovations, I did do some of the work and the reason was three-fold. One, I had the time back then to be on-site more because I was just starting my business. Two, I wanted to learn the different trades so I could communicate better with contractors and later detect if workers I hired were cutting corners. Third, since I was on-site more, I did some of the jobs I could do to save some money. Those limited skills were painting, hanging blinds, installing hardware, and cleaning. I still remember attempting to patch some drywall and my mentor and his handyman complimented me. I knew they were just trying to be nice. I call this management style "Active and Hands-on management."
As I gained more experience, I transitioned to managing the projects and hiring all the jobs for a rehab. I was still my own general contractor. For medium-sized to major rehabs, I hired a well-qualified carpenter who could do framing, trim carpentry and install cabinets and flooring. That contractor was on the job for several stages and could be my eyes and ears while other contractors were on the job. However, I still needed to go by the home 1-2 times a day to meet different sub-contractors and check on the progress. I was also spending time purchasing supplies and fixtures. I call this style "Hand-on management"
The next transition when I was really able to grow my business was when I hired a general contractor (GC) to manage my projects. At this point, I was just managing one contractor. The GC went to codes to pull the permit. The GC called and coordinated all the subcontractors. The GC or subs purchased the supplies and the majority of the fixtures. I call this style, "Hands-off Management"
Interestingly enough, when I first began buying rentals, I was frequently asked, "Are you the landlord or do you have a property manager?" Back in the early 2000s all full-time investors I encountered recommended to manage your rentals yourself. They had horror stories of bad property managers not being organized, mishandling funds, and leasing to unqualified tenants. That scared me into figuring out property management myself. I found out I was pretty good at it, but I didn't like it. Again, it was too time-consuming.
I started off being "Active and Hands-on". For maintenance issues, I would be the middle man between the contractor and tenant and often meet the contractor at the property. For leasing, I would take numerous phone calls and set up showings for unqualified prospective tenants and then meet them at the property if they showed up. I then learned to qualify them over the phone and then in the ad so I only received inquiries from pre-qualified prospects. I would set up multiple showings around the same time and ask them to call to confirm the appointment on their way. For rent collection and accounting, I went from using spreadsheets to buying a course and teaching myself QuickBooks making a lot of mistakes along the way.
After several years I moved to the "Hands-on management". I hired an office manager who handled the leasing calls and appointments, rent collection, and bookkeeping. I hired a full-time maintenance contactor who would coordinate with the tenants and sub-contractors if needed. I was still very involved with managing the office manager, the maintenance guy, and the bookkeeping.
As I mentioned in my last post, my office manager decided to leave less than four years after starting. I then transitioned out of hands-on management to hands-off management by hiring a property manager. I then managed the property management freeing up a lot of time similar to how I only managed the general contractor for my development projects.
To manage or not to manage? That is my question to you. There is value in the active hands-on and the hands-on management to gain experience. If you purchase your first rental property and want to manage it yourself, go for it. If you want to get your hands dirty in your first few rehabs, you will learn a lot. If you want to expand your business effectively, I would suggest to have a plan in place to advance to the hands-off management stage quicker than I did. You will see the rewards.
If you are interested in finding an experienced property manager in the greater Nashville area, consider RENEW Real Estate Services (http://www.renewtn.com/). Renew Real Estate Services offers a full range of property management services in Nashville and surrounding areas including Brentwood, Franklin, Spring Hill, Hendersonville, Nolensville, Thompson's Station, Bellevue and Davidson County.