Most investors who ask this question are looking for a “Rule of Thumb” type of answer. For instance: Up to X number of properties you can manage yourself, any more and you need professional property management. But, that’s too simplistic an answer.
In my experience, I’ve seen individual investors manage 15-20 rental properties on their own with ease as well as investors who lost their mind after managing two problematic rentals.
There are too many factors at play to give a one size fits all answer. But if I had to reduce it down to the essential, the answer depends on four major factors.
Where does the investor fit in the Convenience – Savings continuum?
Picture a continuum where on the far left you have maximum convenience and on the far right you have cost savings. Where do you fit within that continuum? Are you the type of investor that wants or needs to be completely hands-off? Perhaps you have a demanding profession that doesn’t allow the bandwidth to deal with a rental property. Or simply, you are looking for an investment that’s as passive as possible. If this is you, the answer has been already answered for you. The maximum number of properties you can self-manage is zero. The best option in your case is find and vet a good property management company and let them handle the day to day. You will pay them a fee in return for the convenience but since convenience is paramount, the fee is worth it. On the other hand, if you are able and willing to handle a reasonable amount of requests from tenants, you could self-manage a number of properties and improve your cashflow by not having to pay a property management fee.
Does the investor have the temperament to manage Tenant relationships?
Property management is really a misnomer. In fact, managing the property (repairs etc) is the easy part of managing an investment property. The critical (and hard) part is managing the Tenant relationship over the long term. The next thing you have to think about as you consider this question of self-management is: Do you have the right temperament to manage Tenant relationships? In my experience, I have had investors who are masters at this and I’ve had investors that just aren’t suited for the job. In the latter case, they tend to antagonize the Tenants and set the relationship on the war path from the very beginning. If you belong to this group, your best option is to hire a professional property management company and create some distance between you and your Tenants.
What is the age and level of maintenance of your properties?
Now we move from factors that deal with the investor and their personality to the property and its quality. You could have a willingness to do the job and the right temperament for it. But if your properties are older with lots of deferred maintenance they will have chronic problems with the main mechanical systems. Obviously, this can be very time consuming and irritating for the investor and it is equally irritating for the Tenants. In turn, they don’t stay as long as they otherwise would causing more turnover and more headaches for the investor. It’s a cascading effect. The older and less maintained your properties, the fewer you can manage on your own.
What is the quality of your Tenants?
The last (but certainly not least) factor to take into account is the quality of your Tenants. Do you have conscientious Tenants that take good care of the property and handle little things on their own? Or are your Tenants high maintenance and expect you to be at the property fixing every thing no matter how minor? The elephant in the room then is your process for finding and screening Tenants. If that process is dialed in, either through a relationship with a good agent or because you’re naturally good at it individually, it will save you a lot of headache and will allow you to manage more properties on your own.
Bonus: What’s the quality of your management systems and vendor network
Let me give you another bonus factor to consider: the quality of your systems and vendor network. How good are your self-management systems? Do you have a written down process for move-ins and move-outs, maintenance schedules, rent collection and Tenant communications? What about your network of vendors to handle your plumbing, HVAC, sheetrock and paint, electrical? Do you have trusted vendors for each of those fields that you can deploy at a moments notice that will do a good job for a fair price without much supervision? The answer to those questions will determine how many properties you can manage on your own.
