When you are growing a rental property portfolio, the way you manage your properties needs to be adapted. Jason Balin and I have been through this as we have grown our assets from a couple properties to about 20, and we are still in the process of acquiring more rentals.
To start off, if you only have one property, it should be self-managed, especially if you are planning on growing. It will give you the opportunity to learn what is involved with owning a rental property.
Leasing, managing, collecting rental payments and talking to the tenants if there are issues should all be done yourself, but you should build a relationship with a good handyman for maintenance calls. Self-management works for up to three properties.
Once you get up to three to five properties, it’s the time to hire a property management company who can take care of all the leasing, managing, rental payments and maintenance, not to mention all the bookkeeping.
All you have to do is pay them, which is worth it because it’s not doable to manage five properties yourself.
If you are continuing to grow, you will outgrow a property management company quickly. When you get to about 10 properties, you have a six-figure-a-year business — and it needs to be treated like a business.
This is when you should hire a part time in-house property manager to do the leasing, managing and rent collecting. You will need a software for bookkeeping that the property manager will handle as well.
There are a few different options for rental property bookkeeping — Yardi, PropertyWare, AppFolio — whichever one you choose, you need a legitimate property management software, rather than Quickbooks and spreadsheets.
The last step would be getting to 20-plus properties. With this volume, you have the budget and the need for a full-time, in-house portfolio manager.
If this is now your business and your only income, you can act as your own portfolio/property manager — but this is a busy position that needs to be treated like a full-time job.
All the tasks mentioned above — leasing, managing, collecting rent, dealing with maintenance issues, bookkeeping — need to have structure with such a large portfolio.
Going back to the property management company: when you are that level, it’s a good idea to familiarize yourself with how it does things so that when you are ready to structure your own large rental company, you can set it up properly and be able to do it yourself or tell your portfolio manager exactly how you want things done.
Watch the full video below for more details on growing your rental property portfolio.
Chris Haddon is an entrepreneur based in Washington, D.C., a partner at Hard Money Bankers and a co-founder of REI360.net.