Thinking of starting your own property management company?
What's the best way to do that?
One of the things that we talked about internally, it seems like once every quarter, is should we create our own property management company?
The reason we would ever want to do that is because there's no such thing as a perfect project manager. There are always things you don't like, and you could presumably change these things by creating your own property management company.
You could architect what you want. So you're solving one problem, but are you creating a whole other problem?
To answer that question, you have to look at what a property manager does for you. They're essentially controlling the HR, and for the most part, any accounting of your business. You're buying into their systems and their economies of scale. If they're really good at that, then it can be helpful, because they know how to build up their systems. If they're not good at it, you could be in a world of hurt.
As your own property manager, you might spent a lot of my time hiring people and dealing with headaches, but if you like that side of the business, maybe it is for you.
It's clearly one of the benefits of multifamily that you can outsource the property management company.
That's particularly useful when you're getting into the business. It has served us well, going into 2000 units. As companies get larger, however, they tend to also self manage. It's something I think that we will continue to talk about, probably every single quarter, because it's a matter of control.
I want the same reporting coming out of all of our properties, I want this particular initiative rolled out, I want to put solar panels on every one of my buildings…There's a matter of control that we would get by self managing.
With a property manager, you can't necessarily tell them what to do. You can't say, I want this done in this particular way. You can influence them to do what you want to do, but the end of the day, you can't force them to do what you want.
This is frustrating to us because some property managers are better at one thing but not another. One might be good at leasing. One might be bad at leasing but good at bookkeeping. You can't find the perfect thing. So, I think it's one of the things that's going to stay at our a top of our conversation.
If you're going to do it, how can you create your own property management company?
If you're going to do it, you want to hire the best talent on the highest level . So let's say you have 1000 apartments and you want to start your own property management company, you want to hire a director operations that's managed 10,000 units. You may have to stretch to be able to afford that person in the beginning, and it may really hurt.
But that's the right way to go about it. You want that top person to be able to build it from the top down and help you build your systems and processes. Which is good general advice anytime you hire.
In the beginning, you're trying to bootstrap stuff, you're trying to save money, but the best way to do it is to hire from the top down. The problem is, that person is highly compensated. But everything else flows from that person.
Even if you hire that person on a part time basis, if they're high quality, they will solve all the problems for you.
So, the top down is the way to do it, and that's the only way we'll do it. We'll find someone who is an experienced property manager and entice them to come over and start a whole property management company.