SYSTEMS MATTER: WHY DO-IT-YOURSELF PROPERTY MANAGEMENT FALLS SHORT
It's strange to think about how much important and transcendent history has occurred in the last 20 years or so but it’s also really important to do so. Whether you dig into the changes we experienced after 9/11, the 2007-2008 Financial Crisis, or Covid, the fact of the matter is that the days when so much in real estate seemed easy are squarely in the rearview. Don’t tell that to HGTV because they’re pumping millions into D-I-Y programming, but seeing the world through that lens is likely to lead to disappointment, more than likely at significant expense, especially when there are local professionals setting a high bar and doing it for cheaper.
WHAT’S CHANGED?
The world of real estate has gotten much more challenging in the last couple years. There’s much less margin for error with higher interest rates. It’s harder than ever to hire vendors and it’s harder than ever for vendors to find reliable workers. And with real estate prices still near record highs and lagging behind the Fed’s efforts to slow down the market, profit margins are razor thin and will be for some time. When that’s the case, it’s essential that you develop effective and efficient systems and unfortunately that’s rarely part of the D-I-Y catalog.
LEARN MORE: ARE RENTS TRULY UNAFFORDABLE…OR IS SOMETHING ELSE TO BLAME?
SYSTEMS VS. GOALS
As real estate investors and landlords, we all set goals. But just because we set goals doesn’t mean we’re going to achieve them. The most important factor when it comes to meeting those objectives we set is the creation of a process, or system, that is consistent and realistic. For this to work, managing that property needs to be your priority. In the days of yesteryear referenced in the introduction, managing a property or two on the side wasn’t the hassle it is today. It is nearly impossible to create and stick to systems of management if you don’t prioritize that property. Case in point: maintenance today. Unless you’re handling all of the maintenance yourself, you need to establish strong relationships with vendors, and you need to start yesterday. Supply is low, demand is high, and without some history or some greater incentive for that vendor, you’re likely at the bottom of a long list.
In his best selling book Atomic Habits, James Clear sums it up pretty well: “You do not rise to the level of your goals. You fall to the level of your systems.” A decade ago, you could feasibly turn a profit managing your own properties. Today, there are professionals that create margins where individuals struggle to do so. Professionals have the advantage of being able to develop and perfect systems where D-I-Y owners do not. When it comes to getting it right as often as possible, scale is a major advantage.
LEARN MORE: JAMES CLEAR’S ATOMIC HABITS
SCALABILITY
To put it simply, size matters. Experience matters. A D-I-Y landlord who’s managed his or her own 3-unit property for 20 years has less experience than a professional property manager who’s managed seven 3-unit buildings for just three years. And that professional property manager is going to learn more and more each time their team acquires a new property because properties are diverse in their needs and condition. They move toward more efficient processes and strengthen systems much more quickly. They are continually growing. And importantly, they can afford minimal growth where a D-I-Y landlord cannot. For someone who owns their own property they need to create enough revenue to deal with increased property values and interest rates. Property management companies, with dozens of properties under management, can both create greater profit and spread risk over that multitude of properties, which allows for greater overall success and flexibility in management.
On top of that, they’ll build teams and demand more attention from other real estate professionals, including maintenance vendors.
LEARN MORE: NO DEAL IF YOU CAN’T SCALE
COME SEE MY GARDEN
When we bought our house, there was a 20x20 area between the house and the driveway filled with beautiful perennials of all colors and shapes. It looked great…for about a month, and then what grew flopped over and in time it always made its way closer and closer to jungle status. So we got rid of it and started a nice fenced in garden. The first year, it looked fantastic. The second and third years, it looked good. The fourth year, after the squirrels took all my corn, we just grew pumpkins instead.
Apparently, I’m not a great gardener, but I was able to make it work for a couple years and we ate some lettuce, peppers, carrots, and cucumbers when we wanted to. We could’ve kept it going and improved upon what we’d learned the previous summer, but the prospect of being able to buy those vegetables for very, very cheap at local farmstands and not be out there watering every morning (and fighting local rodents) was too appealing to ignore.
Similarly, it can be attractive to manage your own property. Much like keeping a garden, it certainly can be done successfully with effort and constant attention, but it’s not easy, and you can’t manage too large a plot. A professional farmer has acres to work with and know the ins and outs of the game. They’re experts on soil, weather, and all the variables that can impact the growing season in the same way a professional property manager knows the ins and outs of real estate. If you’re looking to manage property because it’s an enjoyable hobby that could put a couple bucks in your pocket, by all means do continue. But if you own property because you’re looking to maximize your profits and build your real estate portfolio, you need a better option.
Nexus Property Management® has been managing residential and commercial properties for over a decade and is the largest property manager in Southern New England. With franchise opportunities that come gift-wrapped with industry leading systems included, we take great pride in helping to rewrite the norms of real estate investment. Contact us to learn more or inquire about joining our team.
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Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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