When does self-managing stop making sense?

It’s all about the math for us.  Self managing makes the numbers for STR work as most PM are expensive and do a comparably poorer job. Maybe if people bought property when interest rates were 3% the numbers still cover a PM but not now. Plus it earns hours for material participation and bonus depreciation now that that’s back. Not sure what the number is but perhaps if you had enough properties in one location to get enough of a discount on PM it would make more sense.

We started a few years with one property and inherited the “mom and pop” management company that was handing things for the prior owners (it’s a shore town… it was one of the legacy “been around for 50 years” type of places).

We ended things with them pretty quickly… they used fixed rate sheets, they only rented by the week or “mini-week”, their knowledge of the major OTAs was lacking (outsourced to a “tech guy”), and their in-house cleaners weren’t even that great.

So we ditched them, in favor of Evolve. We liked their hybrid model… they are not “boots on the ground” but they handle all the channel management and revenue management. We were happy for a while and were actually pretty proud of how we were doing compared to the prior owners.

Over time though, and by the time we bought our 3rd property, Evolve’s value proposition diminished greatly. “Why are we paying them so much, when WE’RE doing most of the work anyway?” Most frustrating of all was the unnecessary layer between us and the guests when it came to communication.

As a highly technical person (ex-Microsoft employee), it didn’t seem hard to do what Evolve was doing. And we were right. As soon as we launched our 3rd property, we were running circles around Evolve and KILLING IT on rates and occupancy compared to them. We started feeling sick at how much money we had given them over the years, for what was really just a little bit of up-front effort -- “set it and forget it.”

As we on-boarded our 4th property, we told Evolve to stop taking reservations on our first 2. We were self-managing #3 and #4 pretty well without needing a PMS… just making sure that Airbnb and Vrbo and BDC were staying in sync and only being slightly inconvenienced by having to log into each OTA separately to make changes.

But when it came time to fire Evolve and bring our first two properties into the self-management fold (for a total of 4), that’s when we started evaluating PMSs and landed on Hospitable. Very happy with that decision, as it also finally solved the problem of repeat guests wanting a direct booking option. And now it’s opened up the possibility of starting to co-host or manage for others, which is definitely in the realm of possibility for the near future.   

Great points ​@EricMiller! And sadly, there are so many who don’t know about bonus depreciation. Do you also maintain a full time W2 job, while self-managing? 

​@Tom Beerley Love your story! We’re working on something pretty special that we hope will help customers like you nail their first owner and begin managing for others. I’d love to hear… how are you thinking about taking on your fist management client? What gaps are present today that you feel you need to fill before you’d be ready? And when you start searching for opportunities, how you assess whether a property is a good fit or not? (If you want to chat about this 1:1you’re welcome to book something with me here.)

​@Emily Tunggala I’m fortunate to have a relative who owns a condo in the same building as one of ours. She recently decided to start renting her place out, and was happy to be my first client. So I have a very patient and forgiving first client to cut my teeth on. I couldn’t fathom having a stranger as my first client… It would be way too obvious that I’m figuring things out as I go (not operationally… just in regard to “managing for others.”).

So the main gaps for me to fill right now are all the things involved with having an arms-length, paying client. What to charge, how to formalize the agreement, how often to do payouts, how to handle up-front investments needed to bring a property up to our standards, whether to list third-party properties under the same account as our own properties (risky given our nothing-but-5-stars track record). And 100 other similar questions. 

Basically I need a PM 101 course LOL. I greatly admire the folks in these forums that are operating at a good scale already. I already know that operationally speaking, I could scale to 100 properties if I owned them all. It’s building out a mature-looking set of SOPs for client-owned properties that will be the biggest challenge. 

I’ll definitely book some time with you to get more of your thoughts. Thank you for that! 

I’ve self-managed long-term and short-term rentals. I’ve done so from the other side of the country and locally. I also have an accounting and tax background. I think there is no value that can be placed on the amount of experience I’ve gained self-managing. That more than anything is why I chose to self-manage. Sure, there are instances where my time might be better spent elsewhere in the business/life. Every time I look into PMs they wants anywhere from 8-12% to basically process rent. Some require you to use prescribed vendors, some get kick-backs/referral fees/commissions. I’ve actually had a top rated PM in my area refuse to take on a challenging property because it would be “too much work”.

Ultimately, I’ve built a great local network of vendors and professionals, it took quite a while and I did have to kiss some frogs along the way. I also do get 3 quotes for everything which helps me identify which vendors to avoid more than which ones to build a relationship with. I am also quick to stop using a vendor. 

What makes self-managing worth it is the experience/knowledge gained and having that experience/knowledge to know when something is not a DIY matter. When is a PM worth it? In my experience very rarely (especially at these cap rates). I’d rather build that capability in house (when scaling). Especially for labor/maintenance services I just need someone to continue to manage those relationships. For accounting/tax matters I’m my own resource. For legal matters I seek out attorneys in the respective niche. I think 4-5 years in the flywheel started to catch a bit of momentum and I was getting referred to top tier professionals. I wouldn’t have been able to make any of these connections without self-managing. 

Caveat being that I am a small operator with a handful of doors. Not every business needs to scale to be profitable. 

What I need is a sophisticated portal and intuitive UI to serve as a hub for my residents, employees, and partners. Especially as a small operator I need something that can layer over my business without trying to pull me away from my business and into the platform. Popular ones have continued to be bought up. 

• cheap rent processing (MVP)
• Applications (MVP)
• maintenance requests (MVP)
• simple investor relations (dashboard, real-time reporting, etc.)
• calendar scheduling for inspections and maintenance 
• services upsells (landscaping, grounds maintenance, cleaners, etc.)