A growing number of new and veteran investors are facing that decision as they look to add to their portfolios at a time when demand for small multifamily properties far outweighs market supply.
It means that investors are often faced with the kind of bidding wars that compromise cap rates.
The temptation is to cut corners, mores specifically management costs.
“From personal experience, I can tell new investors that taking on that work yourself – managing tenants, their needs, their complaints and rent collection can be too challenging,” said Prevost, himself looking to make several new acquisition this year. “What a new investor doesn’t do is factor in the time it takes to do that and the emotion disruption to their family lives. That investment has to be looked at from a business standpoint and without the emotion.”
Currently, most small investors start out holding the reins of property management. Most, in fact, opt to pass control onto a professional firm as they add to their portfolios – a way of putting some emotional distance between themselves and their tenants and their problems.
In the current market, it makes more sense to hold off on new acquisitions rather than allow yourself to get overwhelmed with property management duties, said Prevost. “Don’t think it’s going to be easy to manage even one property directly.
“It isn’t.”
