Should I use a property management company? The actual math.

The PM cost structure (honest version)

A typical residential PM in the US charges:

• 8-10% of collected rent (lower in cash-flow markets like the Midwest, higher in coastal markets)
• Lease-up fee of 50-100% of one month's rent whenever they place a new tenant — typically every 1-3 years
• Maintenance markup of 10-20% on coordinated repairs (they manage the contractor; you pay PM's rate, not direct contractor rate)
• Occasional fees: renewal fee ($100-300), eviction processing fee, sometimes a setup fee at onboarding

On a $1,500/mo rental in a typical Midwest market: $135/mo (9%) + amortized lease-up of $50-100/mo + ~$30/mo of repair markup = ~$200-275/mo all-in. That's 13-18% of gross rent, not the 8-10% the headline number suggests.

What you actually get for that

The PM's job is much more than "collect rent." What they actually do:

• Tenant screening — credit, criminal, eviction, employment, prior-landlord references. A bad tenant costs you 3-12 months of lost rent + damages. PM screening at scale catches issues a single landlord wouldn't spot.
• Marketing the unit — listing photos, Zillow/Apartments.com syndication, showings, application processing
• Lease compliance — state-specific lease forms, security deposit handling per state law, fair-housing compliance, eviction process knowledge
• 24/7 maintenance dispatch — tenant calls them at 11pm about a broken heater, not you
• Rent collection + late-fee enforcement — including the awkward phone call you don't want to make
• Year-end accounting — Schedule E ready financials

The value isn't the rent collection (anyone can do that). It's the systemic risk reduction — the bad-tenant problem and the legal-compliance problem are where unmanaged landlords lose real money.

The actual self-management math

Self-management isn't free. The hidden costs:

• Your time at fair-market hourly rate. Lease-up alone is 15-25 hours (photos, listing, showings, application review, lease signing). At $50-100/hr fair-market opportunity cost, that's $750-2,500 of value, every turnover.
• Worse tenant screening. Most individual landlords don't pay for the full credit + criminal + prior-landlord-call package PMs use. Worse-screened tenant = higher eviction + damage risk. A single bad tenant can cost $5-15k.
• Legal exposure on lease terms. Using a friend's old lease or a generic template against your state's tenant law produces unenforceable clauses + lawsuit risk. PM lease forms are state-vetted.
• Maintenance call interruptions. Pricing your evenings and weekends at $0/hr makes self-management look free. It isn't.

Self-management makes sense at: 1-3 properties in your local market, you live within 30 min driving, you have evenings free, and you've done it before (or you're willing to absorb the first-year learning curve).

PM management makes sense at: 4+ properties (the time math flips), or out-of-state properties (you can't physically show or maintain remotely), or a primary career that doesn't leave evenings free, or properties in high-turnover student/transient markets.

The break-even calculation

Quick framework:

PM annual cost = (rent × 0.09 × 12) + (rent × 0.75 × turnover_per_year) + (annual_maintenance × 0.15) + ($300 renewal fee × keep_rate)

Self-management annual cost = (lease-up hours × your hourly rate × turnover_per_year) + (admin hours × $50/hr × 12) + (expected loss from worse screening × probability)

On a $1,500/mo rental with 1.5-year average tenancy and a $200/month landlord at $50/hr opportunity cost:

• PM cost: $1,620 (annual fee) + $750 (amortized lease-up) + $300 (maint markup) + $200 (renewal) = ~$2,870/year
• Self cost: ~30 hours/year × $50 = $1,500, plus ~2% higher expected loss from worse screening (~$360/year) = ~$1,860/year

Self-management wins by ~$1,000/year here. BUT the standard deviation on self-management is much higher: one really bad tenant adds $5-15k to that "worse screening loss" number and self flips to a clear loss. PM is the lower-variance choice.

The cases where PM is non-negotiable

• Out-of-state properties. Even "I'll fly out for showings" investors stop doing this by deal #2. Bad PMs lose you money; the answer is to vet harder, not skip PM entirely.
• You have a full-time career you don't want to interrupt. Software engineers making $200k+ shouldn't be doing $50/hr tasks on weekends. The math doesn't work; your time is worth too much.
• You hate dealing with people. Yes, this is a real reason. The wrong landlord temperament will produce worse outcomes for both you and your tenants, and a PM acts as the necessary buffer.
• Multi-family 5+ units. The compliance + turnover math at scale strongly favors PM, even for local landlords.

When to fire your PM

Switch back to self-management or change PMs when:

• Vacancy is materially above market — they're slow placing tenants
• Maintenance bills are consistently higher than what you can verify (~20%+ above local contractor pricing)
• Tenant complaints get routed to YOU instead of being handled before they reach you
• You can't get a real answer on a question within 48 hours
• They missed a state-required compliance step (security deposit handling, fair-housing process, etc.)

The right PM is invisible — rent shows up monthly, statements arrive on time, problems get solved before you hear about them. If you're hearing about problems, switch.

Modeling PM in your underwriting

Set the Management % field in TrueCap to 9% by defaultfor any property you don't plan to self-manage, plus add 1-2pp to the maintenance % to cover the markup. If you're going to self-manage initially but expect to switch later (after the property is in your book and you stop having time), still underwrite at 9% — it's the more conservative truth and you don't want a deal that only works when you're donating your evenings.

A deal that pencils at 9% management can absorb a switch to PM if your life situation changes. A deal that only pencils at 0% management is fragile — you're effectively forced to never get sick, never travel, never have a baby, never have a demanding job.