Why We Haven't Brought Management In-House

We have strongly considered in-house property management and vertical integration. Especially when we had to let go of the old management company that managed our Oklahoma portfolio, which put us at a crossroads regarding potentially taking it in-house. We will explain here why we decided against it.

Local Presence

The number one reason is that we are not there locally. Especially since we would have staff reporting to us directly, we felt strongly that we needed to be there more often to handle personal and day-to-day issues while running these properties. Also, we would need to be able to jump in as managers if, for some reason, someone was sick or quit. If we take it on in-house, we need to be more hands-on initially as we build systems and structures.  Eventually, we would be able to step back more with the right staff members in place. We still felt having our presence there at the beginning was necessary.

Found a Good Team

Specifically in Oklahoma, we found a new manager who would do a good job and came highly recommended.  We thought we had a management company that could do a better job than us starting something from scratch.  They already have a system, structures, proper staffing, and experience with all situations that can arise in the management business.  They also have an in-house HVAC team and are open to out-of-the-box solutions to make things succeed.  Lastly, have good transparent reporting and software to get real-time information. So far, they have been an excellent team to work with to push all our Oklahoma portfolio in the right direction.

Profit Center

If we were to take management in-house, we wouldn’t quite have enough scale for it to be much of a profit center.  However, hopefully, we would scale it into a more profitable business as we bought more properties. Ideally, taking management over would create more control, hopefully improving the bottom line. It would also give a more first-hand touch to all experiences in real-time to make new processes, systems, and more informed decisions.

Ultimately, we did not take on management for the reasons listed above.  However, if we take on properties close to us in the future, we would consider taking them in-house.  When we had properties in LA, we did have a portfolio that we managed ourselves.  We believe we have the know-how and expertise to run that side of the business if we can be there in person to direct staff appropriately. We may be a bit old school, but we must feel comfortable taking on that new business, which would highly complement our current real estate portfolio business.