I think the first thing you should do is define your goal, then develop a plan to accomplish your goal. Once you have a plan, then some of the big picture starts to fall into place.
If your plan does not include rental property ownership, then you don’t need a property manager. If you are only buying and selling, do you really need an attorney on your “team”? Are you in a title company state? Any title company can handle the settlement stuff. Do you plan to buy FSBOs and sell youself? Then why do you need a real estate agent on your team?
You see where I am going with this. Bring the professionals in as you need them, you don’t need everyone from the start and certainly not all the time.
Set your goal and develop your investment plan. The rest will become obvious as you begin to implement your plan.
While John T. Reed argues against using property managers, I think a lot of John T. Reed’s “rants” are used to prop up the sale of his own materials (you don’t need a property manager if you have my book,or, the lease/option gurus are bogus – my book tells you how to do it legally).
Propertymanager likes to manage his own properties personally. He contains his overhead costs and keeps a tighter rein on quality control when he supervises his own contractors. Nothing wrong with that and he seems to enjoy it.
I personally don’t like the day to day business of rental property management. I don’t know the intricacies of the landlord-tenant law. I don’t know how to handle evictions. I don’t always have the time to schedule property showings and to interview rental applicants when it is convenient for them. I like my privacy and time at home and don’t want to be disturbed with a stopped up toilet call in the middle of the night.
I hire professional property managers to do all that for me. A professional property manager takes care of all the day to day operations stuff and stays current on the law so I don’t have to.
For me, professional property managers allow me the freedom to invest in areas outside my back yard. At one time, my wife and I owned out of state investment property in five different states. No way we would have been able to manage all those ourselves.
Yes, you will run into some duds but you will also find quite a few professionals, too. Most states have a licensing requirement for property managers, usually a real estate broker license. My home state of SC has a separate property manager license requirement. There is a National Association of Residential Property Managers. I consider it an excellent qualification if a property manager also belongs to the association.
I have been fortunate in my 26 years of landlording to have fired only two property managers. I am currently working with six different professional property managers in three different states. In order to geographically diversify my rental property portfolio, professional property management is mandatory, not optional.
I also would not get too overwrought with the LLC either. There are a lot of successful real estate investors who don’t have an LLC. If you are just starting out, how do you know you will “take” to this business. If you don’t, why go to the expense and effort of establishing a business entity in the first place. I say get into the business first, find your niche and establish yourself. Then consider how an LLC will support your estate planning and business continuity after your business is well established. About six years ago, I asked an attorney and financial planner whether I needed an LLC for “asset protection”. Their response was “probably not” since I have a passive income activity, use professional property managers for all my rental properties, keep my properties in good condition, and have adequate liability insurance for each property. Their feeling was that in the unlikely event I should ever get sued any judgement awarded will be within the policy limits of my insurance. Their suggestion was to consider using LLCs when my net worth exceeded $2 million, when I have significant assets to protect. Today, my attorney is saying that I don’t really need the LLC just because my net worth is over $2 million. He is advising me to just get an umbrella liability insurance policy for $5 million and to increase the policy limit when my net worth goes over $5 million.