Would You hire a $23/Hour Employee to Manage $0.5M of Your Money?

Residential real estate’s appeal as a store of value is under siege. Single-family rental (SFR) net operating income (NOI) averages 4.8–5.6% annually, factoring in operating expenses like vacancies (5–8%), delinquencies (2–4%), and maintenance costs. Depending on leverage, the percentage of NOI translated to cash flow might even be negative. Add to that an average U.S. home price appreciation of 4.27% annually, and the real IRR, adjusted for CPI-based inflation (2–3%), which understates true inflation better captured by M2 money supply growth, hovers at 3–5% for unleveraged SFRs—hardly compelling. Compare that to the S&P 500’s 10.7% average annual return or stock ETFs like VOO (10.5%). Even gold, with 7.8% annualized returns over the past decade, often outperforms. Bitcoin, a rising store of value, has posted staggering 60%+ annualized returns for early adopters, though its volatility is not for everyone. Real estate investors are fighting an uphill battle for competitive yields.

Then there’s the non-passive nightmare of real estate investing. Vacancies, tenant delinquencies, litigation, squatters, and skyrocketing regulations drain time and profits. But the real culprit? The CEO you hired to run your rental business, aka property manager, is not acting as your money manager. Would you hire a CEO that is not wired to bring financial value to its shareholders?

Most property managers are mom-and-pop shops, managing 300–400 units at best, fragmented and unscalable. Most are not wired to maximize your wealth. They fail to understand that investors don’t hire them to “manage properties” – they hire them to manage their retirement plans, their kids’ college funds. Yet, these managers don’t speak “returns” or “profits.” They’re stuck in the past, resisting technology like it’s 1995. They charge 8% of annual rent – roughly 1% of your property’s value, which boils down to $80–100/month for a $500K asset. For that amount, a reasonably hardworking property manager can only allocate a low-paid employee at an average of $23/hour for 3 hours of work (usually with no health insurance), barely enough to cover manual tasks like rent collection through checks or facilitating maintenance calls. This is why your manager is focused on “placing tenants” and “unclogging toilets”—but this is not optimizing your returns. This reality takes a massive toll on investors’ returns and poses a massive risk to entrusting hard-earned money to a setup like that.

Worse, some property managers, those not advanced or forward-thinking, have not yet realized that they are, in fact, “the walking dead,” and they don’t even know it. Some mock Proptech innovators as “tech bros,” predicting and celebrating their failure. Sound familiar? Yellow cab drivers laughed at Uber. Blockbuster ignored Netflix. Kodak and BlackBerry dismissed the iPhone. Yellow Pages never pivoted online.