TLDR: Yes, it can work just the way you propose, but at a cost with every small service call the typical small landlord can do himself turning into the bill of a pro dispatched to the apartment.
Your points are, for the most part, correct. I am a real estate agent, and work in-house, for a large landlord/real estate developer. To be clear, the investor has a large enough portfolio that he didn't hire an outside management company, but was able to hire the employees it took to create the team in-house. To the level where the one broker was able to take on more real estate agents to be part of the company.
In theory, if we took on an outside client, you would find the experience you suggest, but this comes at a price. In other posts here, the warning to small landlords is about all the prone calls. My warning to you is that the "clogged toilet call" will result in a bill. The bill might be $25-50, if the timing is right, and the jack of all trades handyman is nearby, or a $150 bill if it takes a visit from the plumber. In other words, the small owner often finds that he's making money, but using a chunk of his times avoiding paying professionals to do a number of simple tasks. The management company would give you a price, either as a percent of the rent, or flat fee per tenant, and agree to perform certain tasks. Still, each and every task at the apartment will require someone to go do the work. An outside lightbulb (or in a small apartment house hallway) needs a guy to go change the dead bulb. Unless you're real clear in the lease, even an inside light might result in a service call. Do you expect an 80 year old person to climb on a stool to change the bulb in a vaulted ceiling? (A small point here - you'll need to spell out to the management company when you want to be contacted. A $100 expense? $500? The obvious tradeoff is that a call at too l.ow a level has you feeling like you are still micromanaging. Too high, and you'll see a $600 refrigerator bill with no warning.)
No matter how well the tenants are screened, say these are perfect renters, there's the regular small failures, and wear and tear. They move out on the 30th, and you see that there are marks on the walls from furniture. Nothing to charge their security with, this is just dirt that doesn't quite come off the walls. You now need a paint job, and have a month's vacancy, at best. You owe the utilities for that empty month.
My investor has a large enough portfolio that the law of large numbers kicks in. The small percent off the top pays for the management team as well his real estate agents. Units that are empty are a statistic. In your case, an empty unit is 100% empty, or, if you buy a 3 or 4 unit building, 33%/25%. We're buying stoves and refrigerators every few months. In your case, a broken appliance that needs replacing might be your profit for a month or two. For you, it takes 2-3 years for the law of averages to kick in. Similar to the market averaging a positive return, you'll have a bad few months, and then a string of months where you see no extra bill at all.
Often, the reason the small investor fails is by buying too high, and thinking that 'after taxes' they are coming out ahead. They also underestimate the average expenses over time. Yes, the mortgage is being paid down a bit each month, but when you sell, there's depreciation that's lowered your basis so much that a hefty tax bill awaits.
