The 5 Levels of Property Management Expertise

After several years of watching our competition, learning from them, and growing with them, we’ve come to the conclusion that there are definite stages that property managers evolve through as they perfect their skills. It’s not a terribly useful insight, unless you’re an investment property owner who is wondering if the property manager you’ve hired is as good as he claims to be. (Because frankly, we all claim to be great — the market pretty much demands it.)

So here’s what we’ve learned about the stages of property manager development.

First Stage: Business-Focused

The brand new property manager is going to spend most of his time and energy thinking about and working on their property management business, simply because the business is the foundation of everything else that happens. At the beginning, none of us are familiar enough with the basic processes to be able to take shortcuts that more experienced PMs use automatically.

They’re still working out how to negotiate with contractors, figuring out which vendors to pursue relationships with, and working on the cost-benefit analysis of hiring advertisers, inspectors, real estate agents, and so on. Some PMs skip this step by working for other, more experienced PMs for a few years before they go off on their own.

Second Stage: Property-Focused

After they’ve got the basics of their business down, a property manager begins naturally to focus on the properties their clients are presenting them with. The questions change — for example, from “how do I get this building renovated?” to “how do I get this building renovated so that it will be attractive and last a long time?”

Property managers at this stage will learn what attributes of a building are deal-breakers (i.e. if the property is worth 30 percent more than any other building in the neighborhood, you’re never going to be able to fill the vacancy). This may lead to them also narrowing the type(s) of properties they’ll manage and getting rid of properties that don’t fit their focus. PMs at this stage do well as long as they don’t get a problem tenant, but if they do, things can fall apart fast.

Third Stage: Tenant-Focused

Once they’re confident in dealing with all of the aspects of the property itself, focusing on tenants is the natural next development simply because tenants are the source of 80 percent or more of the problems property managers face. A property manager at this stage is learning why it’s critically important to screen tenants with a special eye toward indications of future problems and why communicating with a tenant is vital not just to resolve problems, but to resolve potential eviction cases that make it to court as well.

A lot of times a PM at this stage will finally figure out they can’t hand-hold problem tenants and it’s better to just get rid of them. This is the first stage at which we would call a PM “ready” to be hired, but there’s still a long way for them to go.

Fourth Stage: Profit-Focused

Once the property manager is comfortable dealing with most of the situations that crop up with tenants and whatnot, they’ve gotten a grip on basically all of the major problems that PMs need to solve on a regular basis. This frees them up to concentrate not on problem-solving, but on profit margins. (Obviously, every PM has to pay attention to profit margins, but PMs before this stage can often feel like such things aren’t really in their control.)

The PM at this stage will be “purging” his business, seeking new vendors with better profits, outsourcing to advertisers with better rates of return, getting rid of problem owners and generally improving their ROI — but more importantly, they’ll also be improving your ROI at the same time.

Fifth Stage: Client-Focused

In the final stage of property manager development, the PM learns that not all clients are the same — some have goals other than “maximum ROI per month” — and learns how to adapt their systems to accommodate those other goals. If you’re a two-home family, for example, renting out your second home to save up for your child’s college education until you can pass the home along to said child, keeping the home in sterling condition is more important than maximizing your ROI.

If you’re a local credit union with a foreclosure and you’re renting it until the market stabilizes and you can find a buyer who can pay a legitimate sum, your renovations will look different (and be more expensive) than those of a holding company who intends to rent the property for decades until the next real estate bubble swells. There are enough different clients in the world that this stage will take up the rest of the PM’s career — they will be adapting and evolving to their clients’ needs until they retire.

Unfortunately, there’s no real way to tell where a given PM is in their development without working with them for a few months and seeing what kinds of problems cause them to fluster and flail. All you can do is look at where those problems lie within the stages, and if your PM is stuck in the first 1-2 stages, either patiently wait for their learning curve development or start interviewing for a new property manager right away.

Investors: Have you noticed that the property management you’ve worked with is in one of these stages?

Let me know your experiences with a comment!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.