How big should a property management company be?

Question

I've heard the importance of a good property manager being stressed consistently, but would like to know if the size of the property management company is a concern.  For example, a PM that manages 200+ doors and has a full time staff and administration vs. a small Mom and Pop that manage themselves and have 10-20 doors.  Any concerns over the latter?  Curious to hear any experiences as I need to make a decision on a new PM and a colleague is advocating a small husband and wife team with 11 doors.

Dawn Brenengen · Answer

@Greg Christensen I would consider a 200 property company to still be relatively small.  At 200, there should be a property manager or two, and an assistant.  Anything else would be overkill.  I wouldn't hire someone with only 11 homes under management.  They are either too new to have a good track record or they are just doing this as a hobby or some part time income.

If the company is too big, then there is a large likelihood for communication breakdown.  If one person handles leasing, one does the management, one handles move in and move outs, and another handles accounting, it can be a nightmare for everyone to get on the same page, and your questions will probably get handed from person to person.  I personally like the small handful of people set up.

Lynn McGeein · Answer

I learned the hard way that unless you are local and can handle things if necessary, you need the larger company.  Mom & Pop can work, right up until a family emergency when they let everything go and you don't get paid for 3 months.   That's when you learn that their assistants cannot actually handle funds so even if your funds are there, you have no access to them until they decide to focus on their business again.  The larger firms can be challenging, especially if the manager you like working with gets promoted and the next guy doesn't know as much, but they are also always there, even if one goes on vacation, a necessity for an out-of-state investor.

Scott England · Answer

I think everyone has made good points.  I think it depends on the needs of you, your properties and your tenants.  I would think of it like choosing a bank.  Sometimes Bank of America is a good choice, sometimes you need the 1 branch community bank.

Owen Dashner · Answer

I second what Dawn said about very small PM companies likely not having enough experience to do a good job or doing it as a part time biz.  I also agree with the comment about communication issues when dealing with large PM companies.  When you have specialists handling certain business processes, it can lead to the "right hand not knowing what the left is doing".  This can be frustrating for owners who are looking for quick answers when issues arise.

I think the sweet spot is somewhere in the middle.  Small enough to be agile and react quickly with good customer service and low overhead, large enough to have established business processes and experience handling a wide variety of situations.

Dawn Brenengen · Answer

@Chuck Peterson I'm a small company too, so obviously, I'm biased toward the small company set up, but if you have one person only handling 10 properties, then by definition that has to be part time income - 10% (fee) x $1000 (rent) x 10 properties = $1000/month...and that's assuming the PM is keeping all the money and there is no company dollar.  So, they must be doing other activities to make a living.

I consider my company small, roughly 90 properties, and I handle about 60 myself.  But, I also help people buy and sell real estate, not just manage rentals.  I invest too, so it sounds like we are a lot alike...  (eat, breathe, sleep this stuff)  :)

Chuck Peterson · Answer

Of course, I'm a bit biased since I am running a smaller property management company. Property management is not a hobby for us since we buy, sell, and manage real estate full time. Whereas many other PM companies have ratios of 1 property manager per 50 or more properties, we are operating at less than 1 property manager per 10 properties.

We feel we can provide a higher level of service than many of the big companies out there. For example, given our size, we can visit each property on a monthly basis if we so choose.

Daria B. · Answer

I wanted to vote 100x100x100 more times but am only allowed one vote - what a democracy:)

I agree with @Lynn M.and this is probably what happens to most at least once.

@Greg Christensen

How big should a property management company be?

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