Property Management

[Jason Utley]

What is the best way to choose property management or is it best to manage yourself?

[Dustin Heiner]

Great question @Jason Utley!

If you are close enough to your properties where you can manage them yourself (and can tolerate managing it yourself), you will save plenty of money not paying a PM.

Usually PM's will charge first months rent for a leasing fee as well as 8%-12% typically for a monthly fee for managing the property.  There will be other costs from the PM if there are maintenance calls and other expenses for the property.

Here is what I look for in a PM:

Communication
The PM should be able to return your call/text/email within the same day, or at the latest, within 24 hours. This is a non-negotiable. Only with good communication can your real estate business run well and keep you and your tenants happy.

When I am screening out PM’s before I invest in a new area I expect the PM to be on their “A” game and be in constant conversation with me because he wants to get my business. If the PM has horrible communication timelines and abilities while he is trying to get my business, I can only imagine how much worse it would be when I actually hire him to do the job. I have passed on many PM’s because of their lack of communication in the hiring period because it will more than likely get worse, not better.

Trustworthiness
You must be able to trust your PM. Remember, they are your employee, and they are working for you. One property manager I had was not trustworthy, and I had to fire her. There were missing receipts, unexplained expenses, upset tenants, etc. Don’t put up with a bad property manager. Get rid of them quickly. Like an employee, hire slow, fire fast.

Accountability
Everything the PM does should be ran through you, and you should be able to verify what they do. I give my PM’s the authority to spend under $100 per property per month without my approval. I don’t want to be bothered with a $5 toilet leak, but I do want to be bothered about a $300 water heater or a $2,000 furnace replacement.

I review every statement and every expense/income that I receive. If there are any issues or questions, I ask them right away. If the PM is unable to adequately answer my questions, I start to get suspicious of them doing their job well and how much I can trust them. Once the seed of doubt is planted, it takes a lot of time for the PM to build that trust back up in me so I am able to fully trust them.
Quality of work

Commission percentage
The amount that I pay my PM is based on what I contract with them for their services. Some areas 8% of rents is the going rate and in others 10% is. If it is hard to find a good PM in a specific area, you may pay an awesome PM 12% because you are getting awesome service for your money. I have an area where I am paying 12% for my PM, but he is worth every penny.

Other Fees
On top of the commission for the monthly rents, it is wise to watch out for other fees that they may charge you. These fees add up quickly and eat into your cash flow each month. 

Some things I look out for are:
Minimum monthly fee if the property is not rented.
Up charges for contractor repairs.
Finders fees.
Marketing fees.
Charge to visit the property for any reason.

So, whatever you decide, your property needs a good manager. If it is you or someone else, take care of the property and the tenant and you will make great passive income for years to come.

Hope it goes well!
Dustin