Using Property Management

[Chris Lo]

I got a newbie question. 

If Property Management Company can pick the right property, take care of it and tenants, and everything related to the property for ~10% fee, then why doesn't everyone do it?

Maybe many people don't know about it?

It seems like a best way to buy, refi, and repeat with a PM.

[Steve K.]

Originally posted by @Steve Vaughan:

Originally posted by @Chris Lo:

If Property Management Company can pick the right property, take care of it and tenants, and everything related to the property for ~10% fee, then why doesn't everyone do it?

It's not 10%. Small landlords are also charged placement fees, usually 1 month's rent.  1st year PM fee is now 18%. 

If they are busy and don't get your vacancy turned for an extra month, that's another 8%. There are also repair overrides.  10% is fantasy land. 

Steve Vaughan makes a good point. For example my PM charges 7% as a base rate but with lease-up fees, annual/quarterly inspection fees, notice delivery/eviction fees, etc.all factored in, the effective rate is more like 12-15% in my experience. The main reason not everyone uses property management is probably because of these additional costs and their impact on cashflow/profit but also because not everyone trusts a PM to manage their property as well as they would themselves. It can be more difficult than most noobs probably realize to find a good property management company. I finally found one I trust but I self-managed for years and still actively manage my management company plus still self-manage several of my properties. My PM is about as good as they get IMO but I find they are more limited in tenant placement than I am. In order to comply with fair housing laws they go by stricter acceptance standards than an owner might. For example they accept the first qualified applicant typically and use the same criteria for everyone whereas an owner might screen by looking at "soft criteria" such as eye-contact, handshake, general feeling on whether the tenant will be a good fit for the property, etc. This can be a good thing or a bad thing, but most experienced landlords who are good at self-managing probably feel that they do a better job screening and retaining tenants than a PM, which results in less turnover and higher cashflow.