What do you expect out of a property managent co. and how much are you paying?

Question

Due to all of the interest that people from all over have had in the Milwaukee market (where I live and work) and because I've been a WI licensed broker since 2004, I'm now looking in to focusing my business towards working with investors, both in and from out of town, could be anywhere in the USA as I've been getting contacts from all over the place. Then I saw that nearly everyone asks me the exact same second question-do I know of a good property management company I can recommend here in Milwaukee. I guess that's kind of obvious, since anyone owning property 1000 miles away isn't going to be flying in to pick up the rent or unclog a sink! So, my next thought was why wouldn't I consider getting in to the property management biz as well? That way, I could offer a "one stop shop" for out of town investors looking to get in on what is a great and very stable market here!

So, I've been gathering info already from some of the local management companies as far as what they're charging and what they provide for the price. I'd like to hear from some fellow BP members as well with experience or knowledge on this, what do you look for in a property management company?

-What services do you want them to provide?

-I'm especially interested in where you draw the line between what you'd like the property manager to do vs hiring a contractor for repair, rehab type work.

-What have you been paying for their services?

-Have you had any issues or complaints with them?

-Anything else related to this?

My plan would be to gather up as much info as I can and then assess what it should cost to operate the same services and then make sure that I could price my own service very competitively, I want this possible future part of my operation to be able to sell itself on a stand-alone basis, not just expect people to hire us to manage things just because I also was their realtor for the purchase and if someone for some reason wants me to be their realtor for a purchase here and for whatever reason wants to go with another management company, that's fine as well but my plan is to make it attractive enough so that never happens!

Another aspect here is when someone from out of town's property needs some work beyond the scope of what you'd have the property manager do, when it gets more into renovation work, etc. First, lets say a long time tenant moves out and its really time for some new paint. Is that something you'd want to get from the property management co. to do or something to hire a regular painter for? What if I'm offering services like painting, minor renovation work such as installing new toilets, sinks, counters or things like that.

I think I would avoid getting directly involved if someone buys something requiring major renovations, but that's where I've built up some really great contacts over the years and could certainly refer them to someone decent.

Joey Dwyer · Answer

Almost all of my properties are out of state.I can tell you I don't mind paying the high side of monthly fees like say around 10%, as long as the leasing fees are low.I pay between $250 and $350.It shows you are confident in  your tenant screening and management skills in order to keep a renter in place.I've heard some charge 1 months rent to find a tenant.That gives you no incentive to keep a tenant in place.

As for the repairs,I'm sure I speak for all property owners. We want the cheapest possible price, the best quality work in the fastest possible time.Very funny...right? But seriously, I would love to see the property manager do some of the work himself.That would most certainly keep the costs down.And that really is the bottom line to owners.Most out of state owners are really just worried about getting gouged for money and not being able to do anything about it. And the big jobs it really is about knowing the contractors in your market that you can trust. Just my 2 cents. Good luck Robert !!

Robert Taylor · Answer

Actually, that's a good point, I actually think that even beyond that, investors often forget to check on all of the contractors they hire, etc. and yes, its one thing to see a proof of insurance form and another thing to actually call up and verify it!

I can definitely tell you that's part of my research as well, as far as exactly what do I need as far as insurance coverage, licensing if any, or anything else. I like to sleep at night and not have to worry about getting sued for something or having the IRS snatch my house or whatever else!

Account Closed · Answer

I think most investors fail to ask the property manager are they license and have insurance. And get copies of their license and insurance and verify it.

Joe Gore

Dan C. · Answer

@Robert Taylor I can save you the trouble of calling at least three of them, I'll PM you with info.

@David  Burkart I'd like to get the name, I'll contact you, thanks.

Robert Taylor · Answer

@Dan C. thanks for the local perspective there, I'm planning on checking with some of the various local PM's to see exactly what they're charging for various scenarios, because I can already see how from the PM's point of view, when someone calls with say 50 units that they need managed, well there are many different factors there which would greatly effect what it would cost the PM to provide those services. If I do dive into this, I'd be personally involved in all of the various aspects of the operation at the beginning for sure, to get a feel for what's actually going on as we perform different tasks, to train the people I'd have helping me, make sure that things are being done correctly right from the start, etc. As I think I mentioned, part of why I'm looking to do this is because I'm looking more and more at the idea of specializing in being a broker to serve investors, both from this area as well as anywhere else and they'd need PM's, so I can see it helping to be a "one stop shop".

Now, the other part here and what I think would certainly become the biggest selling point for my PM biz would be once we're in operation for a while and we're able to build a good reputation. I think that would sell far better than any other method!

@David  Burkart -I will send you a PM for that info, thanks!

NA Burkart · Answer

@Robert Taylor

@Dan C.

My two cents...  I recently hired a PM.  One of the biggest perks was that the first 90 minutes of any call was free.  He stated if the tenant calls, usually it can be handled within 90 minutes.  If not, or if there is going to be a cost involved over my set limit, they call/message me.  I'm also paying 6% of the gross rent for that property.  PM me if you want their name.  I've only been with them for two months, but I haven't heard a peep from the tenant.  Beautiful.

Dan C. · Answer

@Robert Taylor The typical approach for larger projects, at least what I've seen, is a PM will provide the owner an estimate and then leave it up to the owner to decide whether they would like to have to PM go ahead with the work, or hire a contractor to do the work.

PM's usually have a fixed monthly fee just for the being responsible for the property and basics like record keeping, taking phone calls, etc.  In Milwaukee it seems they do not charge a commission for renting out an apartment, this work is included in the monthly fee.  For additional work they usually list in their contracts an hourly rate for the labor they provide.  Sometimes the hourly rate is tiered, so there is a a lower rate for work that requires less skill (e.g. cleaning).

As far as charging more for warzone areas, my hunch is that as a  practical matter there are some reasons that doesn't work.  I say that  because I simply have not seen this approach from a PM, I could be wrong  about this.  I suspect that PM companies recognize that over time they  make more money on warzone properties anyways due to higher rate of  turn-over and higher degree of damage by tenants.

In my opinion the most important skills to being a good PM are being organized, having people skills, having specific routines for all the basic landlording duties, and having a command of the relevant state laws.

I think one of the most difficult aspects of being a PM would be that not only will you need to establish rules and routines for your tenants, but you will also have to establish another set of rules and routines for your clients.  Like any endeavor, some clients will be difficult, and a few will be so difficult they are probably not worth even having.

Good luck, I think our market, and probably most markets, could always use more good PM companies.

Robert Taylor · Answer

Well, I'm working on getting them all in a row! I'd still like to hear from anyone as far as what they're expecting out of their property manager and what everything costs. So far, based on the answers here as well as several other threads I've been reading here, it sounds like most property managers are providing:

-Collecting rent each month from tenants and then obviously forwarding that rent to the owner. Sounds like usually this is charged as a % of the total rent, I've seen it everywhere between 5% and 12% and also I see some debate as far as charging based on the rent actually collected vs what should be collected. In most cases, I would think that charging based upon the rent actually collected is more fair, I mean if we're supposed to pick up say $5000 total in rent and we only come up with $3500, why should the owner pay for the lost rent? The exception on that which I see would be if we're talking about a property where its notoriously tough to get rent paid, although I'd think that's an extreme example but say if its a dumpy property that the owner refuses to improve at all, in a bad area and whatever else, if we're spending huge amounts of time trying to track down the tenants and are having trouble getting paid, that's not really fair to us either if we get paid zero for all that work. Hopefully, that's an extreme case though.

-When a tenant needs to be evicted for whatever reason, that we would handle that work. This is one thing I haven't seen much about, if there's usually a charge for that or what. I know it takes some time and effort to evict a tenant.

-Keeping any common areas and the exterior of the building clean as well as cutting the lawn if there is one, here in WI of course, someone has to shovel the sidewalks and stuff whenever we get snow too. I haven't seen too much as far as what people pay for that, but I'd assume it would be a monthly charge based on what needs to be done since obviously some properties require very little while others require a lot of work.

-Basic maintenance work like unclogging sinks and toilets, fixing things like a garbage disposal, etc. From what I've seen, it sounds like there's usually a set charge for whenever this is required and it makes sense to me to have set prices for this where if say a sink is really clogged, from the owner's point of view you don't want to get gouged on this stuff.

-When a tenant moves out, bringing the unit back to good shape to be re-rented, which could include repainting the place, having carpet cleaned or in extreme cases replaced, patching holes in the walls, could be a lot of different things there and that's one I would also say the owner would be concerned about being gouged on by the manager.

-When a new tenant is needed, selecting the right tenant. This is an interesting one, I see where often the mgt company will charge either a flat fee or sometimes its a full months rent or half of a months rent, etc. Another important one for the owner because if the mgt company keeps getting bad tenants in there, that could end up sinking the entire investment!

Basically, my impression so far is that property management isn't rocket science but whenever you're dealing with a variety of people it does take some skill to keep everyone happy, its much more a job that requires getting a list of jobs done each month and doing them correctly, as well as a business where I'd want to hire some people who are good at detail work, as there would be a lot of paperwork and recordkeeping involved and that's got to be well organized and someone needs to make sure that all of the various details are covered 100%.

So, I'd love to hear more opinions on any of this! Thanks!

Joey Dwyer · Answer

@Robert Taylor   Good point. I didn't think about the "war zone" properties and the there is a higher turnover in those areas.I have a small portfolio and I only have sfrs in stable neighborhoods where my turnover is relatively low.So I guess I'm speaking for the small time guy.It sounds like you'e got your ducks in a row, and sounds like your system  would make it easy for an investor looking for a one stop shop.

Robert Taylor · Answer

@Joey Dwyer I certainly appreciate the answer! Based on your answer and some reading I've done on other threads here regarding property managers, I'm definitely already starting to come to conclusions here, but I'd also love to hear more as well. One of the things I'd assumed going into this would be a variance in charges depending on the type of property, what sort of area it is located in,etc basically that you have to figure in that some properties are much easier to keep running right than others. Anything in a "war zone" will very likely be more work, even much more work for several reasons, tenants are more likely to default on the rent and end up getting booted and when they are on their way out are probably more likely to leave damage behind, etc whereas in the better areas, this is less likely to happen. Same would go for lets say one client has a total of 30 units, but they're all duplexes or single fams or even small multis, like up to 4 units. Well, that compared to a client who owns one single 30 unit building, I'd think your costs would be lower for sure managing the one 30 unit building.

As far as the other costs involved, such as for repainting a unit or more minor repairs like installing a new toilet or a new faucet or whatever, my current thought would be to hire on some of the good or great painters and handymen I've met over the years with my rehabs, I do have a few of them. (as well as a much longer list of the ones who DIDN'T do a good job, too!) My current thought would be to hire on a crew to work for me and then bill the client for the work, but hopefully with proper management I can keep those costs nice and low. As I also mentioned, I think anyone needing major rehab work, like if an out of town client buys an REO house or whatever that needs major work, that I'd sub out or refer to an outside company, I just don't want to get personally bogged down in a major rehab project like if lots of big surprises come along, which we all know is very possible!

My goal here would be to provide a complete package of both realtor services for the original purchase as well as the management, so that as time goes on, I can build up a great record with my clients, I see that as a much better way to hopefully grow into something big one day. Besides being totally unethical, for me to keep burning my clients with inflated painting bills or whatever, even if I was able to greatly increase my income right away, I think it would look quite dumb for the long run when in the second year the investors really start catching on to that and by the third year my clients are all gone and I can't find new ones due to the bad rep I earned for myself! That's not good at all compared to having the third year be better and better because good things are being said abut me!

What do you expect out of a property managent co. and how much are you paying?

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