Hire a property manager = no hassle?

Question

Hi All,

So I have a job pulling in easy 60 hour/week and thought about the whole "do it yourself handy man" type deal with a rental property but honestly I don't think it'd be beneficial / efficient for my end.

Whats everyone's thoughts of hiring a property manager to deal with any hassle/ repairs / fixes/ rent collections etc.?

Any tips / suggestions are greatly appreciated!

Thanks!

-Mike

Account Closed · Answer

@Steve Vaughan nailed it.  Just one of many examples from my daughter's PM nightmare: Tenant calls PM to complain the breaker keeps tripping for the kitchen.

Now, what would your normal first question be?  What do you have plugged in that circuit - right?

Nope.  PM sent out their guy, and they put in a new breaker box, after paying their guy to dink around and then decide they need a real electrician.  Then they send out a real electrician to do the job. Job took them several days.  Cost around $500 just for the electrician, I believe.  Charged for supervising everything, charged for their guy to go out and say, yep, he doesn't know what to do, better call our friend the electrician.  They never called my daughter.  Took the funds out of her account and said it was an "emergency" repair.  I think the entire cost ended up around $1,000.

And all they had to do was say, "Don't plug in so many things at the same time."

My daughter lived there for several years and never tripped a breaker.

So, you see, most management contracts are not designed to maximize YOUR profits, but rather theirs.

And, I researched this PM company.  Not only were there no bad reviews, but there were NO reviews and they'd been around for something like 20 years.  All I can figure, is that they pay a reputation scrubbing service.

My daughter ended up firing them and they tried to tell her she owed them a termination fee and she said, well we can either let that go and call it square, or I can sue you for all of the overcharging.  They agreed to let that go.  They went through about $6,000 in about 4 months, of my daughter's reserve and never told her what they were doing.  Absolutely scandalous.  And this is not a particularly unusual story.

Sure, there are good managers out there, but if you look at what is "standard" in the industry, and what they consider "standard" to have in their contracts, I think it's just .... wrong.  To put it as nicely as I can.

Account Closed · Answer

There are a lot of property manager nightmare stories.  So, no, it's not guaranteed to be no hassle.

The simplest advice I can give you, is to read their contract with a fine-toothed comb.  And, don't let them tell you that all of the fees listed in the contract will probably never happen, etc.

I'd also not accept the clause where they don't have to get your approval for "emergency" repairs.  My daughter's PM nightmare was that they called everything an emergency, and emptied her account of thousands of dollars without notifying her - until they called her to tell her she needed to put more money in the account.

Most will use their own maintenance guys, charge you ridiculous amounts of money for repairs, also charge you to supervise the repairs, charge you to find a tenant, charge you to get rid of the bad tenant they got you, and even charge you to fire them.

Just really look over the contract, and negotiate anything you don't like.

OR - take some time to find a good handyman or a list of plumbers, electricians, gardeners, etc., and just make those phone calls yourself and save the PM fees.

I'm sure you'll hear from investors here who have great managers.  Hopefully, they can refer you to one where you live.

Good luck!

Steve Vaughan · Answer

The huge, overlooked actual cost of maintenance (if any) and repairs are what have kept me DIY-ing it.  Make sure your PM qualifies each service call.  The 'sink is broke' will land you a plumber at $100/hr. May just be a loose nut at the trap.  The 'lights don't work' or the 'fridge is broke'- high cost service techs.  Probably just be a breaker.   See how your PM handles service calls Michael Mourey!

Penny Clark · Answer

@michael mo, any repair involving electrical or plumbing should be inspected first with at least two estimates provided to you before any work is started.  Keep in mind, most repair jobs can be handled competently by an experienced handyman for a lot less money. For example, I got two estimates for replacing a broken toilet flush handle - one from a plumbing company and the other from a handyman our company uses. Plumbing company - $148, handyman -$35. Handyman scheduled it that day and was done in less than 15 minutes leaving tenant happy. Now if it involves cleaning out a sewer line or locating a pipe leakage inside a wall or underneath flooring, that's when a you call in the licensed professional.  Trouble is, many PMs out there don't know the difference and the owner gets soaked.

One other tip I'd add is require a photo from vendor showing repair was completed along with the invoice and ask the PM to confirm repair was done satisfactorily with the tenant.

James DeRoest · Answer

Really not convinced about the value of most PMs, especially if you live close by.

What you need to do is connect yourself with a local handyman, find the state lease template, and advertise on Craigslist like the rest of us.

Having used 3 PMs in the past, I'm really not a fan of PMs.

Penny Clark · Answer

@Michael Mo, lots of good information here already. @Sue Kelly is absolutely right about carefully reading the management agreement BEFORE you sign. PM companies may quote you a lowball number for their monthly management fee, then tack on extra fees for serving 3 day notices,  yearly inspections or paying bills on your behalf. In addition, if a PM company has a maintenance arm for handling repairs, often that is the only company it will use. For jobs requiring outside vendors, if the company has a contractor's license, the PM company may charge a percentage of each repair job done the vendor ups the price and you pay more.

Here's a few things I suggest when shopping for a PM:

- Assess communication. How quickly do they return calls or emails? If you ask them to send you information about them and they take two days to respond, you can bet this won't change when you're their client.

- Ask the PM to send you a copy of their management agreement prior to meeting with them. That way, you can review key financial points such as % of lease up fee, if Mgmt fee is based on a flat charge or a percentage of monthly gross rent, required monthly maintenance reserve, as well as extra charges for services outside of those included in their monthly fee. If there is a maintenance reserve, tell them you will decide amount per month, not them. Also look at kill or cancelation fee if you decide to end the contract early.

- Other questions to ask would include: number of units company manages, their vacancy rate, average number of days to fill a vacancy, experience in the business, method of screening applicants and late fee policy. What you don't want is a PM who profits off of late fees.

- Read what investors say about them and ask around your local REIC for PM referrals.

Hope this helps and feel free to PM me if you need more tips.

Account Closed · Answer

Michael Mourey Or just hire good handymen.  As far as maintenance on a new property, it just depends.  It should have passed some inspections, right?  To get financing?  If you had an inspection done, you should have some clues if there are foreseeable problems.

Andrew Nugent · Answer

I too stand behind the idea of calling potential PM and evaluating their response time and customer service to get an idea for how they go about business. I also wouldn't read all of these nightmares PM stories and think they will happen to you. As long as you do your homework you can find a reliable company to work with!

David Avetisyan · Answer

Michael:

A good PM = possibly less headaches. No one is perfect, bear that in mind. The number and quality of tenants matter all well, along with the age of your building.

My PM has to use my repairman and everything has to be done, and approved through me.

Overall, I'm happy with my PM. She deals with all the BS I have no patience for.

Good luck!

Hire a property manager = no hassle?

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