How can I find a good property manager for a poorly located 4plex

Question

So this is my first income property purchase. It is a 4 unit building in Memphis for 18K. One unit is vacant and the other three pay an average of 285/month. The trouble is that I live out of state and I'm having difficulty finding a property manager that will deal with a property on that side of town. I need ideas on how to find someone to manage the property and how do I know how much to pay them. I found one person, but he wants to charge 10% of rents collected, First month's rent and $250 per week to take tenant calls. That seems ridiculously high to me. Any thoughts?

David Panzera · Answer

Yes, @Tiffany Ward, the rate of $250 to answer calls is absurd; the fee percentage covers that. 10% in a not so great area actually is what we do here in Columbus, OH, because of all of the issues that come with it. We have a portfolio of about 400 properties and charge 6-7% on most of them, but the handful we have in lower rent areas are definitely more time-intensive and hassle-filled (windows getting shot out, etc.), thus the higher monthly charge. You are correct about the first month's rent to rent out your units being an incentive for PMs to just keep turning places over, IF they are not doing what we do to rent the property. Like @James Martin said, we do a ton of screening, individual unit showings (sometimes people don't show and don't call to tell us that), marketing/advertising, fielding phone calls, etc. because it's in our and our owners' interests to get tenants who stay. We've been doing this for nearly 20 years and survived ups and downs in the market because we do it this way. Sometimes you will find a PM company that will do 50% of first month's rent; ours is tiered at rent levels so for instance we're not taking 100% of a 2,000 monthly rent. Good luck and shoot me any questions if I can help!

Douglas Skipworth · Answer

Hi, @Tiffany Ward.If you can get someone to manage the property for 10% of the collected rent, you should jump at that. If all four units are occupied and all four residents pay on time, every time, the manager will earn $114/mo. It is my experience that any company that's qualified to manage the property will have to charge you more than that.As @James Martin asked, where is the property located?

Chris V. · Answer

10% does not seem too wild. I pay 8% but my rents are more than double. First months rent is a lot but move in/out fees are not unheard off.$250 p/m on top of everything take calls seems over the top. Maybe it is because the rents are so low altogether? This might be something to think about in general, while your building was extremely cheap your rents are low (which by itself is not a problem) but certain base costs are going to pretty fixed. A plumbing repair in a $300 unit will not be much cheaper than a repair in a $900 unit. But I digress...:)By the way, price should not be your only criteria when you select a manager. The best way I heard someone finding a property manager is calling all listed property mangers and pretending to be a tenant interested in a unit. They chose the best one based on how they were treated, called back etc. This might seem like a lot of work, but having a property management company that sucks is very expensive and extremely annoying. And because you are somewhat invested in them its not easy to switch once you have picked one. Most property management companies suck (I know my main one that I "inherited" does too:( ), so choose carefully and don't be afraid to spend some time on that... It will prove to be a very good investment.Good luck!BTW: Amazing that you can even buy a 4plex for 18K by the way...

James Martin · Answer

What part of town is it located? I may be able to help you.

Tiffany Ward · Answer

Thanks to everyone who replied. I have a concern about paying a property manager extra to get a unit rented out. Doesn't this promote hasty tenant selection and turnover? Is there a better way to get the units rented and compensate the property manager in a way that allows their goals to better align with mine?

Derrick Craig · Answer

@Tiffany Ward10% of rents collected is really good for you in a not so great area of Memphis.. But the added extra amounts for taking calls from tenants seems a bit ridiculous. I am curious just as @James Martin and @Douglas Skipworth to know where this four plex is located?

William Morrison · Answer

I have found 6 to 10% normal depending on the State and what you ask them to do. But the one's I've worked with or have contacted might work with, all have a minimum and your rents wouldn't cover it. One is 8% with a minimum rent of I think it was $500 or $600. I don't have any under $900 so I forgot the actual number. Another is 6% because of the number of properties, but with them I have no rents under $1,500 and all have nice schools ie neighborhoods.As @Jose Guevarra mentioned, I have found monthly flat rate PMs but after talking to them I found them to be a whole different class of PM. They were more of a freelance employee. Very little provided, much more than a phone number for tenants and minimal support.Separate tenant placement fee from operational PM. Same office, maybe same person but a different service. Some are a half to a whole month rent with a minimum. Some charge a fee again when a lease is up, maybe 1/2 the original placement fee.

Jose Guevarra · Answer

Interesting. I called a PM in Memphis and they said they have a FLAT RATE of $85/mo seemed really low but, haven't had a chance to call a second PM in the area to compare. Of course, I have no idea of their quality but, they said they have about 300 properties that they manage.

Account Closed · Answer

Account Closed · Answer

That's insane! The 10% includes taking calls. Sheesh.