How reliable are managing agents?

Question

I am inheriting some high end real estate with two rental units. I don't want to sell as it keeps going up in value. I'm an older gal and can't deal with two tenants myself. In the process of evicting a tenant now. I was told they have managing agents to deal with tenants, but do they really make things almost stress free for a landlord? I'm not looking for someone to just collect rent, but to manage repairs, tenant issues and conflicts etc. I guess I will still have to evict a tenant though. Just wondering if the stress is worth future gains. The property is in south Brooklyn with ocean views. Dropped a bit but came back after Sandy. Was hoping to get some feedback from others who have used these property managing agents. Thanks.

Nathan Gesner · Answer

@Carol Klein you already know there are bad tenants. Does that mean you should never rent? Of course not! You learn how to screen tenants so you only get the good ones.Property Managers are the same. You'll hear all the horror stories about how they steal money, allow tenants to manufacture drugs in your basement, never check on the property, etc. Yes, there are Property Managers like that. But there are a ton of good Property Managers that can handle more than 90% of your workload for a nominal fee AND do it better than you do. I manage 340 units for over 150 different owners. The majority of those owners make more money AFTER paying my fees than they were making on their own. And they don't have the headaches.Here's a little guide a wrote about finding a good property manager. Feel free to reach out to me with questions.You can start by going to www.narpm.org and search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start.1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!4. Review their lease agreement and addendums. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance or problem tenants. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff. 6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

Joseph DiNardi-Mack · Answer

Hi @Carol Klein,To be honest, it really depends on the person. Unfortunately there are a lot of bad property managers out there who charge exuberant fees, or you have to spend just as much time managing as you would the property, or both. That being said there are some diamonds in the rough who will take amazing care of you, and make your life ten times easier. My advice would be to take your time to hire and be quick to fire. You may have to go through a few before you find one that works best for you, but in the long run it will be well worth it. One thing you should always agree upon before entering into an agreement with any of them is how they will be paid. In my opinion you want to look for whoever has the most straight forward, clear, pricing model so you know exactly what you're paying each month and how they charge for maintenance. A good indicator of their overall character is how they charge you for tenant turnovers, those that charge you more for a turnover I steer clear from because their interests aren't aligned with my own. I prefer working with those who use a bonus model, where they get a bonus if there isn't a turnover, rather than those who are paid EXTRA every time there is one.I'd be more than happy to answer any other questions you'd like to ask. Feel free to direct message me if you'd like.P.S. Here is a helpful BP article to reference for some tips on how to pick a great property manager: https://www.biggerpockets.com/renewsblog/2011/02/2...

Nathan Gesner · Answer

@Carol Klein I manage 340 units for 150 different owners and I own/manage my own units. I market my units right alongside my clients' units. I don't do anything to favor mine or steer tenants towards mine.Just because people have the opportunity to be dishonest doesn't mean they will. Trust but verify.

Carol Klein · Answer

Thanks guys. My realtor owns and manages a lot of properties of his own and also for other people. He will be renting or selling mine. Someone mentioned that's not a good idea as he will fill his vacancies of his own properties first. Properties are different though as someone might want an ocean view or a particular location. I will check out the link just given too. Thanks! I have to figure out the gains from invested income from selling the house to that of two rents with all the costs of running a house. Would have to put in $40,000 - $50,000 to do reno to rent. It's been steadily going up in value, but that's not guaranteed. There's just so much ocean front property in that area though. According to the Department of Finance it dropped $310,000 from last year, but the realtors said to ignore it, that theirs dropped more. Just had a very high offer but I can't sell it right now.

Dick Rosen · Answer

You are asking a very general question but my advice would be to find a good competent property manager who can take care of everything for you. But you will have to vet out the bad ones before you pick one.

Carol Klein · Answer

Thanks so much for the detailed answer and link. Seems to be a choice after reading it, of managing the tenant or the managing the property manager. Doesn't seem like this will ever be anywhere near stress free...sigh. I think the best solution for me is to sell, and get steady income that way. With a property manager at maybe $750+ a month and all the expenses of running a house and very high property taxes, maybe that's best for me. Thanks again for the info.