Tell me about the Cons of having a Property Manager...

[Joe M.]

Tell me about the negatives of having a property manager for your rentals...you know, beside less profit.

Any insight or thoughts are appreciated. 

[Jill F.]

I do not have a property manager because in Ohio, to charge a client a fee for property management you must be a licensed real estate broker. All brokers that I have run into structure fees in a manner that creates financial incentives for the broker that are at odds with the best interest of the property owner. For example:

• Many property managers have a zero tolerance policy and move to evict at the earliest possible moment-- then they collect a large fee (typically 50-100% of  the first month's rent) to place a new tenant. There is not much incentive to work with a tenant having a temporary problem. There is a huge incentive to churn a unit.
• All property management companies that I have run across charge some percentage (8-10%) of rent as a monthly fee, some charge whether or not they currently have a tenant in place. This is a huge disadvantage for those with nicer rentals. Other than the occasional drive by, it DOES NOT INCLUDE ANY REPAIRS OR INSPECTIONS which are charged separately.
• Some management company contracts give the management company the right to the late fee. Some still charge a daily late fee (which is legally iffy in Ohio because there is contradictory cases law on the matter). The owner pays eviction costs so...
• Some insist on renovations at turnover to install particular fixtures or paint colors to make touch ups easier for them. The owner may or may not want to stay with the management company or like their choices
• Some up-charge routine maintenance costs by some percentage 10% (some are up front about it and others are not). In any event, there is a financial incentive to do do "inspections" and encourage repairs (needed or not). They may or may not have a "handyman" to check out bogus tenant complaints before calling a pro. Do you really want to pay an electrician to reset the gfi, or an appliance repairman to plug in the frig, or a licensed plumber to remove the tidy bowl clip that got stuck in a flapper? Are you SURE the property manger's HVAC guy is giving you good advice and you really need a new system-- you don't just need a new blower motor, filter, or to just clean the carbon off the contact thing?
• It takes a good bit of effort to get a job quoted and most management companies have a pretty high repair limit before they are wiling to do so.
• Many charge some type of fee to exit the management agreement.

I'm sure there are some honest players that do their best for their property owners but I would not want to commit to a business relationship where there were so many counter-incentives for my manager. I plan to manage my properties until i have enough units to hire a w-2 manager that reports to me so that all management financial incentives are in my best interest. Heck, I may even continue after I have enough units to hire a w-2 manager because i ENJOY managing my properties.