Property Management Companies?

Question

I was curious if any of yall had worked with property management companies and if so, what your experiences were?

I'm looking to be investing in more and more properties and want to "outsource" them to maximize my time in other areas.

Thanks!

Account Closed · Answer

annelise, i say be careful...this topic has been discussed several times here, and jsut about every time, some property manager takes offense to certain statements....that being said, the facts are the facts..some people have had great luck hirig and firing, hiring and firing, and finally finding the right property manager..others don't trust them...

i don't think anyone will look after my properties, my money, or my interest as good as i will...furthermore, i buy most of my rentals these days from distressed out of state landlords who have properties being mismanaged by incompetent managers..i have seen first hand what this has done to their investments, and as a result, i refuse to hire a manager...

that being said, i am getting busy, and am looking to hire on somebody in my company and teach them my process...hopefully they won't rip me off as bad as a manager's company would...i could give you 20 examples of how managers can be corrupt, but one sticks out in my head that illustrates this point the best...i bought a 10 unit building back in august, and one unit had been sitting vacant for 2 years...the managers let several tenants go by that were qualified (i know this because i offer my tenants referral fees and they said, we tried that with the old managers, but they didn't pass the screening)...well they passed my screening, and the apartment was rented out in less than a month...anyways, everyone looks out for their own best interest first, right?  well what do you think better served the management's pockets?? 10% of 400/month, which is only 40 dollars..or god only knows how many applications at 25 bucks each?? if they jsut take 2 applications each month and deny those applicants, they've already made better money than renting out the apartment and collecting their 10%..crazy right??

Kellie McRae · Answer

Just read this thread http://www.biggerpockets.com/blogs/1443/blog_posts/10467 and thought I'd come over and share it.  Perhaps it will help you when you start screening management companies.

Mike McKinzie · Answer

At 8%, the Property Manager gets one month's rent every year.  That is like having a 1/12th ownership interest without having to pay for any expenses.  Your good Property Managers know this and do their best to keep their 1/12 interest producing income.

Everyone that has been on BP for a while know my situation.  I have had to fire PM's before, but I have also had to fire Doctor's, Lawyers, Accountants and even yard care companies.  It is just the process you need to go through until you find a good PM company.  But once you find them, it is a GOLD MINE.  My last five purchases were referrals from my Property Management Companies and they are excellent investments, across three different states (TX, OK and AZ).  This PM company also does annual maintenance including HVAC filters, yard weed control and full plumbing/electrical inspections at a very reasonable cost.

I really like when the PM's own their own properties as well, because they know the frustration of having bad management and thus do their best to provide good management.  The myth that they will rent their own rentals first is such a JOKE.  90% of prospective renters call on a specific house any way and if that house does not work out for them, then they can be shown other houses, and that works BOTH ways.

Many neophyte investors drop out of the game because they try to manage their first rental, which is usually an inexpensive house that has lots of deferred maintenance.  I recommend using a PM company on your first rental, and see how it is done.  Then you can decide if you want to take over management and save a few dollars or if your TIME is worth those few dollars.

Kellie McRae · Answer

Annelise, I say to make sure to go through a thorough interview process.  The same way you would thoroughly screen a tenant, you should screen potential property managers. It's unfortunate that like used car sales people, some managers have made the profession stink.  I tripped on the property management side of business when I became an accidental landlord a little more than 3 years ago & found that I liked it better than appraising (which I'd been doing for 6 yrs at that point) & better than the thought of being a "regular Realtor".  I have been fortunate that my neighbors noticed how well my tenants took care of my home and asked me to manage their home & I've grown little by little from there.  I am happy to say I've been managing properties for 3 years, I've never had to evict anyone and I provide references from both landlords & tenants.  You have good and bad in everything & it's unfortunate.  I agree with Bryan that some people would rather be shady and make money that way which is why it's best to really check them out.  I prefer knowing that each month I'm going to get that $40 (after you get so many properties, it adds up) and the referral which works best for me & my family over the long run than the fly by night application fee and the possibility that the landlord is going to cancel your services.  Good luck either way  :D

Annelise A. · Answer

It sounds like a conspiracy almost, doesn't it?

I agree that you get what you pay for. That saying is the same for almost everything... with a few exceptions.

Thank you for all the feedback... horror stories and all  :D

Joel Owens · Answer

I will tell you from the deepest depths of my soul that I can't stand property management.

You ought to here the horror stories I hear from my sellers when I list their properties.Managing is a very tough business.

I think where many investors go wrong is they try to be CHEAP in paying a manager.When they buy that 1st house they believe that collecting rent will be easy.

When they find out it is much more intensive than thought they now look for a manager.The problem is they didn't take this into consideration when buying and now will have a cash flow problem.

So they then try to find the cheapest person possible.YOU GET WHAT YOU PAY FOR.

What buyers should do is say I am going to manage myself but just in case that doesn't work out I have already priced a PM company into my offer to buy this property.

This is what happens to people who don't plan enough for a fix and flip and they get stuck with a rental and a nightmare to deal with.You have to plan upfront as much as possible so that you mitigate the risk as much as possible of problems happening.

For houses many brokers/agents look at it as good side income but it is not a huge paycheck for them.As soon as sales pick up they could care less.

Why does everyone let themselves get locked into a 1 year contract with no provisions??

I go to the YMCA. I pay monthly and can cancel at any time.Knowing that I can cancel at anytime makes them stay on their toes and keep the place clean and in good condition and keeps them smiling for the customers.

If you belong to a membership where they can keep you locked then they have little incentive to perform.Doesn't mean you don't reward goo service you just put controls in place so that they are always performing.

As far as management  www.irem.org  has better managers to choose from.

Also depending on number of units you can get property management for 5% with 50 units or more.You could also do a graduated payment system.If they keep 100% occupied they get 10%,90% they get 8% etc. Many ways you can set up.

Commercial real estate isn't as bad because you are dealing with professional tenants at normal business hours.Larger residential apartments aren't bad either as you can put many people in place to handle different problems.

Paul B. · Answer

This is an interesting thread because I'm considering starting my own property management company. Between having bought, renovated, and sold a number of houses, plus currently being a landlord myself, I figure I'm well positioned to provide this service to other investors who would prefer to be hands-off. Plus, I've already run my own small business (in marketing) for 12 years now.

It does seem, however, that this business is full of property managers who provide poor service (or no service), or who perhaps don't have the skills or desire to manage properties professionally or to run a small business. On one hand, that's a shame, because it gives the entire industry a bad name, but on the other hand, it creates opportunity for people like me who will do their very best.

I'm sorry that Steve L. didn't have a good experience, but I will say that, yes, I think a good manager sees a vacancy as troubling as you would. A vacancy is just money sitting out there waiting to be made, and on a recurring basis at that. To me it's no different than if a marketing client said, "Do this for me and I'll pay you," and then I said, "Nah, never mind." What logical businessperson turns away business that is ready to go?

Not to mention, it's clear that good property managers are hard to find, and word-of-mouth can grow your business very quickly. Landlords invariably know other landlords, and they talk. Do a good job for one, and another will almost certainly fall into your lap shortly.

Annelise, if you have other opportunities where you can put your time to better use, and if you can find someone who will provide you with excellent service, I do think letting go of the day-to-day management can be more profitable for you in the long run.

Steve L. · Answer

I got stuck with a property management company for a house (long story), but I ended up in a 1yr contract.

After 4 weeks of her trying to rent it, I found my own tenant and told her to rent to him.

They will never care as much as you do... if the property is vacant they're only losing 8%... do you think they're going to do what it takes to keep it full?

Account Closed · Answer

I'm currently managing my own properties.  In the future I may look at this as well.

Property Management Companies?

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