Is a property manager worth 8-10%

[Michael Lauther]

Exacrtly What services should I expect fo get for the 8-!0% a good property manager gets?

[Sharad M.]

Similar topic which may provide some answers:

http://www.biggerpockets.com/forums/52/topics/59621-property-managers-why-do-they-always-overpromise-and-underdeliver-

[James Vermillion]

To address the question in the title...it depends. For some people they could not make it with out a PM, while others find it a waste of money. I would ask several questions...

1) How many properties are we talking about?
2) What type of properties?
3) Can you do the work yourself?

I will do my own PM until I find that my time is better spent doing something else. Only then will I spend 8-10% on hiring someone else to do it.

[Mark Updegraff]

I would imagine you should get the following at a minimum:

Advertising
Tenant Screening
Leasing
Maintenance Service
Reports

But I'm just speculating. As a young entrepreneur that would consider managing other's properties I'm curious as well.

Great thread :D Can't wait to hear everyone's response

[Michael G.]

10% is the norm. 8% in my eyes is pretty good. They are worth it, if they are worth it. Get referrals from other investors. Call me sometime and I will tell you a littany of personal stories of bad PM's. Mismanagement of money, fictious expenses, etc. .

[Steve Babiak]

Originally posted by Michael Greenidge:
... Call me sometime and I will tell you a littany of personal stories of bad PM's. Mismanagement of money, fictious expenses, etc. .

Michael,

Feel free to elaborate directly here on the forums - after all, that way everybody can benefit.

[Brandon Kamm]

Yes they are, if you have a reputable one. Definitely get referrals from those who own similar properties to yours. The first question when asking if you need one is time. Do you have time to lease, oversee repairs, handle an unruly tenant, deal with an eviction, handle a problem at 9pm on a saturday.

Property management is 24/7/365, not 9-5 m-f. Do you have a desk job or a flexible schedule that would allow you to work around a problem at your rental.

Many people think they are throwing away 75 to 100 bucks a month using one, but it's the couple of times that you need them that they are worth while.

With that being said, not everyone is a good one. Screen and interview several. Find one that works your area and you are comfortable with. They should be licensed and insured as well.

If you have one house in a good area you can probably handle yourself. These are often homeowners that couldn't sell so they rent. The houses are in owner occupant areas. When you get into more rental areas more problems tend to arise. That's when a manger becomes more beneficial.

We manage over 1,000 units for 200 individuals, many with just one, some with dozens. If you have any specific questions on basic management services I will be happy to answer.

[Account Closed]

I would imagine you should get the following at a minimum:

Advertising
Tenant Screening
Leasing
Maintenance Service
Reports

But I'm just speculating. As a young entrepreneur that would consider managing other's properties I'm curious as well.

Great thread Can't wait to hear everyone's response

mark,
as we learned in the other thread, you don't get these items for just the 8-10%...they'll usually take 1/2 of first month's when leasing, and they mark up maintence/repairs...so i wouldn't include that in the 8-10%....
for 8-10%, you should get communcation, advertising, collecting rents, and answering service calls...for additional money they will mark up these repairs...

[David Beard]

You should also expect your PM to provide reliable market rents and color on the immediate area, when you're evaluating a purchase.

Also to set rent for your existing units at the optimal level (normally slightly under market to minimize vacancy time and turnover).

[Sammy Paul]

My experience is that they are well worth it.

Mine has a full time operation with a staff that leases out homes that he owns as well. They do tenant screening, lease closing, rent collection, eviction, and handle maintenance calls. Obviously, I have to pay for the maintenance, but I don't have to take the call at 10 PM.

1/2 of the first months rent seems a little steep, but it's not so bad when you consider that they probably get your house rented at least that much faster.

I would highly recommend them. However, I wouldn't get some guy that does it out of his house and isn't doing anything that you couldn't do on your own though.

[Brandon Kamm]

Sammy makes one point that many overlook. There are a number of " mom and pops" out there. Make sure you use a firm with proper state licensing and insurance coverage. Every once in a while you will encounter a situation where if those things are not in place you could have a serious issue on your hands.

[Matt R.]

Advertising
Tenant Screening
Leasing
Maintenance Service
Expect preventative as well as remedial maintenance suggestions. I just paid for some HVAC work that wasn't strictly needed since the units were still working. But I sleep better at night knowing that they are checking on stuff like that and making recommendations about what should get done before it becomes a calamity.
Reports
Again, more than the bare minimum. The more detail and frequency, the better.
Not just what happened last month, but what's coming up in the near future - lease renewals and reminder letters that need to be sent out.
Details of repairs and maintenance so you have an idea of what exactly is being done. Then you can ask questions if needed.

[Michael G.]

@Steve - You are correct. I should share with the community.
In fact, I actually had this conversation in another posting http://www.biggerpockets.com/forums/52/topics/49839-how-to-manage-the-property-manager. Now this was my experience with property managers and I dont want to scare anyone off of PM's but caveat emptor by all means. My opinion is jaded by my bad experiences of over 4 years of hiring 4 bad property managers. The only one out of those four that panned out recently has turned out to be bust.

[David Beard]

A nice web interface/portal is very helpful:

* Tenants can log issues and maint. requests
* Communications between owner/manager can occur
* Owner can access real-time reports on status of property
* Some very nice pictures and information about your property that is available for rent, linked from Craigs List and other places.

http://www.personalrealestateinvestormag.com/uploads/Articles/Property_Management_MJ10.pdf

[Jason Miller]

Its best to weigh your individual pros and cons.

-Time you must spend on a property vs cost of a PM
-your experience and skill(dealing with legal issues, maintenance, tenant problems, determining good tenants etc etc)
-cashflow
-quality of the PM (goes without saying I suppose)
-Network of resources to deal with issues (lawyers, handyman, plumbers, electricians etc etc)

All things to consider. I'm sure others could add to that list.

[Michael Lauther]

I found a property manager for my Dyton OH property, Does anyone have any experience with CitiMark Properties, LLC . they are in several markets . are there any contract details i should consider, it is a one year contract and they will automatically fix any maintenance problem up to $250 without prior authority. is this something that should be negotiated? It would not take too long before the profits are eaten up. What is your experience?

[Steve Babiak]

Michael,

There is a forum dedicated to "ask about a company" - you should post there I think.
http://www.biggerpockets.com/forums/92-ask-about-a-real-estate-company

[Tod R.]

The more higher end the property is, the more important a PM is to the owner. A good PM will project a sense of professionalism to potential tenants. It is there business to know the market rents of the property and its competition.

Our company primarily manages our owned multifamily (and office) properties as well as other properties owned by investors with which we have a relationship. We focus on leasing, minimizing operating expenses and capital costs through proper maintenance, financing and full reporting.

If you have the right PM, they are definitely worth it.

[Account Closed]

they make their big kickbacks on the little things....a 15 dollar caulking job will become 150 bucks...don't agree to that!! tell them you want to approve any repair

[Michael Lauther]

Steve, thanks for the link, and Bryan thanks for the input. I will ask for a much lower cap on repairs, and Tod , this is a low end property but too far away for me to manage. also its in an IRA and needs to be passive. Thanks to all

[Corey Demuth]

The other good reason for using a pm, in my opinion, is if you are trying to invest in a distant area. I am currently looking into investing in Syracuse, which is about a 4-5 hour drive from me. TOTALLY WORTH 10% to not have to make that drive a million times when things come up, screening tenants initially, etc. Granted I will end up making the trip now and then and at certain key stages of the process as I am a hands-on kind of person, but for the day to day crap the PM is totally worth the cost.

[Jeffrey K.]

Bryan,

If you get a call of a leak and the tub needs to be caulked it can take 30 minutes to get there and see what the problem is. 1 hour waiting at the pro desk to be caulk remover and a tube of 1HR caulk ($15) and driving back to the job. 10 minutes of prep and 5 minutes to caulk. They are into this repair two hours and $15 in materials. If you bill at $45/HR that is $90+materials = $105.

[Steve L.]

I know of very few investors with 10+ units that have had successful long-term relationships with 3rd party property managers.

My goal is to get enough units so I can hire a property manager/assistant full-time and in-house. I think when I get to about 50 units it will make sense and start taking too much of my time.

Self-managing a couple units is really not that bad. It should take you 2-3 hrs a week or less. I would suggest maybe hiring a property management company to bring tenants to you for 50% of the first months rent.

[Jeffrey K.]

Steve,

I have more than 50 units and I cant afford to hire someone in-house. 50 units is still less than a 9-5 job most of the year. I figure I will need about 150 before it makes sense. You can hire someone cheap to help with paperwork around 100 units.

[Joel Owens]

Property managers are definitely worth it.

The key is that they do it full time and do not have other things they are working on distracting them from keeping your property performing.

I currently do not own any properties.If I did I would have a property manager.

I am fixing to buy a franchise business that cash flows 60,000 a year after expenses.The manager will be there meeting with me once a week.I don't have time to run it day to day to squeeze every last cent out of it.

I make a much higher return spending time closing deals for my clients.

So how you look at this will really depends on your situation and strategy.My strategy is to work on my businesses but not in them.

If I have to work IN multiple revenue streams I can't be all places at once.If I set up automated controls in place I can keep a pulse on all streams and make sure they are performing.

[Michael G.]

I agree with Bryan A but at the same time you cant have them calling you for every door knob tighten or light switch replacement. I've found that keeping them on a tight rope helps. Don't let them replace big ticket items without them providing you receipt. I want to see the receipt for the water heater they replaced. I dont want them getting it from "Joe's Recycled Hardware Store" for $150 and charging me $425. If and when possible have them take a picture of the before and after of the repair. My buddy owns a property in Rochester, NY and lives in NYC. He is 5 hours away driving distance but can purchase properties for $30k, $40k $50k easy. He had a "mom and pop" PM. They mismanaged his property, wouldnt return his phone calls and charged him 15%! (dont ever pay 15% for PM) He should have cut his losses long ago when they kept giving him stories about why he couldnt keep one of his units rented. The final straw for him was when he called them up one day after being promised a call back. The PM's wife who also serves at the bookeeper told him that he was disturbing them at dinner time! He fired them that day. Fast forward to 3 days ago. The new PM took pictures and showed him the areas of neglect that needed repair. Nice touch. They also whacked him with a $2300 repair estimate. I reached out to a contractor I'd done business with in that city who went out to the property and came back with an $1875 estimate. $425 savings. The point is that that some PM's sub out the work and charge a premium on top of the already high sub-contractor fee. Its a good conversation to have before any contracts get signed. It also helps to have someone in that are that you can go to alternatively for repairs. Also make sure that there is a conversation had about what their fee is if YOU find a tenant for a vacancy. They should really only charge you fro screening that tenant IMHO. They should never charge you a PM fee while the property is vacant. Typically lawn cutting and snow removal is an additional fee on top of the ordinary monthly maintenance charge but you can usually negotiate that into your tenants lease. By all means make absolutely sure they send you detailed monthly income and expense and examine them closely. If your property was recently rehabbed or you turned it over to them in very good condition you should have no monthly expenses. However if you gave them a property that was leaning to the side when you bought it as-is for $17k, best believe your monthly repair bill will rival a small mortgage payment.