Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
My family has managed our own properties for over 35 years, so we have a little bit of experience and knowledge. We aren't perfect, but the forms have been tailored to all our specific issues over the years. I've been talking to professional property management companies over the past couple of years and I am kind of interested in getting some help. I was thinking that I could start with (1) of our (4) fourplex buildings (they are all next to each other, but different addresses).
We have some pretty specific things that we have found work well for us, can I ask that the PM have the same terms (even if it is different than their norm)? Like month to month (instead of year leases), rent late the second day (instead of the 5th), and a limit to the number of vehicles and working on vehicles and storing vehicles. Can one building have completely different terms and rules while a building with the same owner, but managed by myself, has completely different policies? I don't want to get into the issue of discrimination - so is that based on the manager or the owner?
Anyway, I am really reluctant to give up control but am willing to try it with one building. Even though we might be working right next door and see our old tenants, but not be in the place to accept their rent or help them. I'm interested to see if having a property manager is really helpful for us, or just a burden to have to manage. I understand both sides of the PM/owner coin, I guess I won't really know how it plays out in my life until I try it.
@Julie Marquez as a professional Property Manager, I will not tailor my management services to the individual owner. First, deviations are a recipe for disaster because it requires me to follow unique processes which increases the likelihood of a mistake. Second, the processes I have in place are already proven with a decade of experience and 350 rentals.
Speaking to your specific examples:
1. Many Landlords want M2M so it's easier to get rid of bad tenants. As a professional PM with 350 tenants, I rarely run into a tenant that I want to get rid of but can't. The last one was in 2014. Instead, I have strong systems in place for screening, training, managing, and evicting tenants. If the tenant wants to break a one-year lease early, I have a system in place that actually puts more money in the owner's pocket 80% of the time. Before assuming your system is better, talk to the PM about why they prefer one-year leases and how they handle early terminations or problem tenants.
2. Is an extra three days of grace a hill worth dying on? If the PM doesn't charge a late fee until the 5th, how will that impact your ability to pay bills, build wealth, or enjoy your children? If you find a quality PM, they'll justify when/why they charge late fees when they do.
3. Any PM worth their salt will already have policies in place regarding parking, only allowing vehicles that are licensed and operational, etc.
4. You can have separate managers for separate properties. Some can be professionally managed while others are self-managed. Do not give only part of a property to the manager (e.g. a fourplex with you managing half of it) as that only adds complications and problems.
It sounds like you're worrying about problems before even interviewing property managers. Learn how to identify a good PM, then start interviewing at least three separate companies. Here are some tips:
Remember: cheaper doesn't mean you'll make more money.
You can start by going to www.narpm.org to 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. Regardless of how you find them, try to interview at least three managers
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.
4. Review their lease agreement and addenda. 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, late rent, evictions, turnover, etc. 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.
7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?
This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!
Seems like you answered your own question, you won’t know until you try it. You could hire an employee to do it so they would do it in your way, just a thought.
@Julie Marquez We have gone full circle, started by doing our own management for years, hired a PM when we invested OS, then we moved to PNW where the properties are, bought more properties and self managed them and eventually grew tired of the PM. Now we self manage it all; but we are not trying to scale, it is strictly to supplement retirement income. I think your idea of having a PM do a control sample is outstanding; some things you can probably negotiate on, others not. Four or eight units for a year should tell you a lot.
Many habits of the PM we found troubling, like the way they wanted to show the property to 'everybody' qualified or not, and charge us even it the candidate never showed! I don't need that! Their selection criteria were lax by our standards. When units needed work they added their own mark up to the contractor bills sometimes doubling them. Keep us posted Julie, interested to hear how you make out. All the best!
Julie, we deal with this reaction from people a lot. No one will care more about your property than you. The best you can hope for is a company that gives great effort and care towards your properties. That's what our company does here in NJ. With people that have multiple properties and are reluctant, we often tell them to give us 1-2 and see how they like our service. Usually, after a few months we wind up managing the entire portfolio for them.
Keep in mind you will be freeing up a lot of your time and be able to focus your mind on other things. It's hard for people to quantify their time value but it's incredibly important.
@Julie Marquez Your perspective comes from actually having managed rentals which is impotant when choosing a property manager. Have them manage one of your buildings like you mentioned and take it from there, I think it is a good idea to appraoch it that way.
People who have never managed themselves are more likely to end up with either a bad manager or a manager that doesn't match their expectations because their expectations are all out of whack having never actually managed before. You will be more likely to pick a manager that ends up working out based on your experience.
@Julie Marquez Your perspective comes from actually having managed rentals which is impotant when choosing a property manager. Have them manage one of your buildings like you mentioned and take it from there, I think it is a good idea to appraoch it that way.
People who have never managed themselves are more likely to end up with either a bad manager or a manager that doesn't match their expectations because their expectations are all out of whack having never actually managed before. You will be more likely to pick a manager that ends up working out based on your experience.
@Julie Marquez as a professional Property Manager, I will not tailor my management services to the individual owner. First, deviations are a recipe for disaster because it requires me to follow unique processes which increases the likelihood of a mistake. Second, the processes I have in place are already proven with a decade of experience and 350 rentals.
Speaking to your specific examples:
1. Many Landlords want M2M so it's easier to get rid of bad tenants. As a professional PM with 350 tenants, I rarely run into a tenant that I want to get rid of but can't. The last one was in 2014. Instead, I have strong systems in place for screening, training, managing, and evicting tenants. If the tenant wants to break a one-year lease early, I have a system in place that actually puts more money in the owner's pocket 80% of the time. Before assuming your system is better, talk to the PM about why they prefer one-year leases and how they handle early terminations or problem tenants.
2. Is an extra three days of grace a hill worth dying on? If the PM doesn't charge a late fee until the 5th, how will that impact your ability to pay bills, build wealth, or enjoy your children? If you find a quality PM, they'll justify when/why they charge late fees when they do.
3. Any PM worth their salt will already have policies in place regarding parking, only allowing vehicles that are licensed and operational, etc.
4. You can have separate managers for separate properties. Some can be professionally managed while others are self-managed. Do not give only part of a property to the manager (e.g. a fourplex with you managing half of it) as that only adds complications and problems.
It sounds like you're worrying about problems before even interviewing property managers. Learn how to identify a good PM, then start interviewing at least three separate companies. Here are some tips:
Remember: cheaper doesn't mean you'll make more money.
You can start by going to www.narpm.org to 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. Regardless of how you find them, try to interview at least three managers
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.
4. Review their lease agreement and addenda. 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, late rent, evictions, turnover, etc. 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.
7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?
This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!
Since you have reached a point where you've scaled up your family's REI portfolio a bit, it could make a lot of sense to go the PM route; or, you could continue to manage it yourself with a bit more guidance by using a proven platform to help you with the different steps of the process (ie. listing, tenant screening, digital lease creation, rent collection, maintenance tracking, etc). Pricing and standards for each PM company vary, and it really also depends on your region; some have said you might pay 1-2% in prop management fees which sounds incredibly low (and borderline unbelievable), not factoring the standard 1-month rent fee policy; on average, you're going to be paying 4-6%, or higher out to a property manager in addition to that 1 full month rent (standard fee). Give some thought to the number of units you have, and where you are in your REI process. The advantage you have at this point is there are certain things you know to look out for having managed it yourself for a while. Also, pay close attention to the fine print (specifically as it pertains to their fees and other charges that might come up). A lot of great options out there for self-managing if you decide to go that route; aside from providing the basics (listing, tenant screening, digital lease creation, rent collection, and maintenance tracking) some self-management services/tools also offer your tenants additional capabilities which makes it an easier sell on your end when getting them to transition over (ie. their ability to report on-time rent payments to the credit bureaus). Either way, I hope this info helps! Best of luck to you. @Julie Marquez
Technically, yes. You can hire a property manager and write your Management Agreement to meet all your specifications. Reality: won't happen.
Property management firms have to protect themselves and often that means they stick to their guns on using all their legal agreements (Management, Lease, etc.). Afterall, you are hiring them for their professional services then you should let them manage it the way they know best. If property managers have a different contract for every landlord then there would be legal clauses that potentially fall in the gaps.
I would encourage you to do the following:
Test a PM: Start off by testing one property but on the PM's terms. You can negotiate the variable rates such as 'monthly management fee' but generally speaking, you will need to use their management agreement. Make sure you have an agreed termination policy for this trail run. Standard language is 12-months and early termination is 100% of their fees due. I would work to find one willing to accept a 90-day trail, no early termination fee.
Self-Manage with help: You can continue to self-manage but try to outsource certain aspects. Perhaps all you need is a leasing agent.
Share PM with another Landlord: Depending on your portfolio size, perhaps you can find another landlord with a mid/large portfolio and together split their monthly expenses. This gets you more of that personal service you're looking for and they would be more willing to accept your terms than a traditional PM.
@Kenny Dahill Thanks for the tips about testing for a PM and the contract language for that. Sometime I forget that this isn't all or nothing, and that I can change my mind in the future. I'd love to find another landlord in my area, even just to exchange ideas. That's a good reminder to network more
@Rob B. Thanks for all the info. I can't believe there are some for 1-2%! The ones I talked to in my area are more like 6-12%
Same, although some users here who have gone the PM route will swear by it (just seems really really low). Here in Chicago, that 6-12% number is right on par with what I'm familiar with.
@Nathan Gesner I was hoping you would respond, thank you for the very thorough and thoughtful reply. I think it all comes down to trust. I hope I can trust the PM to do a better job than I ever did, and that I will never need to interject my one random opinion on their processes. I've gotten many recommendations and interviewed a couple of companies and have an idea of who I think is the best fit - now to get to the nitty gritty and understand their lease and processes better. I'll be referring back to your post - and no, m2m is not worth dying for, I'll just let the professionals do what they do best.
@Bjorn Ahlblad How many properties do you guys have? Even if just one of the buildings, maybe by having a PM just take one building will help me a lot during my busy, young kids, season of life. Like you did, I can always change course later. This business is so up and down - one day I'm like "get me out of this and these tenants" and the other day "this is so easy, I love picking up rent checks."
@Peter Kraemer I have two young kids, a real job, and a two construction projects going on right now. If this guy is good, he could have even more of the portfolio! You probably have to sell a lot trust and confidence
@Michael Noto I really want to view this thing as a partnership, not me just releasing my properties to said PM and walking away. And to view this PM as an important person and vital role on my team, and that we both help each other out. I wouldn't have to fear giving up control if I had the absolute trust in my PM
@Julie Marquez we have 16 properties; a 12 and duplexes. My wife was working full time in Ca, and she is quite happy to be the PM and knows the work involved. If we were trying to scale and had a pipeline of deals we would hire a PM. Having a young family requires a huge amount of time.........if I were in your shoes I'd probably be experimenting with a PM too. All the best!
I would ask you the following: Do you want someone else to manage your properties or do you want someone to help you as you manage your properties? If your answer is the latter, you don't want to contract a PM company.
