Personal experience with property managers, what a horror story?

Question

Every where you read property managers charge you 10 percent of the rents to manage a propterty for you. What they don't tell you is:

1) That's ten percent before expenses get taken out.

2) Sure they manage the property for you, but they also add a 100 to 300 percent premium on anything they do for you.

-Example you need grass cut, cost 40 to 75 dollars. Property management company charges 300 if you say, "yeah take care of it, cut the grass".

3) You need someone to show the place for a new tenant. That's a 100 dollar charge for someone from the management company to show the apartment each time they come out.

4) You use the company to find you tenants. They give you no screened applications and leave you vacant for months, while looking for the diamond in the ruff tenants.

5) They ask you to put money in a reserves account for any maintenance that comes up. They will try there very best to exhaust every dollar so they can make money and ask you to add more reserves.

Can't see how anyone makes money with property managers. Could I possibly get a response from anyone who isn't a property manager? Would really love and appreciate any feed back.

Anthony Wick · Answer

Did you actually have a PM? Did you have a contract? No offense, but it sounds like you either have not dealt with a reputable PM, or one at all, or you didn't hire well. My personal guess is you made up your numbers to make your point. $40 to cut grass goes to $300? No it doesn't. $100 just to show an apartment? If that is real, fire them. Vacancy for months? PM doesn't make any money, along with you.

Nick Gann · Answer

@Anthony Wick

I'm with you on this one. I manage properties, none of this is remotely true on my end... it seems to me it'd be hard to build a business with this ridiculous strategy.

Brian Boyd · Answer

Property managers are perfect. Their purpose is to relieve the day to day management from you but it is still your property to oversee and you need to communicate with your PM. Weekly or monthly calls to get an update, discuss maintenance costs or issues, and forecast what is going to be an issue in the future. We are considering self managing once we get enough properties that make it economically feasible and have already bought the software to do so. In fact, we are going to self manage our next deal so we can start retaining more funds.

Soh Tanaka · Answer

I've been using a few property managers (although I am a property manager myself) for years, and I'm pretty happy with them and the numbers. If the numbers are not working to your favor, you got wrong properties, you chose wrong management companies, or both.

Heather Frusco · Answer

@Mandela Muhammad I have to agree with most on here that you're story doesn't really add up. What property manager charges a 300% mark up? I'm not saying that can't happen but when you put together your other pieces like $100 per showing... are they charging a tenant placement fee or are you just having them show the unit for you? Just saying the story doesn't really add up...

Could you share the name of the property management company you use where they are based?

Heather Frusco · Answer

@Mandela Muhammad why don't you manage it yourself?

Ron Todd · Answer

There are a bunch of posts and articles out there with interview questions you can ask before hiring your pm. I'd recommend doing a Google search and find one that makes sense. If the fees seem outrageous, I'd ask about then specifically during the interview and see what their justification is. I'm using several different PMs across multiple states and each one has a different fee structure. I interviewed each PM and asked a ton of questions and so far I haven't been surprised by any PM shenanigans. If they aren't meeting your expectations, tell them. I recently did that and it changed my relationship with the PM for the better.

Kenneth Garrett · Answer

@Mandela Muhammad

I felt the anger in your post.  I self manage my properties but I did hire a property manager for one of my properties that was 75 minutes away.  It was a terrible experience.  They were lazy, tenant wasn’t paying rent and never told me.  When I asked they responded “oh did you want to know” What are you kidding me.  They were just bad.  I tested them showing a unit.  Never got out of there car to make sure the unit was ok, turn on lights the usual stuff.  Never tried to call the perspective tenant to see if they were running late.  Just sat in the car on there phone.  I fired them that same day.

Now I had been self managing my properties so I understood how things should be done or at least how I want them to be done.  Try not to paint property managers with a broad brush, you need to pick the correct one.  We all need to make money and if you hire out a service they should be paid accordingly.  They should just do there job.  That’s business.

When you have rental property out of state you have no choice but to hire a property manager.  It may take a few to find the right one.  Let them know your expectations and listen to how they operate.  It should be a mutual same minded team.

Good Luck Everyone.

William Joseph · Answer

I think the $100 fee per trip to show a unit is ridiculous. However, if I had a client who was self-managing certain processes and was doing leasing on their own I would build in a fee structure to avoid my company getting taken advantage of. I.e. I am not going to just send a body to show a unit in which we are not getting leasing on for free.

Alberto M. · Answer

Hey @Mandela Muhammad ,

You raised a great topic here.

I totally agree with you, and to add to your pointers, they also tend to keep most (if not all) of the additional income (late fees, pet fees, etc), charge one month’s rent for every new tenant, a fee to renew all the leases every year, and so on...

I have had great and bad experiences and all that was mentioned has happened to me.

My best advice would be to first of all make sure they don’t make you sign a one year property management agreement, otherwise you will be stocked to them for a year even if you don’t like them (getting out will cost you hundreds or even thousands of dollars). Also, try to negotiate the percentage , as you said, they go from 3-12%. I started at 10% but now I pay 5% and in the process of doing internally (due to economies of scale) but as you grow or acquire new properties, try to always improve your terms. It will be good for you as well for them as you are giving them more business and growing together.

Also, be smart and fair about the fees, don’t let them keep them all, but also don’t be greedy and find a middle point. What I have found to work the best is to do a split.

Very important , have them disclose all the fees involved for everything. Drafting contracts, evictions, signing new leases, renewals, repairs and maintenance, etc.

Finally, always compare options in your local market. Have 2-3 different quotes from referrals or good rated companies and then take a decision. That is not only good to help you take an inform decision but will also give you leverage to negotiate good terms.

Good luck!

Personal experience with property managers, what a horror story?

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