What can I expect from a property manager?

Question

I have a question regarding property managers.  Is it abnormal for them to do a 2-minute analysis of whether they're willing to manage a property and give an estimated rent potential when shot an address?

I'm dealing with three property managers in three different locations and all seemed happy providing this service.  I'm making offers on properties (and am in escrow on some), so it's not like I'm not trying to act on the information or am just kicking tires.

Long story short, I received a curt (imo) email from one of them that he basically feels taken advantage of for performing that service and normally he would expect to get paid for it.  I was taken aback because I hate the idea that I'm taking advantage of someone.  I tried to explain that I realized he hadn't made any money off me as of yet, but that I was actively making offers and even had one under contract in his area, so it wouldn't be long before he started generating income off of me.  Also, that I don't understand how I could possibly break into that market without knowing if he'd be willing to manage a house and what I might expect to rent it for.

Then it occurred to me that I don't really know a lot about what the job entails.  Is it crazy to insist on working with a property manager that's willing to do that?  If it's not something a property manager would do, who should I rely on?  It seems like real estate agents have every incentive to overestimate rents and neighborhoods, so I feel like property managers would give authentic information.

I'd love your thoughts and suggestions.  Thanks in advance.

Jonathan Klemm · Answer

@Chris John - I agree with everyone else.  A GOOD property manager is definitely going to help you through the entire process if you are new to real estate.

But in my opinion, most property managers aren't GOOD.  They are just average and don't go the extra mile to really help their clients grow.  Plus a property manager will never treat your property like you would, but that's really the case with anything.

Find a GOOD one like @Mark Ainley and you'll be alright!

John Warren · Answer

@Chris John this PM just tipped you off that you should NOT be working with him/her. A good PM should be able to tell you market rent ranges in about 30 seconds for any areas they manage. With that being said, I have been astounded over the course of my career at how little many 3rd party managers know. Most of these outfits are not doing all that well as property management is a lower margin business. Make sure you do a lot of due diligence on the companies before you go with them.

At the end of your statement you mentioned that real estate agents have the incentive to overestimate rents. I think you might be surprised what a good agent can provide you. I provide rental rates for clients here in Chicago all the time, and I typically send them market comps so they can evaluate for themselves. An investor friendly agent has every reason to want you to succeed. We liked doing multiple deals with the same client which is why we are in the space. The only way this happens is if the client does well on the 1st one.

Drew Sygit · Answer

I politely disagree with everyone here and appreciate @Chris John being polite enough to ask about this issue.

TIME IS MONEY in service businesses! Time is what you are really selling!

If you don't value your time, no one will - and they will take advantage of you and you will waste your value and lose money.

For those of you who disagree, try going to an attorney, doctor, financial planner, etc, MULTIPLE times for free advice and let us all know how that works out for you.

Chris, it's understandable that you want professional advise on the market before you make a big investment. Just so we're clear, anyone telling you what a property will sell or rent for is only giving you their opinion. Yes, some opinions are better than others, but it is always an opinion until the sale closes.

Also, statistically, those that give away free advice are typically the most desperate for business. Otherwise, why would they give away their most precious commodity for free? Likewise, those that value their time and protect it, like the person that told you they feel taken advantage of, are statistically more likely to be better "experts" than the desperate ones.

Just to put it out there, here's how we handle situations like this:

• We discuss what a potential client is looking for in a rental purchase, help them to define criteria if need be, etc.
• We make it clear that we will only evaluate a limited number of potential purchase they send us for free
• We also make it clear, that once that limit is reached and we've demonstrated our expertise, they will need to pay us a $500 nonrefundale retainer fee, that will be applied to any transaction they do with us within 90 days.

Now, we've protected our time and if someone won't pay the $500, how serious are they really?Hope this helps!

John Warren · Answer

@Chris John you want to find a PM who is more like @Mark Ainley. Someone who is willing to share on the front end, but also someone who has been the investor. The more your team has been in the investors seat, the more they will understand what you are going through. I love being able to share actual rental data from units I have leased up with clients. As an agent, nothing says "local market knowledge" like real, on the ground info. That is what you want to find from your whole team and the PM is undoubtedly the most important team member in whatever market you land in.

Mark Ainley · Answer

@Chris John A good Property Management firm will want to hold your hand through the buying process even if they are not representing you on the purchase.  As an investor you want your PMs buy in well in advance of closing.  When I talk to someone like you I want to make sure we are on the same page with location, rent, and condition.  I insist to look through the buyers inspection once under contract so we can talk about what you are up against now and down the road.  Also in and around Chicago different towns have different rules and laws you want to make sure you are on the same page with your PM on.  Most of the time the Realtors are not up to date on those items nor should they have to be.

Not sure what cities you are looking at but let me know and I can connect you with a good one if I have one in my network.  Alot of property managers these days have the rental analysis widget on their website so you can check a rent right from the website.

I work with an investor(actually almost an investor) that has used the rent analysis took on my website at least 100 times and not bought anything yet in over 2 years.  LOL he might even read this post which is OK cause I give him a hard time about his analysis paralaysis.

Jesse Byrer · Answer

@John Warren my advise to you would be to educate yourself so you do not have to depend on anyone to tell you the data. The sooner you can rely on yourself the sooner you’ll have the confidence to make quick decisive action. Good deals don’t last long.

As far as rents are concerned, you can look at several real estate and rental websites to get an idea of what rents go for. Zillow rent and Craigslist are a couple that come to mind.

Good luck!

Chris John · Answer

@Crystal Smith

@Jonathan Klemm

@Drew Sygit

I appreciate you taking the time to weigh in and offer your differing perspectives.  In the end, I feel like it's a service that I require when making offers and crunching numbers.  I'd hate to get stuck with some bad deals because I overestimate rents or a manager's willingness to manage a house in the first place.  It's now my first question when I interview perspective managers.  I'd have had no problem putting money into a retainer and even mentioned that to him, but I guess by then we'd already agreed not to work together.

Thanks again, all!

Chris John · Answer

@John Warren

@Jesse Byrer

@Mark Ainley

Awesome.  Thank you so much for your response and expertise!  I don't want to go too much into specifics in terms of location, etc.  It's a small world and I've definitely put myself into uncomfortable positions before.  haha.

By all accounts, the property manager runs a very successful operation and is well respected.  I think that's the thing that made me doubt myself the most, like I was taking unfair advantage of the other two property managers I'm working with that didn't speak up.  They both literally go out of their way for me in terms of shooting me properties, letting me know which ones they like, etc.

I definitely intend to become a "local expert" in whichever markets I'm trying to buy in, but I'm finding breaking into a market especially difficult.  Out in California, I feel like we have entire sections of towns that are "no go" (as far as my investing preferences), but in other cities it feels like "this street is great, but this street two away is really rough".  I'm finding the proximity issues really interesting and difficult to navigate.  It just feels like cities are organized differently than I'm used to or something!

Also, I've found the rent predictors extremely inaccurate.  Honestly, I've found appraisers extremely inaccurate as well.  We recently refinances some properties, but a rent estimate (or whatever they're called) was accidentally ordered instead of an appraisal.  The rent estimate came back at $1050, but it's renting for $1675.  If the tenants left, rent price probably go up again...  I've noticed that rents in my neck of California are universally underestimated on zillow, but in the location I'm referring to they are universally overestimated.

Ah well, I'm definitely not working with that PM anymore.  I've been "fired" as much as I've decided to quit, so at least the feeling is mutual.

Thank you again for your replies and expertise.  It's good to know I'm not crazy (or at least not for this reason).  haha

What can I expect from a property manager?

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