Property Management - from a renter's perspective!

[Britta W.]

Hi everybody! I'm brand new to real estate (and Bigger Pockets) but I'd like to share something I've learned from my experience as a renter. I rented an apartment for six years (I know, I know, huge waste of money... that's a whole different story) and it changed management companies while I lived there. Long story short, the new management company (this particular company manages around 50,000+ units in the US) ruined the place for me. They took advantage of the renters with hugely overblown fees, they hired unprofessional and dishonest staff, and they didn't allow enough in the maintenance budget to repair anything properly. Safety issues were covered up, and tenant's requests were ignored. Because we, as tenants, understandably have no contact with the owner, I can only assume that the owner was unaware of how his complex was being managed. In any case, I just wanted to put my two cents out there to those of you who are using a management company. Be careful. Just because a PM has a good reputation among owners doesn't mean that it's an ethical company. Sure they may maximize profits for the owner, but at what expense to the residents?

[Tarun Kapoor]

From a compensation economics standpoint, property management contracts are such that they don't align the interests of the owner and the property manager.

Property managers are contracted to rent out the property and manage it to get , say, 10% of the rent. If they don't rent it out, yours is one of the 100 properties they manage, so it doesn't move the needle that much for them in terms of overall profitability. If they do rent it out, they get straight 10%. The money they make is from the 10-11 months of the year they rent out the place.

Regarding performance measurement, there are not quantifiable measures to evaluate them. Normally, one should benchmark a manager's performance to the other managers in the area and give them commission and if they do better. i.e. if it takes 1 week to find a renter in an area X for $800/month and if your manager does the same, then there is no benefit to having a manager as you could do that too. In an ideal works one should take tenant surveys and see if your tenants are relatively happier than other tenants in the area.

Plus there are low barriers to entry in this business. It requires very little skill and most of it is not specialized skill.

If we as landlords could write quantifiable performance, prop managers will quickly become useful.

My 2 cents.