Should you use a property management company

Question

I have seen people managing properties by paying 8-10% to property management companies. If you use a property mnagement company, then are they liable or can you still be responsible for their actions if they do not do something like maintanence?

Drew Sygit · Answer

It's our Logical opinion that the property Class, and corresponding Class of tenants, impact the benefit of hiring a PMC.

The higher the Class, the easier it is to manage and the less a PMC is needed.

For Class C and below, a PMC is usually a necessity - especially for OOS investors.

Regarding liability, it works both ways.

An owner is ultimately always responsbile, but so is the PMC. If a tenant sues for a slip & fall, both the owner and PMC are sued - even if the owner wouldn't approve repairs the PMC recommended that led to the slip & fall.

Tammy Mason · Answer

I agree with the above responses. I've tried it both ways, and had limited success self managing. In the end, I wasn't very talented at putting quality tenants in the units, and I paid the price with several evictions. I reluctantly hired a manager to deal with the day-to-day, and am more than happy with my decision after a couple of years (and I think my tenants are too). It was just too hard and stressful to deal with problems, maintenance, and complaints from afar, while still working on my other full time job.

My relationship with one property manager convinced me to buy other properties in the same area, and continue their service, which got me a discount in management fees for having multiple properties. I plan on doing the same in the future.

My relationship with one property manager convinced me to buy other properties in the same area, and continue their service, which got me a discount in management fees for having multiple properties.  I plan on doing the same in the future.

Drew Sygit · Answer

@Hegsdery Gret it's our opinion that yes, most properties under$100k have a high probability of needing professional management.

Nathan Gesner · Answer

Attorney fees, travel, other expenses. I believe he had three partners, all living outside of California, and they all had to travel to attend the hearings. They won, but they still incurred a ton of costs that were not covered by insurance. He said the entire thing cost over $300,000 but his insurance covered the majority of that.

Hegsdery Gret · Answer

@Nathan G. Interesting. Would liability insurance not cover for lawyer costs ? Why did the person lose a lot of kmoney?

@Drew Sygit Are most cash flowing properties which can be found on ZIllow(less than 100k) mostly properties which require property management? I am finding it difficult to find which class a property belongs to. How do you find this out?

Nathan Gesner · Answer

Yes, you are still liable for the actions of your Property Manager. It doesn't necessarily mean you will be held responsible, but you are subject to scrutiny, at a minimum.

I know an investor with a couple hundred apartments in California. He owned them since the early 80s and they were professionally managed with no problems for decades. One day a Tenant decided to sue for a Fair Housing violation. The investor wasn't involved in any way, except to read the financial reports on occasion, and hadn't visited the property for almost 20 years, yet he was part of the lawsuit and had to show up in court. Both he and the property manager were found innocent of the accusations, but it still cost him a lot of money and he was so frustrated that he sold the property and pulled his money out of the state.

Filipe Pereira · Answer

I believe that someone with a good contact list and decent systems can manage 10 to 15 units by themselves with a full-time job. Obviously this number changes based on each person's life circumstances, whether they have other commitments to attend to, Etc.

For most people property management is a luxury, not a necessity. Especially because most people will never own more than 5 to 10 units. However, people are obviously free to spend their money however they prefer to, so who are you or I to tell them what to do or what not to do. Some people spend money on property management to relieve themselves of the headache, or because they are too far away. Totally sound reasons. Heck, I even know of a couple people who live next door to their rental and still hire property management out!

There is no one size fits all approach to property management, thankfully. As for liability, the buck always stops with you. If the PM did something negligent, they should absolutely own up to it, but if it was something that just happened because the house is old, well, it would be hard to blame them for that, unless you specifically told them to have it addressed previously.

Sean McDonnell · Answer

At the end of the day, the property is yours and you are ultimately responsible for the care and maintenance of it. Good property managers will help you take care of it and schedule maintenance and repairs to be done if that is what you want them to do. If the property managers say they will do something and then dont, the best you can do is fire them and find a new one. You should supervise the property managers especially when just starting to work with them so you can ensure they are managing the property to your standards.

Should you use a property management company

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