'small' vs 'bigger' property management companies

[Albert L.]

[loose definitions - 'small' being mom & pop shop managing less than 100 units. 'big' being anything bigger with staff, software, typically managing no less than 400 units.]

What has your experience been with your property manager? I understand there's different tradeoffs between a bigger team who has more on-call availability, charges more fees, is a bit less communicative and has the means to be a bit 'sloppier' since they have more wiggle room to vs a smaller team. 

What's worked for you in this market? Why did you choose the PM that you did? Why didn't you go with something bigger or smaller? 

[James Wise]

Originally posted by @Albert L.:

[loose definitions - 'small' being mom & pop shop managing less than 100 units. 'big' being anything bigger with staff, software, typically managing no less than 400 units.]

What has your experience been with your property manager? I understand there's different tradeoffs between a bigger team who has more on-call availability, charges more fees, is a bit less communicative and has the means to be a bit 'sloppier' since they have more wiggle room to vs a smaller team. 

What's worked for you in this market? Why did you choose the PM that you did? Why didn't you go with something bigger or smaller? 

With a small Property Manager you are going to get a more personalized service. These folks will know your name, know the name of your tenants & be available via cell phone. A lot of people really like this & automatically equate it to a better level of service. Is it though?

Thing is small Property Management outfits don't make any money. This is one of the worst kept secrets in the business. We are all in business to make money so the small Property Management outfit is probably a version of a couple frequently seen scenarios.

They are just starting. 

• They are coming in & taking market share to grow their business. If you catch a Property Manager on the way up you'll get some great service at a great price. A negative to this are that the low prices may not last long. If they succeed in growing their business the personal service you have been receiving will be replaced with streamlined & automated systems. These systems come with a larger overhead, which of course means your price is going up. 
• Another negative to the Property Manager who is just starting out is that they are unproven. They will be learning & tweaking their model using your properties. The scenarios they encounter with your properties may be the very 1st time they've encounted them. There is no guarantee they make the right choices & actually grow their business to a profitable level. The burnout rate is high in the Property Management business as it's so freakin savage. You may find your small rising Property Manager belly up one day.

They aren't capable of growing a large business.

• Not all folks in business are business savvy. We all know this. I have seen many a folk run a very small Property Management business on the side to supplement a low sales commission business. Again a small Property Management business doesn't really make money when you break it all down. The margins are just so thin if it's not large enough it runs in the red. So what you've got is an unsophisticated business owner who's commingling & supplementing revenue from their management business along with their real estate sales business that is more or less failing. Sure they know your name & answer you texts, but is that as important as them knowing how to properly make money in the industry you've invested hundreds of thousands of dollars in?

Now if you're a very active investor who wants to be very hands on & in control of their portfolio the small Property Manger could be ideal as you can more or less treat them like an employee. They don't have sophisticated systems in place so you can probably mold them into doing exactly what you want. A large Property Manager will not allow anything like that to take place.  Just remember employees equal turnover so you're not going to be able to set it & forget it. You will more or less be the real property manager who's got some boots on the ground pseudo employees working under him.

With all of that said I think a large Property Management business is the right solution for most everyone who doesn't want to be the real defacto property manager. When you are working in such a volatile business you want to work with the best. You want to work with the industry leaders. They didn't get big by accident. These folks have proven systems in place & have invested millions into their businesses so that they are operating like  large machine with many moving parts. Will you be able to text them & get a reply? Probably not. Will you be able to speak with the owner directly often? Unlikely. Will they know what to do when trouble arrives? Absolutely. That is what you're hiring them for. Not a pal that returns text messages.