Quad Cities: What have been your pain points with management?

Question

Hello Quad Cities!

I'm trying to gather some data here to determine what I can do to help solve the management crisis in the QCA. It seems almost every investor I talk to that does not manage their own properties has complaints about the management options here. This seems to be the biggest apprehension that prevents investors (both locally and out of state) from scaling their portfolios in our wonderful market. In your response, please include the cities you're investing in and a brief list of the issues you've experienced. Please avoid name dropping as to keep this a neutral discussion. :)

Drew Sygit · Answer

@Alex Bock the main problem is typically investors not asking enough questions and demanding a well-written management contract! Read below:

We can’t believe how many owners hire the first PMC they speak with!

Then they complain their expectations aren’t being met!

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – and they often select the first PMC they call!

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

Even if someone give you a referral, don’t make the mistake of assuming the PMC will meet your expectations, just because they met the expectations of the referral source.

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Please send us any feedback via email, as we do not use the DM feature here. 
Also, if you like our response, please don’t be shy about giving us a vote😊

John Clevenger · Answer

Couldn't agree more Alex.

I unfortunately hear people on a daily basis talk about the pitfalls of the current management options. Myself as well as some other co-workers are also actively trying to solve this problem and so far what we have found is communication and transparency are paramount. The relationships individuals make (especially involving money) are truly rooted in trust. When someone trusts management companies with handling their assets worth hundreds of thousands or potentially millions of dollars they expect a minimum level of communication and transparency. That looks different for each person of course, but setting the expectation and having a mutual understanding on the front end should clear up any confusion.

Unfortunately the real estate industry is riddled with sleazy individuals that would rather make a quick dollar than an honest one. This type of behavior is also shown in the health industry when people look at bills and can't understand what they are paying for. This is where transparency comes in. Management companies should be able to show clients how and where they make money. Most people are fine with paying for quality management and are okay with higher prices if it makes sense to them. Personally, I would rather overpay to have someone care for my properties the way I would rather than look for the cheapest option. Knowing this I believe the property management companies that can hold themselves with integrity, display it through transparency and communication and even go the extra mile to guide clients to an option which isn't as financially beneficial for them are the ones that will inevitably be the most successful in the long run.

I personally will be curious how the standards and expectations shift over the next 5-10 years in the property management field.

Eliott Elias · Answer

Confront PM's about your concerns day 1, you can't eliminate all, but you will have a better process of elimination.

Quad Cities: What have been your pain points with management?

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