PMC Red Flags to Look Out For

Source: Cytonn Photograph on Unsplash

Not all PMCs are created equal. Some are great, while some are (frankly) charlatans who give the rest of us a bad name.

But, as with all relationships, there are always some red flags you can look out for early on to avoid heartbreak down the line.

5 Property Management Company Warning Signs to Avoid

Whether it’s a bad Yelp review or poor word of mouth, there are always some telltale signs to spot a shady company. But for PMCs, it might require a bit more digging.

So to help you find the perfect partner for your renting ventures, we’ve gathered 5 signs that could signal a problematic property manager.

1. Lackluster Communication Skills

Communication is the cornerstone of any successful business relationship, and property management is no exception. Suppose a company takes its sweet time to respond to inquiries, provides vague explanations, or fails to keep you updated on property maintenance or tenant issues. In that case, it's a definite red flag.

A competent property management company should exhibit transparent and timely communication, ensuring you're always in the loop regarding your investment.

How to Spot it Early On:

How long does it take for them to reply to your emails/calls? How much information are they readily providing you? If they’re not excellent communicators when they’re trying to sell you, they’re only going to get worse once you’ve given them a check.

2. Exorbitant Fees and Hidden Costs

It’s no secret that hiring property management companies can cost a pretty penny, but it should never take a step into the ludicrous. On average, a PMC charges 8-12% of your monthly rent collection for its services.

However, you should watch out for companies that charge well above 12% or tack on hidden costs. A legitimate property management company provides a breakdown of its services so you know exactly what you're paying for.

Be wary of companies with really low prices, too, because often they make their profit by nickel-and-diming you for all your worth, and this can quickly eat into your income.

How to Spot it Early On:

Ask for a full list of what’s included and what’s not. Ask how they bill you for things like maintenance (is it an itemized invoice?) and how the approvals process for these bills will work.

3. No SOP

How can you manage 100s of properties simultaneously without great systems? You can't, that's how.

SOPs (Standard Operating Procedures) are key for making sure a PMC has an organized approach and won’t let things fall through the cracks. But you’d be surprised how many property managers are just winging it. There’s a relatively low barrier to entry in this industry, so people think it’s a quick way to make a buck, but they have no idea what it takes to really run a smooth PMC operation.

How to Spot it Early On:

Ask for their SOP for evictions, tenant requests, maintenance, and sharing itemized invoices. If a property management company doesn’t have these systems in a document form that they can send to you right now, make for the hills.

4. Shoddy Online Reputation

Thanks to Google and the advent of social media, a PMC's reputation is just a few clicks away. And if they’re already making other clients unhappy, that’s a pretty big red flag.

How to Spot it Early On:

Research the company thoroughly and consider what other landlords say about their experiences. A trail of negative reviews, unresolved complaints, and lack of engagement or complete radio silence should give you pause and encourage you to take your business elsewhere.

5. High Vacancy Rates

If the PMC you’re screening has a reputation for high turnovers and/or long vacancies, your warning bells should be screaming.

Motor City’s vacancy rates have been on the up and up recently. In fact, between the period of 2019 to 2021, the City of Detroit’s vacancy rates improved by 4%.

Conversely, if your potential PMC has higher-than-average vacancy rates, it could be a sign of working with disgruntled tenants. A high vacancy rate indicates that the PMC isn’t doing its job correctly. It’s either neglecting proper tenant screening or tenants are unhappy—leading to vacant properties. If they have long vacancies, it means their marketing isn’t great.

How to Spot it Early On:

Ask to see their average DoM (Days on the Market) and vacancy rates for properties in your area. If they can’t tell you this, it means they don’t collect and analyze data (another red flag!).

Don’t Settle for Less

Choosing a reputable property management company is a crucial decision that can significantly impact your rental investment's success. But by avoiding these red flags, you can separate professional and trustworthy companies from rotten eggs.

Remember, you're not just entrusting a PMC with your property, but also tasking it with your peace of mind.

If you’re looking to invest in the Metro Detroit area, we’ve got your back. Leave your properties in our hands, and you’ll have nothing to worry about (we’re great at long-term relationships).