What is the most common flaw, mistake, or oversight of property management companies that manage your property? I am shopping around for a management company and can use any advice you guys have.
Thanks.
Nothing beats a good reputation. Ask some local investors/landlords for referrals. It’s important that you precisley communicate your investment goals to the PM. See if they’re willing to enter a 60 day cancellation clause into the contract that allows either one of you to terminate the contract if you’re not satisfied.
Some property management companies charge a finder’s fee to put a tenant into a one year contract instead of month to month. So, their highest income can be obtained by finding a series of tenants who only want to stay for one year. Your highest income can be obtained by having a tenant move in and stay forever.
Obviously, these folks can be bald faced crooks. They can tell you that there are repairs or expenses when there really aren’t any repairs or expenses, and then pocket your money.
It’s not their building. If the building falls apart or tenants tear it apart, what do they care? Aside from their professional reputation what do they have to lose?
They can be inept. They can let the building go vacant for six months or write up a lease that lacks the things that you need to protect yourself, to maximize profit, and/or to minimize hassles.
I would recommend taking property management courses before hiring a property manager so that you have the vocabulary and insights of a seasoned investor.
Hi Brian,
There are many things that the property manager can do to make you think they’re fantastic. And of course, there are the other things that make you want to choke them.
I’ve seen many of both in many markets. Here are some questions to ask your property management prospect when you’re interviewing them:
- Marketing: what does it consist of?
- How do they show the property (for example, I’m in Atlanta on an investing trip at the moment and talked to a PM today who said he puts a lockbox on the property and gives out the lockbox code to prospective tenants so they can show themselves the house. AHHHH. End of interview). What I want them to do is meet the tenant at the property to let them in and do a bit of a sales job when showing the property.
- What is their screening process?
- What is their tenant placement fee? (what if tenant leaves sooner than a year?)
- Are their property management fees based on collected rents or scheduled rents (for example, is their profitability tied in with yours - this would be “collected rents”; or do they get paid regardless of whether they collect the rent - this would be “scheduled rents”
- Do they have a 24 hour maintenance emergency line?
There are many more questions to ask. I don’t want to overwhelm you. With the questions I listed with no clarification or comment, you want to take notes as speaking with them and compare and contrast what different managers are doing. If you talk to three PMs and two say they do full credit, background and criminal background checks and require income equal to three times the rent; then you have one that just calls the former landlord and wants income equal to double the rent, you’ll start to see which ones stand out.
One more question for tonight…how long have you been in the property management business?
If you have any questions, let me know. If you want more screening questions, let me know as well.
Congrats on asking the question in the first place. I wish I would have thought to do that when I first started investing! Learning from the school of hard knocks is an education, but you take some bumps and bruises. Great job asking!
Take care,
Stacy K.
The worst agents?
Have very poor screening practices and will rent to anybody They get their fee for obtaining a tenant and could care less if your house gets torn up.
Bill you for repairs that were never done. Over-bill you for repairs that were done.
Not bother to inspect when the tenant moves out and just give the deposit back
Too lazy to file for eviction and go to court. They don’t really care if you get your rent or not.
Too lazy to drive by and check the property occassiobnally.
The worst one that I know of: the manager falsely told the owner that the tenant had moved out and then the manager collected the rent and kept it for himself for 6 months.
Also, 2 separate management companies in my area have had employees steal all the deposit money and take off with it. So add poor book-keeping and poor security to the list of possible problems.
I looked on a few websites for good property management companies near Louisville, KY but I am still searching.
Property managers are not owners of the property they are working for you. This is YOUR house not theirs. Most employees don’t take care of your stuff like you would take care of your stuff. You have to know how to manage property so that you can tell if they are doing it right or not. The same applies to contractors yard men maids etc. Most contractors property managers etc are working for themselves because they want to be the boss. In your project you are the boss. They are just to allow you to leverage your time but they must manage the property like you would.
What is the average rate, 8%? Or do most charge by door?
This thread is giving me chills.
Look at any successful investor, do they use property managers? I don’t know one that does.
How do they manage their out of state properties or even all their in-state properties?
I use professional property managers for all my properties. How do you define successful?
I think its important to keep your eye on the “bottom line” if you have property out of state. If you can’t physically be there to mangage the property, you have to have a sysytem in place where you can manage your managers. That includes getting 3 estimates of repairs over $200 +/-, having a repair request form made out by the tenants showing the work that needs to be done. Make phone calls to the tenants to make sure everything is going the way it should.
Knowing what I know with my properties, I can imagine it would be a circus if I lived in a different state. A very expensive circus. But I do low income that requires heavy management oversight and repairs.
I know as a contracter who try’s to bid on comercial maintanance I would say that who ever directly over see’s your property should have control,not their main office.I went to the 50 worst looking properties I could find and tried to place bids.In every case I was told that they wished they could but their corporate office was happy.Only the person on the ground can tell if things are done and how well.
These where all managed by larger companies as well.You might want to look at some of their other properties as well