Author Topic: Property Management - To Use or Not To Use  (Read 6659 times)

ThatGuy701

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Property Management - To Use or Not To Use
« on: April 01, 2015, 12:13:04 PM »
Hello All!

I am starting to do more research into rental properties and it seams like most people on her do their own property management.
I have been discussing rental properties with other local people and a few of them like the idea of using property management companies.
It would be nice to get some feedback and hear from people that are currently using property managers and why they decided to use them.

If there is another post that already covers this feel free to post the link in this thread but I wasn't able to find one that covered the topic well.

Thanks!

Cookie78

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Re: Property Management - To Use or Not To Use
« Reply #1 on: April 01, 2015, 12:43:52 PM »
I've used one for the past 4 years. I decided to do it because I ran into some bad tenants and couldn't handle the stress of dealing with them. I chose a larger well known company and thought that they would be able to find good tenants better than I could. I was wrong. It got to the point that dealing with the management company and their ridiculous charges was just as stressful as the bad tenants. I finally gave my 3 month notice to terminate our agreement last week. YMMV.

I had looked a few times to find a better company, but every one that I looked up had similarly bad reviews.

pros: I could take off for 6 months last winter without worrying about the rental property. Any big decisions can be made over the phone. When things are going well, you just magically get money in your account with no effort needed.
cons: Cost. The 10% doesn't sound like much, but the other costs add up quick. They don't care about spending your money, especially in my case where they were hiring people from their own company to do the maintenance and repairs.

If you go this route, keep on top of the company.

arebelspy

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Re: Property Management - To Use or Not To Use
« Reply #2 on: April 01, 2015, 07:21:37 PM »
If you can't deal with tenants, hire a PM.  Some people use that as an excuse to not invest in RE, instead it's a good reason to use a PM.

If you're out of the area, I prefer to use a PM.  Some do long distance management though.

I do my own management on my local properties simply because it pays a ridiculous per hour amount (over $100/hour) compared to my normal job (and that's with outsourcing all repairs, I don't do any actual work myself).  When I move though, I'll turn these over as well to PMs.

I think many of us DIY it because it's not that much work, and it pays well.

Definitely research into good PMs in your area though if you do outsource it.
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clarkfan1979

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Re: Property Management - To Use or Not To Use
« Reply #3 on: April 01, 2015, 08:12:04 PM »
I manage myself, but don't really do any repairs. I had an old washing machine break last summer. I called home depot and it was $330 with installation for a new washer. It took me about 15 minutes to search on the internet and another 5 minutes to order the washer. Then it took me another 2-3 minutes to call the tenants to make sure that everything went ok.

Drifterrider

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Re: Property Management - To Use or Not To Use
« Reply #4 on: April 02, 2015, 04:49:01 AM »
The property management I and my family uses will negotiate rates for multiple properties (my mother pays only 8%).  This firm does ONLY rental management.  They have been in business over 30 years.  They do not have a staff for repairs/maintenance.  They hire out work to be done but only after consultation with the property owner (unless it is an emergency).  They also do all the book keeping which makes it easier to file taxes.

Just as you would for a doctor, dentist or lawyer:  shop around.

ThatGuy701

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Re: Property Management - To Use or Not To Use
« Reply #5 on: April 03, 2015, 07:50:27 AM »
Thanks for the input everyone.

When figuring the 1% rule do you guys use the full rent amount or use full rent - PM fees?

ingrownstudentloans

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Re: Property Management - To Use or Not To Use
« Reply #6 on: April 03, 2015, 08:14:17 AM »
When I lived in the area where my rental property was, I was completely anti-PM.  I am pretty handy and could do most of the work myself, so I did not see the point in getting a PM.  When I get a new job and moved 23 hours away, I decided to get a property manager.  IT IS AWESOME.  They have an online portal where I can look at everything from rental applicants to the last penny spent on snow removal.  I can create reports 93-ways to Sunday on income, expenses, cash flow, balance sheets etc...They don't want me to talk to them ever, though will take my call if I need to speak with them or have a question, and quite frankly, I don't want to talk to them either.  I pay them 10% of the rental amount plus a new tenant set-up fee (3% of total rental charge for the life of the lease) and it is money well spent.  I don't have to answer late night calls about someone being locked out.  I don't have to worry about whether the snow will be removed in time or the city will fine the property etc.  I am considering buying another rental in the same area because it is so easy to invest and forget about it with these guys.  Every month they deposit the rent less their fee into my bank account.  I'm a fan :)

arebelspy

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Re: Property Management - To Use or Not To Use
« Reply #7 on: April 03, 2015, 08:15:39 AM »
Thanks for the input everyone.

When figuring the 1% rule do you guys use the full rent amount or use full rent - PM fees?

1% is just gross rent over purchase price.

It's very crude.

The 50% rule is also crude, but slightly more accurate.  PM fees is included in that 50%, so you'll see closer to 40% expenses if you DIY, but remember that the extra 10% is a return on your labor, not return on capital (ROI).
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GrayGhost

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Re: Property Management - To Use or Not To Use
« Reply #8 on: April 03, 2015, 08:27:14 AM »
If you're looking at a place where PM fees will push you over the 1% rule one way or the other... I strongly recommend that you keep looking. That's a pretty low ROI for all of the risk and stress a property is going to be, PM or no PM.

trobertson79

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Re: Property Management - To Use or Not To Use
« Reply #9 on: April 16, 2015, 08:50:30 PM »
I once tried to manage a property an hour away from where I lived.  I ended up with a building full of crack heads, drug dealers.  The alchoholic I had put as my point person in the building took all the rent money and skipped town.  The city came in and kicked everyone out, called it an illegal rooming house, and made me spend about 50K to get the certificate of occupancy back.

I am not a good property manager.  So I hire them.  Even so I got a bad property manager for this same property, and, though not nearly as bad the building didn't make money with all the mismanagment and evictions.  So I searched for the highest rated,  biggest managment company in the area, and now life is finally good.

Knapptyme

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Re: Property Management - To Use or Not To Use
« Reply #10 on: April 16, 2015, 09:18:49 PM »
New to the game of rental real estate and still working a full-time job, I hired a PM. Things are good so far. Because I do some DIY repairs, when something comes up, I can be the one the PM sends in to fix the problem. I plan on using my current PM until I retire and can do it myself more easily. Plus, I'll get my feet wet with rental real estate, see what he does (for the most part), and learn. It costs 10% of the rent, and only costs money when it's rented.

protossZerg

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Re: Property Management - To Use or Not To Use
« Reply #11 on: April 19, 2015, 09:09:52 PM »
Hello All!

I am starting to do more research into rental properties and it seams like most people on her do their own property management.
I have been discussing rental properties with other local people and a few of them like the idea of using property management companies.
It would be nice to get some feedback and hear from people that are currently using property managers and why they decided to use them.

If there is another post that already covers this feel free to post the link in this thread but I wasn't able to find one that covered the topic well.

Thanks!

We managed our properties ourselves for the last 7 years.  We switched over to  PM for three reasons:
1) We moved out of state.
2) We both took on new jobs and needed to focus on our jobs.
3) We want a higher quality of life, spend more time with the kids.

All of our properties are higher end, so they require less supervision.  If I had section 8 or the like, I would immediately hire PM.....if you can find one that will manage a section 8.

The problem with PMs is, in competitive markets, it is hard to find PMs that don't charge an arm and a leg.  Most want to charge 1 month rent to fill the property, $2600 to find a renter is ridiculous.  My property manager charges 5% - 7.5% of my rents per month......I feel this is reasonable.

We interviewed several PMs before we found the right one.  Spend the time finding the right PM with reasonable rates, and have a back up PMs.

AM43

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Re: Property Management - To Use or Not To Use
« Reply #12 on: April 30, 2015, 08:12:11 AM »
I self manage all my properties(3 rentals)
2 of them out of state.(1 1/2 hour ride)
Never even considered PM company.
They'll never take of your properties the way you will and their fees(management, repairs etc)are way too high.
I dont care if you make healthy profit after paying them. In the end you are out of thousands of dollars that you could have kept.

arebelspy

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Re: Property Management - To Use or Not To Use
« Reply #13 on: April 30, 2015, 08:57:20 AM »
I self manage all my properties(3 rentals)
2 of them out of state.(1 1/2 hour ride)
Never even considered PM company.
They'll never take of your properties the way you will and their fees(management, repairs etc)are way too high.
I dont care if you make healthy profit after paying them. In the end you are out of thousands of dollars that you could have kept.

Some of us are willing to make that trade, because our time becomes more valuable.

I self manage, and get paid ~$100/hr to do so (thousands of dollars, as you say).  But soon, when I ER, I won't be willing to sell my time for that cheap, and off to a PM it will go.

We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
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AM43

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Re: Property Management - To Use or Not To Use
« Reply #14 on: April 30, 2015, 09:18:55 AM »
I self manage all my properties(3 rentals)
2 of them out of state.(1 1/2 hour ride)
Never even considered PM company.
They'll never take of your properties the way you will and their fees(management, repairs etc)are way too high.
I dont care if you make healthy profit after paying them. In the end you are out of thousands of dollars that you could have kept.

Some of us are willing to make that trade, because our time becomes more valuable.

I self manage, and get paid ~$100/hr to do so (thousands of dollars, as you say).  But soon, when I ER, I won't be willing to sell my time for that cheap, and off to a PM it will go.

I guess my biggest issue with PM companies is that I dont have much trust in them for taking care of things the way I want them. I am very picky when it comes to doing things, especially timing.
My tenants love me because I am there either same day or next day latest to take care of any problems they might have.

math-ya

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Re: Property Management - To Use or Not To Use
« Reply #15 on: April 30, 2015, 09:56:44 AM »
I agree with am43. A property management company will never care like you will. For what pm companies do, and how badly they do it, they end up costing you a good deal of your income. Not just in fees, but with expenses that are less tangible, such as lower quality tenants.
With that being said, a pm company fits better with an investor that is more highly leveraged and has a greater number of units. I only have a few units, but my margins are big. So it's not hard at all for me to self manage. a person w lots of units (b/c of debt)can't manage on their own as easily. So with deflated profits, they then need more units. Growth is very tricky - you want to have a goal in mind, so you don't get ahead of yourself. I know my tenants appreciate that I'm on top of their units like a pm never would. Last winter when one of my tenants was at work I was in her basement (randomly checking stuff out)and noticed her furnace acting funny. I texted her and she didn't even know it was broken. By the time she was home from work it was fixed. (Bird flew down the chimney and roasted himself inside the furnace) pms don't give you that service

AM43

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Re: Property Management - To Use or Not To Use
« Reply #16 on: April 30, 2015, 10:25:03 AM »
I agree with am43. A property management company will never care like you will. For what pm companies do, and how badly they do it, they end up costing you a good deal of your income. Not just in fees, but with expenses that are less tangible, such as lower quality tenants.
With that being said, a pm company fits better with an investor that is more highly leveraged and has a greater number of units. I only have a few units, but my margins are big. So it's not hard at all for me to self manage. a person w lots of units (b/c of debt)can't manage on their own as easily. So with deflated profits, they then need more units. Growth is very tricky - you want to have a goal in mind, so you don't get ahead of yourself. I know my tenants appreciate that I'm on top of their units like a pm never would. Last winter when one of my tenants was at work I was in her basement (randomly checking stuff out)and noticed her furnace acting funny. I texted her and she didn't even know it was broken. By the time she was home from work it was fixed. (Bird flew down the chimney and roasted himself inside the furnace) pms don't give you that service

^
This

A lot of RE Investors forget that major part of success is ability to respond to your tenants needs in timely manor.
When I say timely manor, I mean same day, next day latest.
Try asking PM Co to do that.
Not all PM Co. created equal, but I would not hire 99% of them.

arebelspy

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Re: Property Management - To Use or Not To Use
« Reply #17 on: April 30, 2015, 11:25:13 AM »
I agree with am43. A property management company will never care like you will.

I think everyone would agree with that.  I'd be very surprised if anyone argued against it, so it's a 100% uncontroversial statement.  :)

Given that those of us choosing to use PMs understand that, it must be worth the tradeoffs to us to pay all that money, and have it not taken care of as well, in order to free up some of our time (and make us more location independent).  :)
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sbaTexas

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Re: Property Management - To Use or Not To Use
« Reply #18 on: May 01, 2015, 05:11:00 PM »
Can someone give me a rule of thumb on what's a reasonable charge for finding new tenants?  The PM im talking to quoted me 100% of a full months rent for a new tenant. .. .this seems absolutely ridiculous.  Any feedback on what a reasonable rate is?  I'm in a big city fyi.

Another Reader

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Re: Property Management - To Use or Not To Use
« Reply #19 on: May 01, 2015, 05:48:04 PM »
I have to disagree with math-ya's comments.  A more highly leveraged investor with minimal cash flow and many units can ill-afford a property manager.  Not only will that person pay the management fee, he or she will pay for all the stupid mistakes and miscommunications of the property manager that add to the operating costs for his or her properties.  That slippage can add up to another percent or two in expenses, even if you manage the managers.  Property management companies take on too much and try to streamline.  That results in things being replaced instead of repaired, the water being left off or on, damaging the landscaping, pipes breaking in vacant buildings, and the like.  If you are running thin margins, you need to be looking at every dollar before it is spent, not after.  Trim the portfolio, fatten your margins, and go on vacation because the best property manager you can find is doing a reasonably good job.

I have to hire property management for the houses that are in another state and 700 miles away.  Way cheaper than hopping on Southwest every time there's a problem that can't be handled by telephone or you need to find a new tenant.

I do agree it's very easy to make acquisition mistakes in trying to grow too quickly.  Did that myself a couple of times, and had to learn the expensive way.

math-ya

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Re: Property Management - To Use or Not To Use
« Reply #20 on: May 02, 2015, 06:06:13 AM »
I have to disagree with math-ya's comments.  A more highly leveraged investor with minimal cash flow and many units can ill-afford a property manager.  Not only will that person pay the management fee, he or she will pay for all the stupid mistakes and miscommunications of the property manager that add to the operating costs for his or her properties.  That slippage can add up to another percent or two in expenses, even if you manage the managers.  Property management companies take on too much and try to streamline.  That results in things being replaced instead of repaired, the water being left off or on, damaging the landscaping, pipes breaking in vacant buildings, and the like.  If you are running thin margins, you need to be looking at every dollar before it is spent, not after.  Trim the portfolio, fatten your margins, and go on vacation because the best property manager you can find is doing a reasonably good job.


I have to hire property management for the houses that are in another state and 700 miles away.  Way cheaper than hopping on Southwest every time there's a problem that can't be handled by telephone or you need to find a new tenant.

I do agree it's very easy to make acquisition mistakes in trying to grow too quickly.  Did that myself a couple of times, and had to learn the expensive way.
You totally missed my point. My point is about growth, not who can afford a pm. If you cannot afford a pm, your investment sucks.  When you grow too big too quickly, your ability to self manage goes down. At some point you're gonna need some help. So knowing where that point is, is very important b/c it is different depending on the amount of work you want to do yourself. It's also a hard number to figure out unless you have been in the business for years and know the types of hassle and work that is involved in this business.
Back to my original point, where I was saying my tenants furnace broke. It broke b/c there was no chimney cap, and a bird got down there. I fixed the furnace AND fixed the underlying problem. Would a pm fix the underlying problem? I guess it depends on how good your pm is. But from my experience they are more of 'fire putter outters' than they are problem solvers.

NoNonsenseLandlord

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Re: Property Management - To Use or Not To Use
« Reply #21 on: May 03, 2015, 12:18:57 PM »
A PM can be a blessing or a curse.  If you do not live near your properties (50 miles?), you need someone to show the place, and get new tenants.  Having said that, it is not that difficult.  Handlinig phone calls is easy.

Do you want to sacrifice up to 25% (or more) of your profits to a PM?

http://www.nononsenselandlord.com/2014/06/property-management-is-a-waste-of-time/

SUP

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Re: Property Management - To Use or Not To Use
« Reply #22 on: May 04, 2015, 12:06:08 AM »
Can someone give me a rule of thumb on what's a reasonable charge for finding new tenants?  The PM im talking to quoted me 100% of a full months rent for a new tenant. .. .this seems absolutely ridiculous.  Any feedback on what a reasonable rate is?  I'm in a big city fyi.

In some areas that is the market norm. On an annual basis one month's rent is 8% of the rent collected. Interesting point that some owners don't consider is that full service property management can be done for about 10%. 

For all of you talking about property managers, look at where their fees are. Not the management fee, but the other fees. If their is a leasing fee? - then they get paid on turnover, and if this is a full or even half a month's rent then they make a lot off of your losses. Turnovers and vacancies can be an investor's largest expenses. If your PM gets paid for turnover then where is the motivation to have good, long-term tenants. I'd rather pay my property manager for renewals (ballpark $200 or less).

I use a PM. Worth every penny. In a lot of cases the PM actually makes you more than if you do it yourself. That is my challenge to hiring them. They should make me more than if I did it myself. They usually pull this off in rent and late fee enforcement, marketing, and less time vacant. Also, it should be weighed against what you can make doing your profession or what value you put on your time. Even if you are retired there should be a dollar amount on your time.

I know a doctor who manages his own places. He was cleaning out a fridge on a Saturday complaining to me. LOLOLOLO Go be a doctor. Someone else will do that for $15 an hour. Also the extra time vacant because he can only work on them when he has time off. His turnovers average 3 months. Pros should be under 30 days at the most.

NoNonsenseLandlord

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Re: Property Management - To Use or Not To Use
« Reply #23 on: May 04, 2015, 06:29:03 AM »
Quote
His turnovers average 3 months. Pros should be under 30 days at the most.

It's all in the marketing.  You can always increase demand, by lowering price.

I rarely have vacancies.  If I do, it's less than 2 weeks between tenants.  If you have good tenants, and good properties, turnovers are a breeze.  With solid tenants, you can show properties 6-8 weeks before they are vacant and get them rented.

Of course, getting good tenants is not always easy, but with a basic understanding of marketing, it is not hard.  If you cannot get a good tenant after you showed it ~3 times to qualified prospects, you are either under-marketing, or over-priced.

Picture a vacant unit as a  truckload of bananas.  Both will spoil at the end of the month.

protossZerg

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Re: Property Management - To Use or Not To Use
« Reply #24 on: May 05, 2015, 11:09:17 PM »
Can someone give me a rule of thumb on what's a reasonable charge for finding new tenants?  The PM im talking to quoted me 100% of a full months rent for a new tenant. .. .this seems absolutely ridiculous.  Any feedback on what a reasonable rate is?  I'm in a big city fyi.

I think it varies by market and by the property.  I have found that if the house is in demand (good schools, well taken care of, plenty of updates), then I can negotiate to a half month of rent.