BiggerPockets

I hear this ALOT...
"I had a great PM company, paid them $X but they are gone, had to fire them. They were great in the beginning and then..."

What makes them great at the beginning?
What are the biggest let downs?

I ask because my partner and I are putting together a business plan to start managing other investor's properties as well.

What do you all think is the best Value Proposition that we could offer that the current management pool is lacking in.

Very interested to hear everyone's perspective.

Ok, thanks Bryan.
When you say that "they don't care for your property like you do", specifically what service/actions from your management company would make you feel otherwise.

I know many people bring up expenses. How could your management company handle expenses in a way that would be not only satisfactory but just plain "make sense"? In turn, making you feel like they care as much about your property as you would.

Just looking for ways to set ourselves apart.

Chris,

This is great. As investors ourselves, we feel like if we offer our network of qualified service people at our "investor" prices, we would be able to satisfy our clients, thus create more business.

Does anyone else have stories like this? How could your company have handled it in a better way?

The problem with proiperty management is that if everything works out perfect, then you are just doing your job. If a tenant is late, then you aren't living up to expectations. If a furnace breaks down at Friday night at 6 PM... etc.

I have found we have to screen the owners we work with just as much as tenants. I know there are bad property managers out there, but sometimes expecations are too high.

I can't really think of specifics Mat. Over charging for services or being lazy when finding cheap solutions is a constant problem. I have also found that many managers want to bury their head in the sand instead of deal with late pays or evictions too.

Some of the smaller companies constantly have turnover or "upgrade" their system causing trouble with money hitting our bank on time. They also want to sign new management contracts midway through a tenant's tenure because some new crisis came up they didn't expect. Recently it was owners being foreclosed on, which necessitated kicking out tenants.

Another major problem is cash flow. Managers collect rents at the beginning of the month and take forever to send the money to me because of how their system works. That would be something I would stress if you are trying to differentiate yourself. Owners with many properties will really appreciate not having tens of properties where they have to shell out the mortgage prior to collecting rents.

Some simple statements each month are very helpful too. I don't want to read through 15 journal entries to see what happened for the month and I certainly don't want to trace balances across months. Give me something simple to understand with a common sense breakdown of how the property is performing.

For larger properties this seems to be less of a problem, but a lot of the problems described above are very common for smaller property managers...from an owner's standpoint.

I am sure I can think of other things...I'll try to post about them as I can think of them.

Does anyone have a copy of the contract they have with their managers or the reports they use? Are these reports sent by email or can they be found on the web through a portal?

@Jeffrey....Yes

It depends on the property manager. Some of mine have online portals and some don't.

Yeah it's tough.property management is on the back end of the business. I do the front end of purchase and sales.

You have different levels of property management.On the large end you have specialty turnaround groups that have teams of people (consultants) for shopping centers and multifamily,hotels,etc.

Their job is to do a forensic analysis and to try to squeeze every last cent out of the property.

Property management is highly litigous and usually the owner and the tenant want to blame the broker and then the broker has to clear their name.

Pay out is low and time consumption is high.If rent on a SFR home is 600 a month and to manage that property you are getting 60 bucks a month so 720 a year isn't squat.Most of those property managers are working for a company and do not get all that money anyways.

So if managing a property gets you say half of the 720 which is 360 a year and you put in 5 hours a month.360 divided by 60 hours in a year equals 6 bucks and hour gross before taxes and other expenses!!

All that for dealing with the tenant and writing down the date,time,complaint,etc. and tracking expenses making calls and sending payment and reports.

As a property manager it is much easier to control a larger project than with a bunch of smaller parcels with multiple owners and expectations and fee structures.

The problem with most small investors is they don't utilize a full time property management company.Instead they use an agent that focuses on sales and does rental management on the side as an afterthought.

It is real hard to find a great property management company and even if you do they might only service a few counties.So you can use them for some of your properties but not others.

I think what happens sometimes is new investors underestimate the time involved in managing a property and dealing with issues.So when they buy they say I will manage myself.

Then they find out how much work it is and then want to use a management company.By then they try to go with the lowest company as cash flow is tight because they bought to high.

Then they use someone based on lowest cost and the problems start to mount.I am not saying you will not find bad service at the higher fees just you will definitely find many more problems in general getting a PM company with the lower fees.

You pay for service it's just how much will you pay.Some things I do myself as I see the value in it and others not.

For instance I could save 3 dollars by changing my own oil,getting filthy dirty,having to dispose of the oil or I could just go somewhere and have it done for a few bucks more.

On larger projects of 50 units or more with multifamily or large retail projects 5% is common with built in bonuses based on hitting costs savings and performance numbers.

just bought a property from an out of state landlord who used property management..the manament was responsible for paying the water bill for the owner...they paid late every month and all the late fees and interest were charged back to the owners....

my problem with property management is that they earn more money when things go bad....they make more money on tenant turnover due to application fees, 1/2 of 1st month's rent, etc. to stand out, show landlords how you're different...split the application fee with the owners, only take your 8% for the firs month...

Here is an example of past companies I used: tenant moves out of one of my properties, I purposely emailed the property management to make sure to winterize the property asap and not turn the gas on. My email went out the day I found out the tenants where moving. Well 2 weeks later and all the pipes are now froze. So one problem you have is as you get larger and manage more you are Dependant on others and will have to hammer home your same ideals and give little room for employee error.
Most I have used nickel and dime you to death and simply do NOT go the extra mile if it is something they are not making money on like a vacant property. Also slow with evictions and turn around of the property.
Another big issue I have had is using people that do not give a detailed break down by property every month and online access to review the accounts.
Make sure to give the owner a copy of applications you receive and have them sign off....eliminates the blame if the tenant stops paying right away.
I know property management is a huge pain so I try to give some room for the poor guys to breath. The co I use now has a great system down and seem to be the best I have used. Maybe bum some ideas from them. http://www.altpropertymanagement.com/