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A Real-Life Property Management Setup

by Ali Boone on March 23, 2013 · 13 comments

  

Literally, real-life. I’m giving you the inside scoop as to exactly what I get in terms of property management for my own rental properties.

I feel inclined to reemphasize, in case you aren’t familiar with property management, or even if you landlord properties yourself-

The fate of your rental property investment lies in the management of the property after you buy it.

This is not a famous quote, it is my own quote. If you buy a rental property and your management, whether managed by a property manager or by you, performs poorly, you will lose money. Quite possibly an astronomical amount of money. The fate of your investment truly lies in the hands of the management of the property.

Property Management Needed

For anyone not interested in landlording properties themselves, or if you are an out-of-state investor who is not around your properties to manage them even if you want to, property management is the way to go. Unfortunately, good property managers are extremely hard to find. I’ve said this a lot, and I wish I knew a good manager to recommend in every market, but if you know the questions to ask when interviewing managers and what to look for, you drastically increase your chance of finding a good manager yourself.

There are a ton of great articles on BiggerPockets about property management, what to look for in a property manager, and even perspectives from property managers themselves. I want to give you something a little bit different in this one. I asked my favorite property manager to send me over his list of services. This is straight from him and what he shows potentials clients. He offers three options for level of service. I thought it would be cool to show this to you so you can not only have a list of things that a property manager should be sure to offer you, but also to show you potential things property managers can offer you. As expected, these extras typically cost more, but sometimes not. I know a great property manager in an area I’m not currently invested in who does all the extras for the same price as a basic service.

Three Different Packages

In the packages below, the cost for the Basic service is 10% of the monthly rent, the Preferred is 12%, and the Platinum is 15%. I always go with the Platinum. Yes, it does cost more, but I can’t tell you how much I love hardly ever seeing repairs expenses on my monthly invoices. My repairs expenses are so minimal that I’ll gladly pay the extra 5% per month to almost never see extra expenses and to have the peace of mind of not worrying about maintenance issues.

PM

Be sure you know what you are getting with your property management. The only thing not listed on here, that is by far the most important to me, is how well the manager communicates! That is key for me.

Cheers to property management.

Photo Credit: Thomas Hawk

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{ 13 comments… read them below or add one }

Dawn A. March 23, 2013 at 9:33 am

Great article! At some point in my life I know I will want to use property management services. At this point I’m small (6 rental units in 5 properties) but there is value there IF the company is good. That’s the key. One tip would be to talk with other landlords either at local landlord meetings (if your city has them) or REIA meetings.

Reply

Ali March 25, 2013 at 4:02 pm

Definitely, Dawn! i also recommend talking to real estate agents. Some of them may do it themselves small-scale or know of another agent who does. I have the best luck with that type of manager. I’ve never found a larger scale company I like. Not even close!

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Mehran March 23, 2013 at 12:03 pm

Great article Ali! Being from Los Angeles as well, I’m investing out of state as well. I wouldn’t even consider buying in a market unless I have already found a great property manager! What’s the point of a good deal if a lousy PM puts bad tenants in that destroy the place and don’t pay rent? Found me a GREAT one in one of my target markets that answered all my questions via email (10 other PM’s avoided my questions like the plague) and I can tell really loves her work. I’m very excited about closing on the property(my first) on April 5th! Even more exited about lining up my second har har.

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Ali March 25, 2013 at 4:04 pm

Fellow LA-er Mehran, awesome! Well, I’d say it depends on how many questions you asked as to whether the manager you found is actually the best just because she answered all of your questions ;) If that many avoided them, I’m curious as to what they were!

What is your target market?

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Mike March 25, 2013 at 6:09 am

Solid ideas here Ali, I never considered a tiered model for property management. Thanks for the great idea! Mike

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Ali March 25, 2013 at 4:04 pm

Hey Mike! Long time, no talk. We’ll have to catch up soon. Glad I could give you the tiered idea, and hope it helps! :)

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Karen Rittenhouse March 25, 2013 at 6:22 am

Hi Ali:

You’re so right about the importance of good property management.

I’ve never considered charging more for the additional services we provide. Hmmmmm. You’ve got me thinking!

Thanks for another great post.

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Ali March 25, 2013 at 4:06 pm

Glad it helped, Karen! I love reading your articles as well, and I’d certainly use you for PM if I was in that market. Yeah, definitely don’t hesitate to charge a little more. It’s worth every penny to me as the owner!

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Corey Sandy March 26, 2013 at 9:07 am

Thanks for the great advice. I’m a full time Real Estate Agent I also have a couple rentals myself and have starting managing a few for my investors.. I love the tier concept and will use this going forward..

Thanks Again.

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Ali Boone March 26, 2013 at 11:31 am

You bet, Corey! Good luck managing. I hear nothing but stories of bliss and great tenants ;) What market are you in?

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Oriah April 4, 2013 at 11:51 am

Hi Guys,

I started a property management company last year and currently we have a few hundred properties under management. After reading the article, there are some great tips here and I think that they are valuable for investors. That being said, the prices in that sheet are very high, in fact, they almost kill any returns investors have. With our property management company, we analyze what a client needs to cash-flow and adjust our prices accordingly. We charge between 7-9 percent depending the size of the portfolio. If any of you guys have any questions or want insight on how we work internally, please feel free to reach out to me.

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Ali April 4, 2013 at 12:15 pm

Oriah, that’s awesome you work with investors to help them on their returns. Very admirable. Luckily the Atlanta market cash flows well enough that these prices don’t hurt much, but it is always nice to find cheaper too.

More importantly, yay for south Florida! I’m from Ft. Lauderdale and try to go back as much as I can. Love it down there!

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Eric Davis July 1, 2013 at 9:55 pm

Great article!! Very informative

Reply

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