Landlording & Rental Properties

Protect Your Investment: How to Tell a Good Property Manager From a Bad One

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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Investing in real estate is similar to anything else. You purchase an asset, which generates a return. After a time you become fully capitalized and your return is all profit because your investment has been paid for. Real estate, however, unlike many other income generating investments, relies on a few key elements to ensure that the return keeps coming and the value of your investment isn't diminished. The number one element is property management, and this is what I will talk about today.

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When I first started investing in the U.S. real estate market, I was living in Australia. I had accumulated a large portfolio there and also purchased some property in other areas of the world as well. The investment potential was so good here in the States that I decided to sell out of my Australian portfolio and move to the U.S. I can absolutely say that it was one of the hardest moves that I’ve ever made, but well worth it in the long run, and I’m happy I’m here.

The Importance of Being Able to Trust Your Property Manager

One of the major concerns I had as a foreign investor was the people that I was working with to look after my property in my absence. Now my entire business model preaches fully passive income through turnkey investment, but I completely understand the stigma that has been generated due to non-preforming investments led by bad management. I also understand that many investors find it much easier to self-manage because of the well-known issues with many PM companies.

From my perspective, a property manager should be looking out for your investment. They should be protecting the asset from harm and assisting you, the investor, with communication both up and down the line with tenants and anyone else who may come in contact with the property. In the past I have had some great PMs who have allowed me to make some awesome returns, but I have also, like many others, been burned on many deals due to poor property management. Honestly, the loss equals hundreds of thousands of dollars. Another reason why I moved to the US is so I could see what was going on with my investment.

The really good property managers that I contracted with all had two things in common: they communicated well and they were responsive to the needs of the tenants.

Our company currently has some investors abroad who own property in other areas of the US, and by far the most common complaint I hear is with the wait for communication to be delivered. I mean, if you as an investor, call your PM and leave a message because no one answered, should it take over a week for someone to get back to you? In my opinion, NO! Just think of the number of issues that could potentially occur in that one week span.

Bad Experiences With Property Management

Recently, we had a past tenant of ours call Josh (he looks after our property management) to see if we could assist with a water issue. I recall him being on the phone, and the details I was hearing were appalling. The pipes had frozen in her building, and so she and the rest of the tenants had no water. She contacted her property manager several times, who told her that someone would be out soon. No one ever came. Eight days had passed. Yes, 8 DAYS!

The tenants contacted the local health department, who came out and assisted all of them in moving to another location. They also paid for their security deposit. What a shame, and I truly understand the feelings of desperation these people had. None of them wanted to move. They all enjoyed living there and even offered to pay for the plumber, but in the absence of a responsive property manager, the neglect and lack of concern caused a great loss to the investor and the tenants.

Sometime ago I owned some properties in upstate NY. They were great performers, and I got in at a decent price. I had a great relationship with my property manager, and we talked often. Then one day he called and told me that he had accepted a job offer in Florida with a larger complex. I was happy for him, but my stomach sank with uncertainty. His company appointed a new PM, and at first the transition went smoothly.

Then, about 3 months later, I was missing rent. They were constantly informing me of maintenance issues; then, nothing. No communication. No calls, no emails, NO RENT! I had to travel there myself to see what was going on. I was infuriated to find my properties vacant, vandalized and boarded up. I had lost my entire NY portfolio in a matter of a month due to poor property management. It took some time, but they did get fixed. I found new property management and sold off the entire list. No more NY for me.

Conclusion

To sum this up, property management is the key to your return. Just as you would vet a tenant, you need to do the same thing with your PM. They need to show you that prompt communication is their top priority and that they are responsive to the needs of the property, your investment. You should never wait a week for a return call. So many things could happen in 7 days. At Ohio Cashflow we like having one property manager look after a maximum of 25 properties. This allows for their utmost undivided attention at any given moment to not just the tenants’ needs, but also the investors that own the properties.

Have you had a poor experience with a PM? What did the good ones do well?

I’d love to see your comments below.

Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    Darrin Wesenberg from Columbus, OH
    Replied over 5 years ago
    Engelo, O-H! In my hometown of T-town! Great article about the realities of hiring a property manager. I’ve considered hiring one for my out of town property but have been reluctant due to hearing various horror stories. You always have great advice–keep em comin!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Darrin, Thanks for your comment. T-town is the place to be 🙂 Make sure you meet them in person first and that they are prompt at communicating. Thanks and have a great day.
    Matt Rosas
    Replied over 5 years ago
    Great info. If you are looking in Holy Toledo, Engelo is the cash flow man.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    haha Thanks Matt, We pretty much have all of Ohio in our back pocket not just Toledo 😉 Have a great weekend.
    Matt Rosas
    Replied over 5 years ago
    Right on G. Let me put it this way, if you are looking for midwest cash flow and want free soccer tips for your kids. Engelo is the man!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    haha Matt, Much better. Thanks lollol Have a great week mate 🙂
    Deborah Tuck Architect from Dayton, Ohio
    Replied over 5 years ago
    Just thought I’d say hi, Engelo. I am also from Australia and investing in Ohio – hope you left some for me!!! Lost basically 2 properties in Kansas City due to appalling PM who was working with an even worse contractor, who had come highly recommended. I guess they think you’re easy pickings if youre not local…. I now only work with people I’ve met directly. Can see why you moved to the U.s. – that plane trip really sucks!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Deborah, Thanks for your comment. Not to sure we will be able to lol Already bough most of Toledo so now we are Gung Ho in Dayton before we take on Cincinnati and Columbus. I was actually thinking about renaming Ohio in Engeloio haha jokesss 🙂 I get weekly emails from investors that have been screwed over by shady operators. On many occasions the turnkey companies actually sold a decent product but the out sourced PM they had was shocking. Not too long ago there was a news article about a PM company in KC that took 3 months rent from a ton of investors and just fled KC. Quite a few of our fellow Aussies used this PM. Shocking stuff. I hope your on the right track now. Feel free to add me on Facebook and we can stay in touch. Have a great day.
    Frances Regalado Investor from Pasadena, California
    Replied over 5 years ago
    Hi, Thanks for the great article. I’m in CA and travelling to Cleveland next week to search for properties. Do you PM in Cleveland? If not, can you recommend any reliable property managers, as I would like to network/interview them. Thanks for the article. It’s so true! Thanks, Frances
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Frances, Thanks for your comment. We don’t currently conduct any business in Cleveland. I also don’t have anyone their that I could comfortably put my name behind. I suggest you post your comment on the Bigger Pockets forum. I am sure there will be a few guys from Cleveland that will reach out to you. As far as I am aware, they are quite reputable. I hope that helps. Thanks and have a great day.
    Larry Schneider Investor from Pittsburgh, Pennsylvania
    Replied over 5 years ago
    Very good post. I never had a property manager because I could never find one. I screen them like tenants and never could find one worth a pound of salt. If there is any kind of PM ratings sites on the internet the information would be greatly appreciated.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Larry, Thanks for your comment. Its very hard to find a PM that doesn’t nickle and dime. Most of the profits they make are on the “service fee” they charge on top of maintenance calls. I think its BS but I also know that especially here in the Midwest the PM fees are so low that other means are needed to keep the business going. If I could suggest anything it would be to work on your business and not in it. Spend as much time possible looking and vetting the right PM. Eventually you will find the right one. That will leave you at peace to further grow your portfolio and not worry about tenants calling. Thanks and have a great day.
    Nate T. Investor from Tempe, Arizona
    Replied over 5 years ago
    I think we all agree that bad managers are a problem. But how do you screen for good ones?
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Nate, Thanks for your comment. Check out a podcast interview I did with Bigger Pockets a while back. I talk about and stress how to find the right people and what questions to ask. https://www.biggerpockets.com/renewsblog/2014/09/25/high-school-dropout-300-real-estate-deals/#comments I hope you find it useful. Thanks and have a great day.
    Edward Briley None from Virginia Beach, Virginia
    Replied over 5 years ago
    Well I can say this here, because most of you will realize what I am saying. What was described above was the average real estate agent, and real estate agencies. I think that most (or hope) that many of you are well above average just because you are on here. Many real estate agencies, will only list a property, do very little advertising to sell your home, or your property. I called one not too long ago, because I was interested in buying an investment property. I was informed that the agency did not allow the listing agent to talk to me about the property, and matter of fact they suggested that I contact my own Realtor to tour the property, and make an offer if I was interested. I thought then, at that time, I would never allow this company to list my home. Maybe I am wrong, but I am not going to pay a commission to someone that will not even show my home, when they are getting at least 3% to sell it? I can list and advertise a property for less than $400, so why would I pay these people to do it? I can even pay the selling agent 3% for the selling of my home. At least I would know, when and who showed the property. The same for many property management companies, AKA real estate agencies. They only care about getting a cut of the rent. They do not feel that they should have to put themselves out to rent your property or take care of it. Matter of fact, many will tell you that they don’t have the time to rent it for you, and they are just too busy to get back to the tenants so repairs can be made. When I am paying someone to do something, I expect them to do it. I also expect to hear from them at least once a week to see how things are proceeding along, and contact me immediately of any problems that may arise. After all, what is the reason they are being paid?
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Edward, Thanks for your detailed comment. Unfortunately I feel your pain and have witnessed it first hand. We recently decided to start up our own in house property management along with a Realty company. Our PM only charges half months rent for finding new tenants and we never nickle and dime with on top “service fees” for maintenance calls. We also only manage what we sell through our turnkey company. This enables us to keep it small and focused, not needing to stress on making a profit through the PM company as the turnkey sales compliment and support our PM along with knowing the workmanship conducted on the properties as our crews did all of the work. Its a different model to the stock standard PM but it definitely most benefits our investors. Thanks and have a great day.
    Frank Kocher
    Replied over 5 years ago
    There are some stellar managers around, however I had some problems with managers also. In my experience, one property manager steered potential tenants to other buildings managed by her firm . This caused thousands of dollars of lost rents. She also did not look after the apartments which resulted in an increased vacancy rate. She is a personable person but she accepted more properties than she could handle and favored one of other apartments . She is a great book keeper and I could see the extent of my losses. Another management firm, did not put in the effort to communicate with the tenants , to care for the apartments, or to market the property effectively. If an appliance broke in one unit, they would move an appliance from a vacant unit rendering the donor unit uninhabitable instead of replacing the broken appliance. Finally I hired my own property manager as distinguished from a property management firm and the second hire worked out very well. Now the apartments are full and I am investing in continuing to improve them. Both firms had excellent references.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Frank, Thanks for your comment. Sorry to hear about your issues and I am glad that everything is on the right track now. Real Estate can sure be a roller coaster of a ride at times. Have a great day.
    Eva Salas Real Estate Investor from Silicon Valley, California
    Replied over 5 years ago
    My advise is references, plural!! I im in multi fam in Silicon Valley and went thru 3 PM co’s before I found a Co. that truly did look after my interests, and still do. Before hiring, I asked for, and received, a copy of all forms they use with tenants ie contracts, notices, etc. As well as a copy of financial statements they send ea month. They also send receipts for everything relating to my props. In addition, there was no long term contract with them. Straight m to m. The logic here is why would either of is want to be stick with ea other for 6 months to a yr if we were not a good fit?! On the very rare occasions when they make a mustake, I email the broker/boss and copy relevant employees and expect and receive a prompt, meaning within a few hours, response. To me, 24 hrs is PLENTY of time to get an answer. They are available 7 days a week and I do not feel in the least bit guilty calling or texting on a Saturday or Sunday. A good PM Co is worth its weight in gold!! They were referred by an agent many yrs ago and have saved me $ and countless headaches!!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Eva, Thanks for your comment. References are always a great way to speed through the search for whatever is your looking for 😉 I like your strict vetting process although I don”t necessarily think it would work here in the Midwest with $50,000 – $150,000 SFH. Many PM’s would not be as organized as the one you mention above and some questions would need to be angled differently lol Thanks and have a great day.
    Chad Hale Property Manager / Investor from San Jose, CA
    Replied over 5 years ago
    Thanks for the article Engelo. Unfortunately the quality of property managers and real estate agents varies quite widely kind of like a car mechanic. Find a good one that is honest and cares about you and life will be much simpler and profitable. Find a bad one or a string of bad ones and life gets harder. Perhaps, so much so that you leave real estate investing altogether. That is a bummer. The bar is fairly low to attain a real estate license and claim to be an expert. So you definitely need to interview whomever you work with. Thankfully BP has had several articles and forums giving out great information on this. I have a template email with several great articles that I regularly share with people when they ask about property management outside of my area. They are thankful for the BP info and have made positive changes. Regards, Chad
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Chad, Thanks for your comment. I always say that working with the wrong people will cost you money and never the stats and demographics of a particular area. A business principle that I will always practice is having the right people around me who can supply a specialized knowledge when needed. Finding a good PM was definitely one of them. Nowadays it different as we have it in-house 😉 Thanks and have a great day.
    Bernard Rubin Investor from Brooklyn, New York
    Replied over 5 years ago
    I own and run a property management company in NYC. Our success stems from the fact that we treat the properties as our own. Property management is a trust relationship. Managers and landlords are a marriage. We offer a 6 month trial period where the landlord gets to know us and sees what we do and how we treat our managed properties. Once the 6 month period is up we go in to a 1 year contract period. To be a successful property manager you need to be available 24/7 365 days a year and sometimes be willing to come out of pocket. We provide our landlords and tenants a 24hr number where they can call us. There are no answering service we pick up the phone. A landlord has to feel that the property is being managed better then he himself can run it. Sometimes when looking for a PM don’t always concentrate on the big players their to big to concentrate on each property the smaller newer guys are sometimes able to be more on top of your property, because their smaller.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Bernard, Thanks for your comment. Love your model and 100% agree about the “big players”. We never really look to them when looking at anything new. Small boutique companies can perform better IMO and will happily tailor to the clients needs 😉 Thanks and have a great week.
    Eric D. Investor from Eagan, Minnesota
    Replied over 5 years ago
    You always have great advice. A PM can make or break you. You need to understand how to manage properties yourself, before you can hire someone else to do it.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Eric, Thanks for your comment. Whenever I have lost $$$ it was due to trusting the wrong people. PM is key to ongoing success once a purchase has been made. Thanks and have a great week.
    [email protected]
    Replied over 5 years ago
    Disappointing article. I was expecting to see questions and or methodology of choosing a good PM but instead it is some war stories. While I appreciate the relevance o the stories perhaps a better title would have not accurately reflected the true nature of the article.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Gerald, Thanks for your comment. Your critique is appreciated and taken on board. Thanks and have a great day 🙂
    Mark Morris
    Replied over 5 years ago
    Great content Engelo – There is nothing more frustrating than looking at your pm report and finding a heap of what seem small jobs constantantly appearing at not small prices. Thankfully I found yourself and your team at Ohio Cashflow who offer a great turnkey operation backed by your professional PM company – being a UK investor peace of mind is key. Thanks and keep that rent coming in. Ps 1 year gaurantee is the icing on the cake!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Mark, Thanks for your comment. Its been a pleasure serving your vision 😉 Glad you like our new guarantee also hehe Have a great day and speak soon.
    Account Closed from Orlando, Florida
    Replied over 5 years ago
    Engelo, Great post. I have a colleague who got an awesome deal on a property because the hired property management company was horrible. The owner was out of state and entrusted the property management company to periodically check on the house and make sure there were only a certain number of tenants occupying the house. Needless to say none of this happened, the house was completely neglected and the tenants almost destroyed the house. As a result the owner sold it for almost half of what he originally paid. Not doing your homework or trusting the wrong people can cost you big money as you mentioned in your article. Your article serves as a great warning for potential investors about PM companies. Engelo, keep up the good work I enjoy your articles and posts. Charles Knighton II, MSRE
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Charles, Thanks for your comment and kind words. This is something that I unfortunately hear every week. Many of my fellow Aussies find me online and contact asking for help. They were sold overpriced ghetto properties with poor PM in place. I always suggest that they cut their losses short and sell for whatever they can and if they put more money in they will most likely loose that also. Thanks again and have a great day.
    Christina Carey Real Estate Broker from Dayton, OH
    Replied over 5 years ago
    One more to add to the list: Depending on your state’s regulations, a property manager who is doing so for others’ properties must have a real estate license. I don’t know about the other 49 states, but here in OH, a property manager must either a.) have a real estate license under a broker that performs property management (not all of them do), or b.) work as a W-2 employee (not an independent contractor) for the property owner in order to comply with the law. The OH Division of RE is particularly fond of making “test calls” and stalking the internet looking for violators, and they are handing out large fines for anyone managing another’s property without a license.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Christina, Thanks for your comment. Due to how strict the laws and regulations are here in Ohio we have spent a ton of $$$ making sure everything is buy the book lol, I am sure our attorney likes us a lot 🙂 In-house broker with my guys in the office getting licenses, 17 different bank accounts lol, etc… I don’t think its this strict in other states. Thanks and have a great day.
    Christina Carey Real Estate Broker from Dayton, OH
    Replied over 5 years ago
    Sounds like you may have put one of your attorney’s kids through college.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    lol Almost Christina haha
    Chad Hale Property Manager / Investor from San Jose, CA
    Replied over 5 years ago
    In California, you must be a licensed real estate agent working under a licensed broker or a broker to perform property management duties. One exception is managing properties you own your self. More reading here: California Bureau of Real Estate http://www.dre.ca.gov/ Section on Property Management http://www.dre.ca.gov/files/pdf/refbook/ref22.pdf Chad
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Chad, Thanks for your comment and sharing this info. Same here in Ohio. Have a great day.
    Jordan Finkelman Development Coordinator from Miami, Florida
    Replied over 5 years ago
    Does anyone know if bigger pockets has a property management directory?
    Engelo Rumora Specialist from Toledo, OH
    Replied over 5 years ago
    Hi Jordan, I don’t believe so. Maybe shoot Brandon Turner a message. He can definitely assist. Thanks and have a great day.