A Great Property Manager is More Important Than a Great Property: Here’s Why

by | BiggerPockets.com

Humans, as individuals, are cyclical creatures. Rarely does our interest in something pique and then stay piqued — it goes up and down over time. We also experience a phenomenon called “executive exhaustion,” where making difficult decisions and putting in loads of mental effort can actually leave us unable to continue making good decisions. That’s one very common reason that real estate investors end up with crappy property managers. Let me explain.

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Investing Ain’t Easy

Investing in a piece of real estate — if you’re doing it properly — is an exhausting task. You have hundreds of variables to pay attention to, lots of math to do (most of which you don’t actually have enough information to finish, which means you have to estimate and trust that your estimations aren’t going to screw you later), and a huge part of your financial future riding on the efficacy of every decision you make as part of that process.

Related: Easy Ways Homeowners Can Protect Against Unethical Property Managers

By the time you’ve actually invested in a rental property and gotten it ready to rent, you should be absolutely 100% done with that place. If you’re not, you probably didn’t stress enough — I’m not even joking. But unfortunately, that level of executive exhaustion and declining interest makes it very easy to just open a phone book, pick a name that says “property manager” next to it, and hire them on the spot.

Needless to say, that’s just about the worst possible idea you can have. A very common saying in the real estate investment world goes something like this: “It’s better to have an average property and a great manager than a great property and an average manager.”

Why is This?

Because an average manager is going to allow many, many more problems to reach your level than a great manager is. Furthermore, a great manager is going to save you a lot of money that an average manager isn’t.

Here’s an example:

Investor A has a home with great investment qualities. He rents it out for $1,450/month, pays only $450/month total in all costs, and spent a mere $35,000 cash to buy and $25,000 cash to renovate. So he’s looking at a rental yield of 20% — a titanic yield. But his property manager is forced to evict two tenants within six months, each one leaving the place empty for a month, and the second one left behind $2,100 worth of repairs to complete, all due to a failure to properly screen out bad tenants.

  • Income for those six months: $5,800
  • Costs for those six months: $4,800
  • Net profit: $1,000

Investor B has a home with modest investment qualities. He rents it out for $850/month, also pays $450/month in costs, and spent $52,000 with only $8,000 in renovations. Total rental yield: 8%. Not bad! But not great. However, his property manager screened his tenants properly, found one with a solid credit history, good job, and no major issues. That tenant signed a two-year lease, and six months later:

  • Income for those six months: $5,100
  • Costs for those six months: $2,700
  • Net profit: $2,400

So not only did the “worse” investment pay more money, but it was also significantly less stress to the investor because a great property manager is worth more in the long run than a great property.

Related: How to Choose the Right Rental Property Manager

The lesson here is simple: After you put in six months of hard work carefully discerning everything there is to know about a house, its neighborhood, your finances, and the other myriad of details you need to know in order to be confident investing, don’t screw it all up in your executive exhaustion. Even if you have to wait a week or two and take a break and recover, do it and come at the almost-as-daunting task of finding precisely the best property manager available for that property with a fresh mind. It will save you far more than two weeks’ worth of trouble — and money — if you do.

Do you have a story about a great property manager who helped you maximize profits? What about a terrible one who tanked your investment?

Leave your comments below!

About Author

Drew Sygit

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designations and joined mortgage & several affiliate association Boards. He also did WebX presentations and public speaking. It was during this time he started personally investing in single-family rentals, leading him to also start Royal Rose Property Management with two partners. He also joined the Board of a local real estate investors association, eventually becoming its President. The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank acquired four failed banks from the FDIC, increasing from $100M in assets to over $2B while he was there. After that, he took over as President of Royal Rose Property Management. Today, he speaks at national property management conventions and does WebX presentations.


  1. Ryan Ball

    You really can’t overstate how important a good property manager is. It is not a service provider you want to select solely based on cost. If you can find a property manager who also owns investment properties, I think that helps as they truly understand the importance of tenant screening and taking care of small maintenance issues before they become big issues. You can usually tell when you look at a property to purchase if it has been well managed. Bad tenants, higher turnover, vacant units, tons of deferred maintenance are all things a good property manager can help limit.

    • Drew Sygit

      RYAN: you wouldn’t believe how many property owners select a PM solely on cost thinking we’re all 100% the same (a commodity)! Second big mistake is choosing based on which PM tells you they can rent it for the most!

  2. chukwudi motanya

    First property manager I had was horrible. House was vacant for 3 months and would only contact me with updates once a month. I would send a weekly text on progress and she would either ignore or get annoyed at the continual texting.

    Wasn’t until turning to Bigger
    Pockets that I got the advice to move on and found someone in this network to replace her. New property manager found a tenant in 10 days…

  3. Pyrrha Rivers

    Like Chuckwudi, I had a bad first property manager, however I remembered reading here on BP “Hire slowly and fire fast”. So I hired him in November and fired him in January although it wasn’t really due to the property not renting since I understand that the holidays are slow time for lease-ups. The problem I had was that he advertised the property inaccurately. 3 bath home advertised as 2.5 and the pictures were marginal, especially the single kitchen picture.
    New manager found a toilet leak and a shower leak on her initial walk-through when deciding if she would manage the property. Why didn’t the previous manager find those? A good manager is a stress reliever and a bad one a stress inducer.

  4. Andrew Syrios

    I gotta agree, for the most part at least. Great management can make almost anything work. Bad management can run even a great property into the ground. You need good management if you are a buy and hold investor. Great properties are a must too, but in the long run, even OK properties will work if you have great management.

  5. Jason Miller

    Sadly, I have yet to find a good PM company. I think they may be a mythical creature.

    The highest i would rate any is 7 out of 10 and the lowest should be behind bars. I have fired 4 property managers. Long vacancies, glaring maintenance issues, stolen rent (10k worth), several evictions and 4 turnovers that cost nearly 30k. Of my current 3 property managers, 1 is still new, and the other two are okay. They at least do what I ask them to do. I now manage my managers much more closely. I have contact with each of them at least once per week. Far to much at stake to not be the squeaky wheel.

  6. Chris Clothier

    Drew, nice article today and so true.

    I find the real problem is that investors have allowed the bar to be set so low for acceptable property management. Poor communication, bad decision making and even risky behavior threatening the owners with being dragged into lawsuits are all common place today and even worse….it is accepted as normal by investors.

    Management is so important to the long-term success of an investor. Best advice I can ever give to investors is to hire a manager that can demonstrate that they are professional. I loved Jason Millers comment about Unicorns, but I do believe that great management companies are out there. Maybe not in every city , but high quality companies do exist and they are not cheap. They charge more for their services because they are better and provide real value for that service. Thus, making it worth every penny you pay to keep a great investment property….well, great!

    Loved the article – great job.

  7. Tyson Luthy

    A good property manager should be able to protect your investment, get you more rent, on time, lower vacancy, and help control maintenance related expenses.

    I’ve seen many cases where a “not so great” property became a profitable investment due to management.

    The only catch I have seen is, good management companies typically shy away from poor properties because they are more work and don’t make the managers as much money.

    Magic can really happen when you have a good property AND a good manager!

    • Drew Sygit

      TYSON: thanks for pointing this out. So many owners don’t understand this and expect a good property manager to charge the same amount to manage their bad property and turn it around for the same amount as a good property. We’ve run into these “penny-wise, dollar-foolish” owners many times. They baulk when we tell them we have to charge more on their property AFTER telling us all the problems they have — including telling us horror stories about previous PM’s! Hey, you just gave us an idea for another blog post! Thanks:)

  8. Greg Gaskill

    This might be crazy, but could it be that in assistance to all the research we need to do to properly evaluate a property in the first place, could be significantly assisted by a great property manager??? Just this year I found a property manager in an area we had had previously two poor ones in a row. Now, knowing this new property manager better -and after reading this article, I realize he knows the area, upcoming area projects, and other areas with properties which could be great rentals.

    • Drew Sygit

      GREG: you are so right! Thanks for pointing this out:) You want to be careful though, to understand where a PM’s focus lies — property management or selling turnkey rentals with profitable markups? We’ve run into several competitors that were primarily flipping rentals with huge markups and causing disasters on the PM side.

      We know of a few companies, that have separate staff for property management versus property acquisition, but they are few and far between.

      Our primary focus is on being the best PM we can be. Helping our clients find new investments is secondary to that. We’re not ashamed to admit we can’t do both well — at this time. As we grow we plan to create a separate team for acquisitions so our PM service doesn’t suffer:)

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