Landlording & Rental Properties

4 Lessons We Learned as Our Property Management Company Grew

Expertise: Business Management, Landlording & Rental Properties, Real Estate News & Commentary, Real Estate Marketing, Personal Development, Real Estate Investing Basics
106 Articles Written
4 Lessons We Learned as Our Property

Our property management company has expanded enormously over the past few years, and during that time, we’ve failed pretty epically on more than one occasion. We’ve gone from a dedicated manager and a couple of close allies to being a far-flung company with more than two dozen dedicated full and a few part-time workers. We’ve learned lessons that we literally didn’t know existed to be learned a few years ago! Lend us an ear while we share a few of them with you.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

4 Lessons We Learned as Our Property Management Company Grew

Lesson #1: Not all properties are right for every property management company.

Over the past few years, we’ve said “yes” to a few properties that we really shouldn’t have, and we’ve paid the price. We’ve always handled residential homes in the Metro Detroit area. We’re very good at that. But we were hungry, and it led us to take on a few properties that, in retrospect, we probably weren’t ready for. We tried listing and managing a couple of commercial buildings. We tried to help out a few investors who had been sold bad properties in bad areas. We even tried to handle a few properties that were distinctly outside of our normal territory, though not by all that much.

Related: 10 Unforgettable Lessons From My Loser Rental Property

The lessons came raining in. We parted ways with each of those clients; at least one of them left with our blessings and a referral to someone more appropriate to their needs. We learned that it’s better to say “no” the moment we’re asked about a management job if the property in question is entirely outside of our realm of expertise or not a good fit for our business model. That “no” might disappoint a potential or existing client in the short-term, but not nearly as much as they’ll be disappointed if we say “yes” and then turn out to be unable to meet their expectations.

sell-or-rent-house

Lesson #2: Not all investors are right for every property management company.

In the same vein, we learned over the past few years that some people just don’t work well with our way of doing business. Sometimes, it’s a clash of management styles. For example, we’ve consciously decoupled from a few investors who were super-involved, hands-on types who didn’t seem to want us to actually do anything to or with their property. We would discover a need for maintenance, collect bids from contractors, create a work order, send them the paperwork, not hear back for several days, and then suddenly, they’d send a late-night email proudly announcing that the work was done and that we could move forward with marketing. Or we’d get all our marketing geared up and start showing a property, only to have the owner tell us they already found a tenant.

Other times, it's a clash of personalities. We've taken on several property investors from overseas, including a few from places where the local culture couldn't get much further from the to-the-point, no-nonsense, call-it-like-you-see-it attitude that typifies Detroit. One of our overseas clients became immensely agitated when we told them point-blank that the work they had just had completed (by some independent contractor not hired by us!) was insufficient and we weren't going to be able to market the property until we went in and fixed some bits they had out-and-out failed to address. They were upset not because of the bad news (that's just par for the course if you're a property investor), but because we made no effort to soften the blow and no effort to apologize for not softening the blow. Calling a spade a spade just isn't how things are done everywhere in the world—lesson learned.

Lesson #3: Keep the manager/investor relationship uncluttered.

Detroit’s unique real estate market spawns some very interesting “entrepreneurs.” One particular ex-client of ours had acquired several properties and then sold equity in those properties to a bunch of third parties, creating a whole set of SFRs that had “hybrid owners.” This isn’t all that unusual by itself—but then he insisted on being the contact point for all of them and on delivering all communication from us to the other owners. The problem was that by inserting himself in the communication process, he created a number of delays and inefficiencies that made it all but impossible to get straight answers to simple questions in a timely fashion, let alone funds for needed repairs. There’s almost certainly a property management company out there who would love to deal with him as a client—but we’re not it.

“Clutter” in the manager/investor relationship doesn’t have to be in the form of another human being. We’ve also nearly lost a couple of clients due to a much simpler form of complication (there’s a strange turn of phrase): language. This has happened two ways—once because we had a client who simply didn’t communicate in English as effectively as they thought they did, and another time because our VAs didn’t communicate in English as effectively as we thought they did. We learned to keep our communications as simple and straightforward as possible and to never assume that our clients were doing the same thing.

tenant-screening-tips

Related: The Landlord’s Ultimate 34-Step Property Management Checklist

Lesson #4: A property management company divided cannot stand.

This lesson came from within. Our VAs were almost all individually hired, with only a few being referred by others who had already joined us. And while we still have regular team-building meetings so we all know each other’s names and faces, we trained each department in relative solitude. The VAs who did each job talked to the departments that were the most closely related—maintenance and inspections, inspections and marketing, marketing and leasing, leasing and accounting—but the groups that weren’t immediately in each other’s faces had almost zero idea of what one another did.

That might not sound like a big deal, but it led to a slow, pervasive apathy, because many of our people didn’t have any feeling of importance in the overall picture. That led to a kind of subtle malaise during which calls weren’t getting returned with any sense of urgency, problems that cropped up were pushed on to the next guy instead of being tackled by the first person equipped to understand them, and generally balls were dropped and cracks got slipped through.

We found a solution in the form of a full-company meeting in which literally every person described their job and which other people in the company relied on them and how it furthered the ultimate goal of maximizing owner profits. Knowing exactly who was “upstream” and “downstream” from them and how their job performance was making other people’s jobs easier or harder did a huge amount to get everyone on the same page and re-dedicated to doing their jobs with a more proactive perspective.

There are more, of course—a few years is a long time to learn—but some lessons we’re still processing, and others are awfully hard to put words to. But we look forward to sharing some more in the future. Until then, we’ll leave you with our now-company-standard salutation, one we love because it reminds us that the control is in our hands:

Make it a great day!

What lessons have you learned in your years as a property manager?

Let me know with a comment!

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.

    Tim Sabo Rental Property Investor from Johnstown, PA
    Replied over 2 years ago
    Great article! We’ve considered hiring a property management (local realtor) to handle some of our PM issues, and I never realized all the potential trap doors there were. When we sat down to discuss the opportunity with them, I went through my own realization that it would be quite a challenge to let go of those things I have been doing for years and trust someone else to do those things with the same voracity and thoroughness I applied; and it dawned on me that I was not ready, yet, to let go. Your article clarifies how many of these issues can come to bear from investors who need help but are not yet ready to trust others to run a portion of their business. You’ve done a good job presenting the ‘other side’ and it is important for investors to read this article to ensure they are prepared to let go first.
    Tim Sabo Rental Property Investor from Johnstown, PA
    Replied over 2 years ago
    Great article! We’ve considered hiring a property management (local realtor) to handle some of our PM issues, and I never realized all the potential trap doors there were. When we sat down to discuss the opportunity with them, I went through my own realization that it would be quite a challenge to let go of those things I have been doing for years and trust someone else to do those things with the same voracity and thoroughness I applied; and it dawned on me that I was not ready, yet, to let go. Your article clarifies how many of these issues can come to bear from investors who need help but are not yet ready to trust others to run a portion of their business. You’ve done a good job presenting the ‘other side’ and it is important for investors to read this article to ensure they are prepared to let go first.
    Drew Sygit from Birmingham, Michigan
    Replied over 2 years ago
    @TIM SABO: you sound just like a DIY owner that interviewed us several years ago — after comparing us to two competitors, he notified us he wasn’t hiring any of us because our contract, which he complimented us on being the most thorough, made him realize he wasn’t ready to give up control either. He did hire us about 6 months later after reanalyzing what he was doing. One way you can address your control issue, is to start delegating parts of the property management process. We suggest the first delegation being “Tenant Placements”. Delegate this to an agent, but INSIST they use your application, let you do the screening, and use your lease. Otherwise, you’ll run into a common problem we do when dealing with agents trying to place a rental prospect — they just want a paycheck and don’t care about the quality of the tenant!
    Christos Zalidis
    Replied over 1 year ago
    @Drew, what are the next delegating parts of the property management process, following the first “Tenant Placements”, according to your experience ? Thanks
    Drew Sygit from Birmingham, Michigan
    Replied over 1 year ago
    @CHRISTOS ZALIDIS: Good to hear fro you. Sounds like you’re acting on all this. Can you please give everyone here an update on how it’s gone, so they can learn from your experiences?
    Denise Brown-Puryear from Julian, North Carolina
    Replied almost 2 years ago
    @Tim Sabo. I so agree. I’m very similar to you Tim… I’ve been doing this a long time, but have been thinking lately that once the remaining rehab projects are done, I’d like to hire a management company. But it would be like giving up my “kids” LOL. Regardless, it is something that I am actively planning to works towards within the next 2-3 years. Thanks for the article Drew.
    Chris Wagner Professional from Windsor Locks, Connecticut
    Replied over 2 years ago
    Thank you Drew for the great tips, please keep them coming. I am in my first year of having my own Management Company and welcome any and all advice.
    Drew Sygit from Birmingham, Michigan
    Replied over 2 years ago
    @CHRIS WAGNER: Glad you find our info useful:) Be sure to follow us here and on our website blog.
    James Wise Real Estate Broker from Cleveland, OH
    Replied over 2 years ago
    Great article Drew. As an owner of a company that went from managing our own small portfolio to 700+ units in a short time frame I can empathize with some of those mistakes. We too have had some similar experiences. Learning to say no up front is one of the hardest lessons we’ve had to learn as well. How many units are you guys up to at this time? Are you looking to keep up the steady growth or are you ready to start leveling the portfolio out?
    Drew Sygit from Birmingham, Michigan
    Replied over 2 years ago
    @JAMES WISE: Pretty much what we did! We’re down under 600 units after re-assessing our portfolio and choosing to part ways with some clients that didn’t match our preferred owner-profile. When 20% of your clients are causing 80% of your problems, it’s time to review your relationship with them. Like anything else you want to do well, this should be an ongoing process:) Difficult decisions, but already paying off for us with a lot less stress for our staff. And we’re already engaged with several new clients that plan to purchase dozens of properties in Detroit and appear to be much better matches for us. Be sure to follow us here and on our website blog, so you don’t miss any of our posts:)
    Valerie Chambers from Cleveland, Ohio
    Replied almost 2 years ago
    James, I’m totally relating to point #4 and love the idea of the team meeting to share how all the roles flow and help or hurt.
    Jessie Huffey from Sandpoint, Idaho
    Replied over 2 years ago
    Great Article. I am one of those investors not ready to “let go”, but I know that about myself and that is why I do not use a property management company. In a way I do property management for other investors as I am the “property manager” for my parents properties as well. I really do get why many investors need the right property management company: it adds a level of professionalism and a “buffer” between tenant and owner, many owners lack good communication skills/language skills (absolutely essential to successful property management), and property management is already familiar with state landlord tenant laws and best practice for problem resolution; not to mention owners just don’t have time and it causes major stress for certain personality types. I am weighing the possibility of extending my current property management practice beyond the portfolios of my extended family and this article was super insightful!
    Drew Sygit from Birmingham, Michigan
    Replied over 2 years ago
    @JESSIE HUFFEY: just be careful and know your state laws on who you can legally represent. In Michigan, you have to have a real estate broker’s license — even to PM for a relative. It’s probably not a big deal now, but could be if something goes wrong. If you’re going to expand pick a great online PM software and be sure to set it up correctly AND use it to it’s fullest potential.:)
    Keith Weigand Rental Property Investor from Cleveland, TN
    Replied over 2 years ago
    Great article. Hidden problems that are only discovered when you are actually in the PM business. Thanks for sharing
    Drew Sygit from Birmingham, Michigan
    Replied over 2 years ago
    @KEITH WEIGAND: Ah the stories we could tell:) Thanks for reading and commenting.
    Mary White Rental Property Investor from Klamath Falls, OR
    Replied over 2 years ago
    So much comes down to communication, doesn’t it? We plan to set up our own property management company. This is largely because there’s only one good company in our town and lots of terrible ones. At what point did you segregate out the tasks (marketing group, maintenance group, etc)? Thanks for the article and the tips.
    Drew Sygit from Birmingham, Michigan
    Replied over 2 years ago
    @MARY WHITE: Congrats on your decision! We started delegating 1) The tasks that were the least important and 2) the tasks we liked the least. One of the first tasks we delegated was the inputting, chasing down missing info and otherwise processing rental applications. Our managers still do the actual “underwriting” of the applications, but hiring someone to do the paperwork part of it saved a lot of time. The 2nd task we delegated was Collections & Evictions. For both we created Training docs and videos, which we’ve refined several times, before hiring someone. Good luck on your new venture!
    Joseph Lane from Baton Rouge, LA
    Replied over 2 years ago
    Thank you for the insight. This is valuable information that I’m sure will help a lot of folks.
    Drew Sygit from Birmingham, Michigan
    Replied over 2 years ago
    @JOE LANE: please keep reading AND start applying everything you learn here on BP:)
    Mitchell Van Overloop Nurse, Investor from Hudsonville, Michigan
    Replied about 2 years ago
    Curious on which PM software you use. And when starting a PM business, is there anyone you absolutely need to talk to before you start? I have talked with my CPA and have a meeting with a lawyer to go over lease details and lawyer things, am I missing a big piece at all?
    Drew Sygit from Birmingham, Michigan
    Replied about 2 years ago
    MITCHELL VAN OVERLOOP: We use Propertyware, which we chose after reviewing Appfolio, Buildium and several others. We wanted software 100% in the cloud, we could access from anywhere. PW is not as easy to use as many other programs, and is nowhere near perfect, but it is the most flexible and customizable. Chose carefully for the long-term as migrating to a new software is excruciating painful! Also, be careful with how you setup any properties you own in your PM software. Usually you’ll want to create a portfolio for yourself and treat them like any other properties to avoid IRS and regulatory issues. Check your state laws for PM required licensing and if you need a real estate broker license. Have attorney review your PM contract with owners. Set up 3 bank accounts – main account for receiving rents, paying owner bill, etc., a PM account for the company income/expenses and a Security Deposit account. You can try to use your software for keeping this all “separate” in a single bank account, but that gets ugly the bigger you get. Automate, automate, automate! ANything you do more than 2-3 times a month, save yourself time by creating it once and then copy & paste as needed. This includes, emails, letters, scripts, etc. Use Word for all your contracts/leases as you can access Developer area to add fillable fields and then “lock” the document with a password so you & your staff can tab through it quickly to add names, addresses, etc and whip out a PMA or Lease in 5 minutes or less. Pain to setup at first, but a huge timesaver. Hope that all helps:)
    Bethany Sloan Investor from Redlands, California
    Replied almost 2 years ago
    Hi, these are all really great feedback points. Im also starting my own PM company and was wondering how you go about setting up all the different trust bank accounts.. I was planning on having three accounts for each property: security deposit account, operating account and a repair reserves account… And one company operating and savings account. For the owner accounts and security deposit accounts I know they have to be in the form of a trust to prevent co-mingling. Do you have to create separate trusts for each property? This part confuses me because then it would be a different trust for the benefit of every owner property/tenant security deposit you handle which seems like a lot. A lot of banks want to see trust docs before opening up a trust account so just making sure I understand this correctly. Thanks in advance for any guidance 🙂
    Drew Sygit from Birmingham, Michigan
    Replied 11 months ago
    @BETHANY SLOAN: We’re not required to use Trust Accounts in Michigan, so we use business checking accounts for Operating & Management accounts, and a savings account for Security Deposits. You may also be able to get a Surety Bond for the security deposits and keep all the funds in one account. Check your state laws.
    Matt NA Investor
    Replied about 2 years ago
    I would like to ask anyone’s opinion on what may be a good accounting software for managing just a few rentals ? If anyone would be so kind as to share your opinion I would appreciate it. Thanks, Matt
    Bethany Sloan Investor from Redlands, California
    Replied almost 2 years ago
    I use quickbooks online for 2 properties, units. Very easy for $15/mo. I did just sign up for Buildium.com and pay $31/mo for accounting and a whole host of other features as well (e-leases, auto-pay, tenant portals, etc.)
    Bethany Sloan Investor from Redlands, California
    Replied almost 2 years ago
    I have used Quickbooks Online for the last few years which easily handles all the accounting features for $15/mo. I just upgraded to Buildium for a lot more features in addition to accounting for double the price. Worth checking out.
    Mathew Zorn Rental Property Investor from Virginia Beach, Virginia
    Replied almost 2 years ago
    Has anyone used Cozy.co for their PM? I’m using it right now and it’s mostly free. They are adding stuff to it all of the time but I only have one Rental home of which I own and do the PMing myself with the help of a friend that gives me advice and is the voice/face that my tenants see. Looking to go bigger and own a few more Rental homes that I manage myself.
    Stacey A Pelster from Vernonia, OR
    Replied over 1 year ago
    I have 13 units that I own and manage, and use cozy.co and love it. There are features they could add to make it stronger and as we grow I may look into another software, but for right now it’s great. I just started using the maintenance request portion and it is such a stress reliever not to Be getting phone calls or texts!
    John Wright Real Estate Agent from Cincinnati, OH
    Replied 10 months ago
    I currently use Cozy to manage our 95 unit portfolio. Its great for leasing as you can market your listing, collect applicants, and screen them all in one place and then if you convert We find that tenants also appreciate using the same platform for the application process as well as rent payments and maintenance requests. The one critique I have is that the options for reporting are not very robust.
    John Wright Real Estate Agent from Cincinnati, OH
    Replied 10 months ago
    *If you convert them to tenants then they will use Cozy to pay rent and for maintenance requests.
    Drew Sygit from Birmingham, Michigan
    Replied 10 months ago
    @JOHN WRIGHT: we’ve never researched Cozy and have heard nothing bad about it:) As long as it works for you…!
    Doug Harrell from Bridgewater, Vermont
    Replied over 1 year ago
    This is a great topic, and great comments above. I am a newbie investor in the early research , planning, development stages. A lot of the short comings and mistakes that were made by the above company almost seem like common sense things to avoid but i see how easy it is to get sucked into the undertow and make bad decisions from their experiences. Working in the jobs and industries i have, i have learned and seen companies brush off these very same mistakes 1000’s of times. Companies that are soooo big- and one hand has ZERO idea what the other hand is doing at any point in time can be frustrating to work for , and to work with. No company or team is immune to problems, but its how they are dealt with, and how the company rebounds. From the sounds of it – The lessons of the above company were learned the hard way and dealt with in appropriate manner, and after a slight regroup and refocus they were able to get moving in the right direction again.
    Drew Sygit from Birmingham, Michigan
    Replied over 1 year ago
    @DOUG HARRELL: yes we are guilty often of not seeing the forest because of the trees and vice-versa!
    James M. Hafey from Gloucester, Massachusetts
    Replied over 1 year ago
    Great article. Thank you! I am a long time investor managing my own properties but I recently branched out into the PM business. I’m wondering if anyone has had any experience with TenantCloud software.
    Yohannes Michael
    Replied over 1 year ago
    Hi, I’m in the infant stage here and trying to learn and understand things. I sincerely want to say think you for the insight. As I grow more you will be hearing from me the progress that I am making. in the mean time, I encourage these comments to continue.
    Emerald Sie-Duke New to Real Estate from Anne Arundel County, MD
    Replied over 1 year ago
    Drew, thank you so much for sharing! Perfect timing.
    Alex Hamilton Property Manager from Baton Rouge, Louisiana
    Replied 12 months ago
    Not so perfect timing but, great lessons. Already made each and every mistake by saying yes to owners that didn’t fit. Nice reminder to refocus.
    Drew Sygit from Birmingham, Michigan
    Replied 11 months ago
    @ALEX HAMILTON: We hear you! Wish we had someone to mentor us years ago to avoid many of the mistakes we’ve learned the hard way:)
    Jon Simpson from Berks County Blandon Pa
    Replied 11 months ago
    I have 9 rental units. Have been doing them myself. Would like to release it to somebody soon.
    Drew Sygit from Birmingham, Michigan
    Replied 11 months ago
    @JON SIMPSON: Jon, your profile here on BP doesn’t show a location. We can assist you if your properties are located in the Metro Detroit area. Otherwise, you may want to search here on BP for PM’s in your area. Let us know if we can address any other concerns you have:)