Where do most property managers fail?

Where do most property managers fail?

Real Estate Agent · Janesville, WI · Member since 2019 · 22 posts · 6 votes

I have been working in the automotive industry as mechanic for the last 12 years. I like what I do and I'm good at it, but it's time to get out.

SO long story short I'm getting my real estate license. I'm going to be an agent, but I'm also moving all the pieces into place to purchase my first small multi family in the third or fourth quarter of this year. Now while being a real estate agent is the perfect job for some people I think my abilities will be best utilized in property management. That being said I have decided that I'm going to start a property management company.

Now as the title says where do most PMs fail. I'd like to ask all of you that use PMs where do you feel so many companies fall short and the few accel. After listening to 90% of the BP pod casts everyone has a horror story relating to property management. Please share your experiences with me so that I may stay ahead of the curve and learn from others mistakes.

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Brad LarsenPro Member

Property Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes

7y

Where do MOST managers fail? Let me count the ways:

1) Licensing and Entity Set Up

2) Establishing Proper Bank Accounts

3) Creating a Phone System

4) Having no PM education or experience

5) Accounting

6) Marketing - Of themselves and the homes they manage

7) Application handling with screening

8) Lease execution - minimal understanding of how to fill in a lease

9) Tenant laws and regulations

10) Tenant relations

11) Maintenance (I should say that 5 times)

12) Make Ready issues

13) Security Deposit Itemizations (the most expensive failure you can quantify)

14) Failing to seek advice or education

15) Service Animals

16) Fair Housing

I could go on, but one of the biggest and would considered the "umbrella".....is not providing a quality service to their owners and tenants. Management is not just renting a home and collecting rent. There is a lot that goes into it and you better be willing to 100% commit to be even halfway decent in this industry.

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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
I hope I never need a pm . I’m sure there are good ones ( like Nathan G) out there . The problem i see is the expense of it all . They offer a valuable service but you’ll pay through the nose to get it . The cards are stacked against the owner in every way it seems . The pm holds the deck and makes money on the front end the backend and in every facet to the management. A simple search on here reveals most of the horror stories are from out of state landlords who have an incompetent property manager look over their assets .
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Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
7y
@Brad Hasseler
To summarize where most PM companies fail I would say: building business systems.
If you have great business systems in place you can manage a lot of units and do a great job.
Communication with owners, tenants, and vendors should be built into your business systems and contracts.
Accounting, billing, communication, maintenance, etc... all take specific, well thought out, efficient business systems. Without them you will run a sloppy business and things will fall through the cracks.
I wound have most or all of these set up well in advance of taking on my first client.
Good luck!
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Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
7y
@Jim K. I have heard the same speech about contractors.
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Jason Yarusi
Investor · Murfreesboro, TN · Member since 2013 · 430 posts · 178 votes
7y
It can be a mix of a clear lacking of systems and processes including a clear core focus. (Do you manage SFH A class assets or large multifamily C class assets). Also not having a clear understanding of
Your clients expectations or not clearly expressing how things will be handled. On the other hand investors fail a lot by not setting expectations of PMs and then being disappointed at the result when it was never clear.
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Corina Eufinger
Rental Property Investor · Oconomowoc, WI · Member since 2016 · 996 posts · 431 votes
7y
You can operate a property management company in Wisconsin without a broker's license BUT your hands are severely tied with what you can and cannot do. If you are not a licensed entity without a managing broker you cannot: write ads of properties (owners must write ads), you cannot negotiate leases terms with the applicant, you cannot collect rent in office (regardless of whether it is made out to landlord), you cannot operate a trust account, and finally you cannot enter into contracts for services (i.e. hire a plumber, lawn service, trash company) on behalf of the landlord. I'm sure there is more that I'm forgetting. You can show properties, pass papers, bookkeeping, handle tenant relations, and complete move-in and move-out inspections. Yes you can do bookkeeping as long as the rent checks are delivered to a known address associated with the property (dropbox) or mailed to an address of record for the owner/entity.
The biggest obstacle for me has always been unable to enter into contracts (verbal or written) for services. That's the hard one to get around. Everything else...is more or less doable.
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Corina Eufinger
Rental Property Investor · Oconomowoc, WI · Member since 2016 · 996 posts · 431 votes
7y
I got caught up in that license thing I totally forgot to answer the actual question.
Most PMs fail by being glorified bookkeepers. They can't have conversations with investors about ROI, forced appreciation, capital expenses, etc. They don't know anything about how multi-families are valued and nothing about budgets or property planning. They think budgets are guidelines and always bendable. They do what may be more efficient for them but not necessarily the owner (I.e. replace versus troubleshoot and repair) or do what makes them more money (extra turnover work that isn't necessary). Bottom line..they look an investor's property and see $$$ for themselves and not the owner.
Oh, lastly nickel and diming investors for fees (new lease fee, lease renewal fee, Section 8 tenant fee, invoice payment fee, etc).
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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
7y
Originally posted by @Matthew Irish-Jones:
@Jim K. I have heard the same speech about contractors.
And it's probably far more true of contractors as a group than it is of property managers, certainly the contractors I know! AND I'M NO UNICORN, not by any stretch of the imagination.
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Brad Hasseler
OP
Real Estate Agent · Janesville, WI · Member since 2019 · 22 posts · 6 votes
7y
@Corina Eufinger instead of waiting 2 years I plan on courting a broker. I dont like being limited. 😉
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Rebecca KnoxBusiness Member
Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
7y
The top complaints I hear are overpriced maintenance services, extended vacancies, and poor communication.
I definitely agree that successful Property Management much like any business, depends on the infrastructure, systems and the ability to keep up with your growth.
In my opinion, one of the shortages in the industry is skilled workers--handymen and contractors. This is a big dilemma in the property management arena. Some PM's, just like contractors, don't know when to say no or what their maximum capacity.
It sucks to hire a property manager only to be left with the task of managing the PM.
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Lynn McGeein
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
7y
Our biggest problem with an individual PM was when the PM had personal issues -- family problems, illness, to a lesser extent, vacations -- while I know it is insensitive to say so, our properties were quickly bottom of priority list (likely rightly so when someone is dealing with a severe family illness), but their assistants could not send payment, only the licensed PM can handle funds, so I did not get payment for quite a while even though the tenants were paying rents on time. I had a vacancy during that period that just sat vacant until my husband and I flew in and found out what was going on as it should have been rented in a week. Through advice of the real estate board in that state, I switched PMs to a larger company with several PMs on staff in addition to complete staff for bookkeeping, maintenance, etc. I have been with them for years. The maintenance expense is higher, for sure, but we do what we can to limit that, and no problems with payments, communication, and proper statements and yearly reports. If you are planning on not having other partner PMs, at least have a network of other PMs that can take over during unexpected emergencies or vacations.
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Ryan Seib
Attorney and Real Estate Broker · Madison, WI · Member since 2016 · 265 posts · 100 votes
7y
PMs are also in a volume business. Totally different business from you as an investor. Your bottom line is driven by rents minus all the expenses you want to minimize. The PMs' bottom line is driven by...some of your expenses the PM wants to maximize! The PM is not a passive model it is an active business systems and as such is deeply driven by priorities and systematic action. To have a good PM relationship I would think the most important factor is making sure your priorities as the owner align well with the PMs priorities for how they handle your properties. If you just find a random PM, toss your properties into the hat, and let it shake out, I think you have invited the problem that the PM is also going to look at your properties as just numbers.
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Asury Johnson
Rental Property Investor · Clarksville, TN · Member since 2017 · 73 posts · 99 votes
7y
@Brad Hasseler we manage our own properties and bought homes that were under management. It seems like one of the most common issues are lack of inspections or unreported issues. I know some PMs charge for each requested inspection on top of the 10% they typically charge. We tried a PM twice for our homes and did not like it. We were generating more activity and interest our vacant homes than they were. I mean, we are the ones ultimately financially responsible, so we were marketing more aggressively to get these homes rented. Thankfully, we were in a month to month contract with the PM and cancelled with a fee, of course. We eventually hired an assistant to help do inspections, phone calls, emails, and applications. We learned early on to train our tenants which made self management less stressful.
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Kinjal Patel
Investor · Austin, TX · Member since 2016 · 42 posts · 4 votes
7y
@Brad Hasseler
Screening Tenants and communication with landlord.
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Andy Brown
Rental Property Investor · Tampa, FL · Member since 2017 · 70 posts · 115 votes
7y
@Brad Hasseler
Communication. I'm in a business where I constantly have to keep people updated much like PMs do (or should). A PM could be a rock star if they just texted back "I'm looking into it and will try to get back to you on this in the next few days." It's the zero response that gets me.
But PMs are still worth it. I spend my free time with my family instead of installing toilets, listing/showing units, chasing rent, evicting tenants, renovating units, etc. I can't really complain about the 10% when the most "work" I'm doing is monitoring things from my phone. But we all have different priorities and reasons for structuring our businesses the way we do. To each their own if the numbers work.
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Ryan McKelvey
Jacksonville, NC · Member since 2018 · 67 posts · 58 votes
7y
@Brad Hasseler
Communication communication communication. Oh did I say communication?
1 Reply
Stephanie Jones
Property Manager · Memphis, TN · Member since 2020 · 80 posts · 32 votes
6y
My answer may sound very simple, but most property managers and real estate agents fail first by simply not answering the phone. Being accessible is key. If an investor trusts you and pays you to manage their property, it's critical that you're responsive to both your tenants and your property owners.
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