Investors, what makes a property manager GREAT?

[Justin Reyes]

Hello, a friend and I are starting a property management business very soon. We both have our real estate license and understand how important it is to have a great property management company looking over people’s assets and we want to be one of those great companies. Can any investors out there tell me what do they look for when hiring a property Management company. Thanks a lot! Here is come services and key points will we build our company on.

-Comprehensive Marketing and Advertising

-Owner Deposit- No Delay Fund deposit to owner

-Schedule Rent Increases

-Recommend market rate rent cost

-Strict tenant Screening & Selection

-Monthly record Keeping/Statement

-Cost-Effective and Reliable maintenance

-Lease Law Compliance

-Regular “Common Area” Inspection

-24 Hour Online Access To Parking

-Rent Collection

-Lease Renewal (3 month notice)

-New Tenant 60 day Inspection

-Handle all tenant calls, emails, and texts

-Owner Communication

-Property up keeping including lawn care

[Bjorn Ahlblad]

I would add annual inspection of each unit with pics and video. Pre move ins with video; move outs with video. I would want to know that you are on top of all local regs and tenant laws. How can I check references if you are brand new?

Have you self managed properties? Who else is on your team?

[Justin Reyes]

@Bjorn Ahlblad Since we are a new company, we don’t have any references. Have to start somewhere though

[Mark Ainley]

@Justin Reyes Responsiveness- the ability to react or respond quickly to a property, tenant, or owner needs or questions.  Includes delivery of necessary info promptly and in a positive way even if it is bad news.  We have built our business on that one word and now we actually track and use it in various KPIs to measure.  

The list you have is very boiler plate, necessary, but delivered by your competition 90% of the time.  You need to find a more efficient and repeatable way to do it 97% of the time.

  It is the ability to provide responsiveness and ensure an owner doesn’t feel he needs to manage the manager.  

Reach out anytime as we are just south in Chicago and suburbs.  I can tell you all the things not to do and things I would have done sooner or different. 

[Justin Reyes]

@Mark Ainley Thank you Sir I really appreciate that. I will definitely take you on your offer.

[Account Closed]

My list may sound like I am against management companies. I am not. I only want to tell you about the problems management companies come up against so maybe you can create a better management company. 

Management companies need to give their clients a complete list of additional fees that are made clear and easy to understand. Many management companies will say that have a 6% fee for managing the property and don't it clear about all the additional fees i.e. re-signing a lease, re-renting a unit, charging a percent of repair costs, handling legal issues. etc.

Property managers are in a difficult position where they have to manage the property and satisfy the property owners by showing a good profit on the books. To do this, the property managers are in a much worse position than the property owners because if the property owners manage their own properties, make repairs and the books are in the red at the end of the year this is more-acceptable for the owners. 

When the management companies show the property owners books that are not making a good profit then the property owners want to fire the management companies. So, to have books that are in the green the management companies cut corners and allow for a lot of deferred maintenance. In the end, the property owners end up with dilapidated properties that are difficult to rent and need many times more repairs.

Property owners tend to want and expect that management companies can turn around (re-rent) a unit within a few days after tenants vacate the units. This expectation does not always give the management companies as much time as they would like to sort through applicants and wait as long as they would like. So, management companies tend to rent to more-undesirable tenants whereas the property owner would not rent to those tenants and would leave the unit vacant longer. But, again, if the property management company waited longer to rent a unit the property owner will look for another management company.

I don't know the answer for all the problems. The only thing I can think of is the management companies need to educate property owners in the beginning and negotiate guidelines and expectations that are clear.

Personally, I would not want to be a property manager and I don't think the 5 to 9% (or whatever it is) is enough money. I have an 11-unit property that is 8 miles from where I live. Recently, I terminated my property manager and one reason was because I was not paying him what the job was worth.

I paid my manger $500 per month for the 11 units and the only things he had to do was put the 8 trash cans on the street every Monday, take the cans back in, collect the rents and keep the laundry room clean. It sounded like a reasonable amount of money, but the manager lived about 16 miles from the property. So, for $500 per month (I paid for his gasoline) he had to make about 20 trips to the property every month. 

I could give a tenant the $500 per month, but I would never hire a tenant for any reason. It is bad enough dealing with tenants, but dealing with a tenant/manager is double the trouble and I would prefer a professional management company vs a tenant that doesn't have a clue about management and only takes the job because of the free rent. It is sort of funny because when you have a resident manager you often have to spend as much time dealing with the manager as it would take to manage the property yourself and you can get into more legal troubles with a resident manager that a tenant will ever give you.

[Justin Reyes]

@Jack Orthman thank you for your respond, it was really informative. I hope you have better luck with your PM.

[Matthew McNeil]

Honestly, I think the answer to your question can be somewhat subjective.  On paper, each of your line item points is great and you're certainly trying to be thorough as you lay out what you plan to offer. "Subjective" being that the weakness of any PM, regardless of what's offered, is always going to be the tenant.  Additionally, this is what I've experienced; the quality and efficiency of the PM's management will invariably be in direct proportion to how many properties are being managed.  You're a PM managing 50 properties and all of your clients are thrilled with your management.  Grow that to 300+ properties and you've reached a point of critical mass where the level of quality if sacrificed simply because the same level of efficiency at a small scale is very difficult if not possible with increased volume. 

[Jim Brozny]

@Justin Reyes 

I’ve been an investor for 20 years.  For the last 10 years I've hired multiple management companies to manage my properties. Here is what I find important. Maybe you’ll find it helpful:

Value – Your list looks like a standard list of services. To provide those services, some companies charge a percentage of rent and an administrative fee. Other companies charge a simple flat fee per unit. Assuming the services are provided adequately and equally, which model provides the best value to me?

The same goes for lease renewals – some companies charge a flat fee (or no fee at all), others charge a percentage of monthly rent. For those that charge a percentage of monthly rent, what is the extra value they bring to the renewal? Why does it cost them more to execute a renewal on a $2400/mo unit vs a $850/mo unit?

Maintenance – some companies have in-house maintenance teams. How those teams are managed and utilized is important. For example, my management company charges $70 per hour for a call. If they cannot fix the problem, they call a contractor. Often the contractor charges a visit fee. Now I have two fees. Not necessarily a good value for me.

Partnership – What kind of management company do you want to be? Or maybe another way to ask is what kind of clients do you want? Are you a full-service, one-stop shop for owners that want nothing more than to receive their monthly payout? Or, do you mind having an involved owner that pays attention and understands the market and industry? Personally, I’m looking for a company that views me as a strategic partner – not just a set of properties to insert into their daily processes.

Transparency – Responsiveness and communication are very important, but visibility into my properties is just as important. In addition to monthly and yearly financial reports, I’d like to see detailed, monthly maintenance reports. I know applications such as Buildium and Appfolio provide any number of reports to owners. However, it’s at the management company’s discretion to make reports accessible to owners.

I agree with what @Matthew McNeil says about quality and efficiency. Scaling is a challenge. I’ve been fortunate to work with a couple good companies that went through significant growth periods. But through the scaling process something got lost and the value just wasn't there anymore.

[Justin Reyes]

@Jim Brozny thank you so much for the great advice!

[Crystal Smith]

Originally posted by @Justin Reyes:

Hello, a friend and I are starting a property management business very soon. We both have our real estate license and understand how important it is to have a great property management company looking over people’s assets and we want to be one of those great companies. Can any investors out there tell me what do they look for when hiring a property Management company. Thanks a lot! Here is come services and key points will we build our company on.

-Comprehensive Marketing and Advertising

-Owner Deposit- No Delay Fund deposit to owner

-Schedule Rent Increases

-Recommend market rate rent cost

-Strict tenant Screening & Selection

-Monthly record Keeping/Statement

-Cost-Effective and Reliable maintenance

-Lease Law Compliance

-Regular “Common Area” Inspection

-24 Hour Online Access To Parking

-Rent Collection

-Lease Renewal (3 month notice)

-New Tenant 60 day Inspection

-Handle all tenant calls, emails, and texts

-Owner Communication

-Property up keeping including lawn care

I'd add the following to what makes a property manager great:

1. He/She is not a one-person band-  We have to see evidence that it's a team composed of maintenance people, tradesmen, legal, accounting,.... One person bands fail miserably
2. Takes maximum advantage of technology to automate the business- This includes collection of rent, payment of vendors, managing owner trust accounts,.... 
3. Invested in their business- If you're asking me to give you part of my portfolio to manage I want to know if you've invested in your business.  Are you adequately capitalized?