Exactly WHAT do you want from a PM?

Question

Since some of you are, unfortunately, looking for a new one, what would an Ideal PM provide to you in terms of services, information, reports, etc. and what do YOU feel would be a proper fee structure? Now, be realistic here!

What do you DISLIKE the most about PM's you have utilized (besides, you know, Fraud!)?

Michael Onstad · Answer

Wow, I know this is a really old post but I am new to BP, and my family is about to start our first BRRRR. the property manager portion is still something I am researching to find a great fit for us. The points shared above are hugely insightful and I wrote notes on all of them. thanks a lot.

Richard F. · Answer

As always, good advice REI...

T bone...I know what you are saying about returning phone calls, some people are horrible at it! As for me, my owners and vendors get my cell phone, and I am available 24/7. Out of town owners get priority when they are in town, and we try to meet at our office to review financials etc; then depending on circumstance I like to walk the property with them, and discuss long term strategies and capital improvements planned or in progress. Left up to me, I would REQUIRE owners to have email!

Prospects and tenants mostly deal with office staff for scheduling showings and handling routine maintenance issues. I actually do all showings, the method and timing varies depending on the market. I have shown by appointment only, meeting at the property. You are lucky to get 50% actually show up. I have had prospects come to the office without appts. and then go out and show directly. This can work well if you have the traffic, and quality units. I've shown, leased, and moved in six prospects in one day with an excellent office support staff! Low end units are MUCH tougher though, and it generally takes longer to process their apps. Currently, because of drive times, and market realities, we schedule showings at specific, published, times, and for most properties we get good traffic and rent in two to three showings. Really high end stuff we will make individual appts, but it's amazing how many people just don't give a rat's butt about meeting their commitment.

Re your comment about showing on weekends, again, markets vary, but you really get a lot of "tire kickers" and nosy neighbors on the weekend. If someone is serious about obtaining housing, they will make time during business hours.

Not interested in reports? Typical...all you owners want is your check!

Seriously, you NEED to review at least basic info, and review receipts for ALL repairs. Mistakes are sometimes made. You need to understand what is happening with YOUR property.

For marketing, I have always primarily used the local newspaper with the biggest ad section, then a variety of other free sources, including Craigslist which works very well here.

Prompt response to maintenance is crucial, for a variety of reasons. Markets vary, but I generally have always tried to have someone out within 24 hours to make any minor repair. NOTE: Whenever a tenant calls around 4 PM on Friday (actually, I always ask), I always ask "how long have you had this problem?" If they reply with 3-4 days or whatever, I am NOT sending out a repairman until Monday straight time!.

One thing that helps with that, in the past I have worked for a company that spelled out what emergency repairs were, and what their response times were expected to be for various levels of repair.

BP... Fees-

In my experience, much of what you said is typical. It is ALL negotiable, however. Consider these points:

There is a certain amount of admin work to "setup" a new account, whether one unit or 12 unit or 100 units. Gathering and verifying all the needed documentation, coordinating additions to insurance, changeovers of utilities or service contracts,etc. and even getting all of the owner's basic info is sometimes a real pain! (Some Owner's are lousy at returning phone calls too!!!) It takes time to set up new properties in accounting software, and document everything properly, and set up physical files for vendor contracts. Then there are the tenant files, maybe getting signatures on new leases, issuing new house rules and contact info, inspecting the interior of new properties, getting "on top" of tenant issues and property issues. Maybe we need to get new bids for service contracts.

Takeover of new accounts, as well as disposition of properties when a mgmt contract ends is very time consuming.

In regards to your comment about paying handymen...I have done it both ways, that is, I have had "in-house" staff that performed most repairs, and yes, we charged the owner's more than we paid the employees, but our "net" was less than $5 per hour after workers comp insurance and all the other things that go along with it. This was clearly disclosed to our owners, and they certainly had the option us of hiring contractors to make repairs. Guess which is cheaper. And, for my part, I HAMMERED on Quality, and long term repairs, so time after time I could show by the numbers that long term repair costs dropped for these owners, because things were done right. There are LOTS of "handymen" that work cheap, but really cost you.

Currently, mgmt does not want the liability of an inhouse crew, so ALL work is contracted out. We are at the mercy of the vendors in what is still a booming construction market. Prices are high, quality is frequently low, contractors don't take ANY interest in the properties, so you lose "eyes and ears", they work on their schedule, and on and on.

Certainly, I have some preferred vendors that do reasonable work for a reasonable cost, but there is no contest for which scenario provides the most value. As long as everyone is honest. That is getting harder and harder to find these days...

Currently, our fees range 7 - 10% of collected, depending on number of units, location, condition. Aside from actual advertising expenses, we don't charge a lease up fee (on residential), we have a $100 setup fee, and no upcharge on vendor invoices. We keep the late fees (which covers the sometimes excessive extra time spent sending notices, knocking on doors, following up and chasing the money up to the point of initiating an eviction); evictions once turned over to the attorney are billed same as other vendors. Major renovation or repair projects may be subject to a 10% coordination fee.  There are small additional fees for translation services, foreign corporation registration and similar items, but nothing that I think you would call extravagant.

Tom NA · Answer

Actually, my friend does have his RE license so I believe that I am covered but thanks for keeping myself and others protected, John!

Account Closed · Answer

To all who might be consider using a friend or someone else...

In some (many?) states a property manager who is handling a property that they do not own needs to hold a license with the state. Some states that means a RE agent license. In a few states there is a specific property management license.

If you are using an unlicensed agent then you can be held liable for their activities and you might find that you can not take action against a tenant who is not paying.

Check the laws that apply in the state where you own rental properties.

John Corey

PS. I recently checked in with OH Realtor and the civil penalties are $1,000 per day per property if the state goes after an unlicensed agent.

Tom NA · Answer

I don't feel like I'm overly demanding but I want the following:

1. Someone who promptly returns phone calls - prospective tenants, existing tenants, and myself.  My last PM seemed to feel that several day turnaround was adequate and that's the main reason they are my ex-PM.  A prospective tenant will quickly move on the next place if you don't give them a voice to speak with in a short timeframe.  Similarly, I don't call often but when I do, I have good reason and am not expecting to wait 3 days for a return call.
2. Someone who actively markets my property.  I consider it a major problem that I am paying someone to find me tenants yet I found 2 out of 3 from 1000 miles away via CraigList.  And when I did find potential leads, see #1 above to get an indication of how hard it was to put these people in touch with my PM.  I often ended up sending pictures of the place and doing everything short of showing the property due to my PM not responding for days sometimes.
3. Someone who takes care of the maintenance promptly.  At least my experience here was mostly good.
4. Someone who is willing to show my property on both evenings and weekends.  I am definitely flexible on this and understand that PM's need to have a life to but if you consider that many potential renters have jobs during the day that they cannot leave, you need this type of flexibility to show the property.
5. Nothing beyond the most basic of reporting required for me.  Collect the rent, subtract any fees, and send me my check with a statement.  End of year, etc. are nice but not necessary.
6. I expect to pay anywhere from 6% to 10% for this.

Lucky for me, I have a friend in the area of my property who also has his own rentals so he has become my property manager.  He's ultimately flexible, responsive, etc - everything I couldn't get from my last PM!

Joshua D. · Answer

How does your fee structure work?

I've only used property managers in one state - MO, and they all seem to follow the same path. Typically what you see is:

5-10% of gross rents collected (some set minimums in addition)
50-100% of 1st month's rent for getting a vacant unit rented plus advertising (high in my book)
50% of 1 months rent for lease renewal (complete rip off)

Some will take a portion of late fees (bad)
Many will charge you hundreds of dollars to handle evictions (even though they do nothing but call the lawyer who handles it all)

Typically, they also charge $25+ per hour for handyman (who they likely pay WAY LESS)

The fees are never-ending.  I no longer employ any mgt. firm because you can't make a buck if you hire one of these companies.

If you have a better solution, I'd love to hear how you're running your business.

Richard F. · Answer

Looking to set up shop...no. Looking to improve what we currently do...Always!

Joshua D. · Answer

Beachbum - 
Are you trying to set up a PM shop?  Just curious.