how helpful are property managers, really?
Real Estate Investor · Renton, WA · Member since 2008 · 16 posts · 0 votes
I'm new here and really like this site. All this talk about property managers makes me wonder. How many of you used property managers? I've heard their rates are usually 5-10%. I handle one SFR right now, but am looking into multi-families. How much of the burden to property managers really take off the owner?
Thanks,
Todd
I have never used a property manager and if you know what you are doing they are not necessary.
Also, as many people like to say.....nobody cares as much about your property as you do!
I would learn everything I can about becoming a top notch landlord.
Property managers are useful if you own out of town properties. If your property is local a property manager is unecessary.
Don't alot of people end up getting burned out of the "landlording" business rather then the REI business.
It sounds like most people like to start off without a PM company and do it themselves because they can save some money and make more. But do you really want to wake up in the middle of the night because of a tenant call? Deal with them to collect rent? Talk to them when they have problems with everything?
I don't own any property or deal with tenants but I feel as though a good PM company would be worth it's weight in gold.
You can focus on finding the deals and as long as you build the expense into your analysis and it still cash flows nicely why not...
Also won't limit yourself to local investing. Unless you want to move every time a market gets hot somewhere around the country.
Until VERY recently I was leary of using a property manager.
Now, I have seen the value and they are worth far more than their weight in gold.
The key is your relationship with them. Using a property manager does not mean you are a hands-off owner. You are a partner with the property manager and work together to maximize the profit to both of you.
As to costs, for sfh, the costs can be as high as 15%. For multis, the more units in the deal, the lower the % rate. If you are going to use a property manager, interview them and make sure you understand how they are going to manage the property. Discuss every little detail, find out how they market, how they keep the tenants happy, how they handle rent collections, evictions, the whole ball of wax. Find out what the going rate in the area is for a property manager and pay it. Don't try to haggle with them it will cost you more than you save.
In my opinion, property managers are the most overpaid people on the planet. I do all my property management myself and it requires VERY little effort, other than answering the phone and collecting the rent (believe it or not, I LIKE collecting the rent). The call in the middle of the night is more of a legend than fact.
Pay a property manager for a property that I could manage myself? No way.
Mike
I agree with Michael--we had a property management company for awhile to cut the rental load--their idea of a clean house was not our standard--they would give back deposits that never should have been--if something goes wrong all they do is pick up the phone and call a plumber and send you the bill--if you spend the time and money on a property, you want to know who in the world is in your house--I want to see the people and deal with them directly-- the company we used ended up being sued by a number of local landlords--we ended up firing them and filing a complaint with the Attorney Generals office because they kept a number of our deposits.--fortunately we had the paperwork to prove our case, but they were worthless--hands on landlording is the best way to handle your business. And Michael is right about the call in the middle of the night--it is pretty much a legend.
On the other hand, as I said before, good property management is worth more than their weight in gold they will increase your bottom line NOI not decrease it. Good ones cost you absolutely nothing.
As to the call in the middle of the night, even when I managed my properties myself I never received such a call. My answering service did one time. Even if it happened every night, that is not the reason you should hire a good manager.
To each their own I guess, I make much more money by not managing them than I would managing them. I can concentrate on improvements that allow rent increases or decrease costs or even better find another one to buy.
It all comes down to where you maximize your effectiveness.
That is blatantly false. You do not make more money by hiring a management company unless you are not capable of managing the property to the same standard as the management company. It is also simply nonsense that doing the management yourself is keeping you from concentrating on improvements or finding other deals to buy. There are 168 hours in a week. Even doing ALL the management AND maintenance for several dozen rentals, I typically only work about 16 hours a week. That leaves 152 hours for concentrating on improvements and finding deals. If you can't get it done in 152 hours per week, something is badly wrong!
Mike
No doubt that logic is why Donald Trump manages all of his casinos, apartment buildings and hotels. That logic certainly explains why if you checked into his casino and found your shower didn't work the knock on the door would be "The Donald" with his bad toupee and a pipe wrench ready to do the maintenance.
Oh, and let's not forget that logic explains why if Geico is your insurance carrier and you call to file a claim you can expect to hear Warren Buffet on the other end of the line ready to take the claim information.
Wait a minute! They don't do that! Hey, Mike, you need to get on a plane and go to Omaha, Nebraska and explain to Mr. Buffet how he will make more money by actively managing every aspect of every company Berkshire-Hathaway owns. After all there are 168 hours in a week. That should leave him plenty of time to earn another billion or two while doing an hourly job like answering the phone. :roll:
There is a very big difference between working in your business and working on your business. There is nothing at all wrong with you working in your business by doing everything yourself. And there is nothing wrong with me working on growing my business by outsourcing when it makes sense.
I have no problem with you wanting to do it all yourself, why do you have a problem with me delegating and improving my leverage and improving my monthly cash flow?
I'm just curious though, what happens if you get sick or injured and can't do it all yourself? :idea:
Hi Guys ,
I'm a property manager in Los Angeles, and I manage a little over 40+ units, and let me tell you its a full-time job! First of all every situation is different. It all depends on the time you have available. I believe a "GOOD" property manager can actually make you more money in the long run. I know many people who manage themselves but miss out on money because they don't know the rules of the game, another thing is getting into trouble by doing the things they shouldn't be doing. So if you plan to manage property please get educated. Even if you plan to use a property manager you should know the basics. Whats easier managing 10+ units or managing 1 property managment company? If they aren't working to your standards, and please be clear about what you expect don't think they should know what you want, just fire them, and find yourself a new property management Co. One more thing if you plan to hire a property Managment Co make sure they belong to a national property management association...
Gary,
My compliments to your wonderful and witty response to the usually negative Mike from Ohio. You illustrated exactly what many of us have been saying all along, me in particular, only to hear that there are "x" amount of hours in a week and more $ would be made from self managing.
I could not agree with you more and I think it is wise for all the others to take a close look at what you have stated/illustrated.
Gary,
By the way, your last post did not have the link show up for why to use PM.
Could you re-post? Thanks.
Interesting discussion. Always helpful to hear divergent points of view. There must be some basis for the difference between what Mike's saying and what Edward's saying. As best as I can tell, they have similar numbers of units. Yet Ed, you say its full time, and Mike says its 16 hours a week. Hows that?
Hey, Will. Thanks, I'm glad my point was not lost in all the sarcasm.
Here is the link: [LINK REMOVED BY ADMIN - LINK HAD NOTHING TO DO WITH PROPERTY MANAGEMENT]
By the way, I'd like to take credit for the analogies in my earlier post but actually they are what my mentor used on me in May of this year to drive the point home to me about using a property manager.
A good property manager might be nice. Where do you find one of those?
I can't believe the tenants and the goings-on in the rentals located around my properties that are managed by property management companies. Clearly not much managing going on there.
P Nw,
I have my mentor to thank for helping me find the one I use in Spokane and no doubt he will be the one I turn to again until I am confident I can do it on my own.
It comes down to interviewing them and measuring the things you want done. It sounds like your problems start with poor tenant screening. I'm sorry to say, that is probably more your fault than the property manager. You have to very clear on the standards and criteria you will allow. If they deviate, then they better have good malpractice coverage.
The other thing is you don't get a property manager and walk away. Going back to the Warren Buffet example, there is accountability all the way up and down the command chain.
The last, and this is why I know I will be relying on my mentor for a few more times, is negotiating what is in the contract. Things like who controls the bank accounts, is payment based on gross rents or collected rents, what happens if the occupancy suddenly drops, who initiates and who approves marketing, all those little things you'd have to deal with over and over again if you were doing the work. Except, you get a clear understanding of what and how they are going to do it and then you let them do it.
It is a partnership. I am still in contact with the Spokane manager every day and will be until at least the rehab is complete. Every weekday morning, 9 or 10 AM their time depending on my schedule; 20 minutes and we are done. Once the rehab is complete it will start to scale back. My time per unit works out to way less than 30 seconds a week.
Gary,
There's a difference between the Tump/Buffett example and what you are proposing as management. The difference is Trump and Buffet OWN the management company.
There is a point at which you will need management but you will find more than likely find yourself severely frustrated with most professional management services (some people I know are satisfied) because it is their management style you are handing your property over to. When you hit a point of critical mass, the cashflow vs. percentage of professional management costs justify the overhead of in-house management. In house management are your employees and answer directly to you.
Tim
Why? If you're not hearing from the tenant and you're getting the rent, why would you want to visit? You're not going to go in without giving notice, and the tenant's not going to like that. You'll surely hear about it if it burns down. Do you really drive by every property once a month?
"I am not new to this business. I am new to multifamily buildings and to using a property manager.
As I said, I am feeling this astonishingly high level of stated efficiency week in and week out less and less the longer I think about it."
You're about to get a crash course in the ease and efficiency of managing single family's versus the ease and efficiency of managing multi units. In fact I'm selling off my last multi to reinvest into singles.
The only reason I can see to leave singles and go to multi's is the financing options available on larger property. It's not because it's easier because they're "all in one place".
Tim
It does not matter whether I own the management company or just control their actions and activities in relation to my property.
Let's really look at some numbers here.
Mike says he spends about 16 hours a week on "a lot more than 40 units." You can read my post above, I not feeling that but willing to assume it to be true. I find it very hard to believe he is doing this with more than about 60 units.
He spends 16 hours a week managing, repairing and rehabbing 60 units.
I spend two hours a week (100 minutes on the phone and about 20 minutes reading daily and weekly reports) managing over three times that many units.
If I aspire to work just as hard as Mike, I can manage more than 24 times as many units as his 60 in those same 16 hours each week.
Assume I pay 10% in management fees. It is actually 4% but let's use 10%.
So, my effective rent on each unit is only 90% of what it would be if I managed it all my self. And I gotta tell ya, I don't think I could do 60 units in 16 hours a week.
So, he gets 100% on 60 units and when I grow up I will only get 90% on 1440 units.
What is more, that assumes I never get to wean the property manager to the point where I don't have to do the daily calls. If I do, then I can manage a lot more than 1440 in the same 16 hours. Probably somewhere close to 2200 units.
Now, do the math, which will generate more total cash month in and month out?
"It does not matter whether I own the management company or just control their actions and activities in relation to my property."
Oh really? Lol.... You know what - go for it. God's speed.
You can quote all the numbers you want but you can't calculate human nature (unless you're an actuary and you're still smiling so I don't think you're one).
Tim
Hey Tim I was wondering if you could explain why your are leaving multi to go back to single as people usually go the other way.
thanks!