Investor · Silverlake, CA · Member since 2015 · 16 posts · 4 votes
I am remodling a townhome I inherited and am looking for property management, since my mom's manager just retired. I found a company that will manage it for 7%. However, when I told the remodling guy that someone might be stopping by the property, he said he had been planning on asking me if he could manage it for 5%. I am looking for opinions & advice on what I should do.
Does he manage other properties? I'd be a little nervous if this would be his first house he manages. There are a bunch of laws and procedures that he needs to know and just starting out no doubt he will be "learning" on your house. Your moms old manager cant recommend anyone?
I forgot to mention that the property is in Denver. The remodllng guy is managing a few properties with his wife. I'm sure he doesn't have a RE license. Since he just moved from CA to CO, he is currently trying to get his contractor license there. I like the fact that he lives nearby and speaks Spanish, but I don't know the extent of his legalese.
My understanding is you need to be working under a licensed broker in most states to do the money and lease up part of property management. Doing maintenance calls you don't need that.
Your Maintenance guy may be ideal for the second part of managing the property and taking tenant calls directly but how does he plan to handle the lease up and rent collection? Ask him maybe he has a plan or someone he works with? Or did you plan to lease up yourself and have him handle tenant contact? It isn't just about the percent, even people who are licensed do a lousy job. Dig into the details of what you get for your payment. Most important is does it work for you?
@Annette Homewood you can work around the license requirement if you structure the situation right. Not sure I would advise that. The license requirement is there for your protection. In order to handle money or negotiate the terms of a lease in Colorado you must have a RE license or you are operating outside of the law.
Finding good people is always a challenge. I am local and finding reliable cost effective people to work on my property is my biggest challenge for my rental business. I usually go the same route as you do. Over the years I have collected a couple of people that have managed to stay in business and are reliable but they only represent about 20% of my needs.
This is all great advice and I appreciate the replies. It's looking like I should go with the management co. Before I do, I'm curious if anyone can think of some examples of what could go wrong if the handyman were managing instead of the management co.
This is all great advice and I appreciate the replies. It's looking like I should go with the management co. Before I do, I'm curious if anyone can think of some examples of what could go wrong if the handyman were managing instead of the management co.
As far as what could go wrong by hiring someone untrained and unlicensed to do your property management, the list could be endless. What if he violated Fair Housing laws when renting it out (maybe not even intentionally but because he didn't know any better)? Do you really want to be dragged into a Fair Housing lawsuit?
Or what if he violated a tenant's privacy by entering their residence without giving proper notice and then on top of that the tenant later claimed something valuable was missing from their house?
Or what if he hired someone who was also unlicensed (since he obviously doesn't see the need for licenses) to take care of some electrical repairs and the next day your house caught on fire because of faulty wiring? Or worse, someone got hurt/killed in the fire?
All to save the 2% extra a legitimate licensed property management company would have cost? Hardly seems worth it to me.
Thanks again for the replies. I would like to add that I just asked a prop. management co. in CO if having a RE license in that state was a requirement to be a proper management co. and he said no, and added that that's a common misconception in CO, and that none of the seven people in his office have a RE license.
Manage it yourself, then once you learn how to be a good property manager you will know what to look for when outsourcing the job. If you do outsource first, I would not strictly focus on the management fee percentage (i.e 7% vs 5%) ... some of the most expensive property managers I've ever had have charged the lowest fees; 5% does not mean a whole lot if they pick your pockets with marked up repair invoices, select bad tenants that don't pay rent & trash the place, and ignore the repair requests of good tenants causing small problems to get large. Specific to your remodeling guy, he may know how to repair stuff, but does he know how to screen and manage tenants? This is key, but again, if you DIY PM 1st, you'll learn this very quickly and know how to spot it in a PM you hire.
Thanks again for the replies. I would like to add that I just asked a prop. management co. in CO if having a RE license in that state was a requirement to be a proper management co. and he said no, and added that that's a common misconception in CO, and that none of the seven people in his office have a RE license.
I think you got some bad info there Annette, or you misunderstood the requirements. Here's some more info on the topic:
Sorry, just realized property is in CO and the handyman was the one that just moved from CA to CO, not you. So, you won't realistically be able to manage it yourself. All of my other recommendations besides that are still true. To that, I would add to get a recommendation for a PM from another investor here who is a disinterested 3rd party with no affiliation other than having properties under management with the PM. Your handyman may be the best PM on Earth, or he may be scum, and all shades of grey in between ... but I'd be highly skeptical that he could make a decent, honest living putting in the attention needed to do a good job at 5% on a small portfolio. Same may be true for the PM company you're looking at for 7%. Finding a good, honest, reasonably priced PM out of state, especially when you have little experience, is hands down the hardest part ... speaking from experience, choose carefully, be patient to choose but quick to replace if they don't perform, and prepare yourself since it may be a long & rocky road before you find one.
@Annette Homewood - pretty simple to answer your question. Call up the Colorado Real Estate Commission (303) 894-2166 and ask them the question. They might also be interested in the person who told you otherwise. That company will be getting a visit from the commission enforcement office. The commission position on it is pretty clear IMO.
CP-27 Commission Position On The Performance Of Residential Property Management Functions
Adopted August -1998
Pursuant to C.R.S. 12-61-101(2)(a)&(b), the leasing and subsequent management of real estate for a fee or compensation, is included among the activities for which a license is required.
As for what can go wrong. There is a reason that errors and omissions insurance is required for licensees. Keep in mind, they are trained in compliance. Still, it doesn't mean they do what's right or even are good managers. Based on what is posted in the Commission disciplinary actions, most of their enforcement time is spent on the property management field. That in and of itself should be enough to point you in the right direction.
If you still are not convinced, find a lawyer specializing in real estate and ask them what can go wrong.
Bill S., I did go ahead and call the Colorado Real Estate Commission, and the guy with whom I spoke did say that for contracts and leasing agreements, a property manager does need a RE license (but not for collecting rent and interacting with tenants). So thank you for guiding me in that direction. He was also able to direct me to more literature on the matter in the CO RE manual on their website.
@Annette Homewood I would go with a reputable PM company. However if the handyman you speak of has had experience in managing properties then I would go with him.
Also do you plan on collecting the rent and dealing with the admin work of the property?
I've heard some who have done this. Though, you have to be careful when others are managing your money. I tend to just stick with property management companies, if the need arises. Best of luck!
"Does he have a real estate license? If not, he can't legally manage your property in California."
That's the litany. The PM must have a Broker relationship but does not have to have an RE license and it's for the reason of "having an accountable person to manage the deposits" (in Calif).
CAVEAT (my unqualified opinion) Have the owner receive deposits written directly to them to be held in a savings account solely for this purpose. The PM can then do the day-to-day stuff. PM signs everything as Agent for <owner>.
A bigger exposure is lack of training in Fair Housing Regs - - he needs to get up to speed and to know what can not be asked or said, less you get a discrimination suite.