What should I expect from my property manager?

15 Replies

I closed on my first pure rental property, a two-family home, back in June and unexpectedly had both tenants move out by the end of July. So with some remodeling to do and needing new tenants I decided to hire a property manager sooner than later.

I interviewed a few companies and settled on one, and while I can't find a lot of reviews online at least this one didn't have any negative reviews unlike the others I talked to.

So I had him do the remodeling, which was basically just repainting and replacing the carpets with vinyl flooring along with a couple minor repairs, which took two months total for both apartments. I was a little frustrated with that, but having never done a remodel before I don't know how long that kind of work would normally take.

The work was finished on both units in mid-September and he let me know he was going to start showing them. A couple weeks later I googled to see the listings and couldn't find any, when I asked him about it he said he had shown it to someone and was waiting for the application. A week later the potential tenant backed out and my PM finally created listings on the various apartment search sites. 

Now we're heading into November and I still have no tenants... and my misgivings about the process have kept growing all this time. I had my handyman there to do some more work in the last couple weeks and he was there while the PM was showing the place. According to my handyman he was doing a good job trying to sell the apartment so that gives me some hope.

The bottom line though is that I really have no idea what to expect with the process. Is this par for the course? I'm thinking I should have handled the "remodel" as maybe property managers don't usually do that part and that's why it took so long?

Mike,

I’m not sure how you vetted in hiring this PM other than their reviews, which is only one component of the equation. If this manager is somewhat green and doesn’t manage many properties, that is a red flag, especially if you expect them to do rehab components.
I will say that after schools starts, it does slow down, but we still have move ins throughout the year.
Is this person a Licensed Realtor with access to MLS, and what “exactly” are the other avenues they use for obtaining renters.
I would do some more questioning and due diligence

I think a good PM should be able to handle a light rehab of say under 5-10k.

Originally posted by @Kim Meredith Hampton :

Mike,

I’m not sure how you vetted in hiring this PM other than their reviews, which is only one component of the equation. If this manager is somewhat green and doesn’t manage many properties, that is a red flag, especially if you expect them to do rehab components.
I will say that after schools starts, it does slow down, but we still have move ins throughout the year.
Is this person a Licensed Realtor with access to MLS, and what "exactly" are the other avenues they use for obtaining renters.
I would do some more questioning and due diligence

I searched for reviews and interviewed the options. I've seen this one recommended in my area on these forums but a few people in  the thread had complained there weren't a lot of good options in my area...

He is a licensed Real Estate Agent, although I'm not sure what other avenues they use. (He may have told me but I don't remember.)

What other components should I use to vet PM's? 

Originally posted by @Lane Kawaoka :

I think a good PM should be able to handle a light rehab of say under 5-10k.

 How long would you expect it to take though? 1300sq ft each unit, both replaced carpet with vinyl flooring, replaced some windows and repainted the lower... a few other minor repairs.

Originally posted by @Mike Redick :
Originally posted by @Kim Meredith Hampton:

Mike,

I’m not sure how you vetted in hiring this PM other than their reviews, which is only one component of the equation. If this manager is somewhat green and doesn’t manage many properties, that is a red flag, especially if you expect them to do rehab components.
I will say that after schools starts, it does slow down, but we still have move ins throughout the year.
Is this person a Licensed Realtor with access to MLS, and what "exactly" are the other avenues they use for obtaining renters.
I would do some more questioning and due diligence

I searched for reviews and interviewed the options. I've seen this one recommended in my area on these forums but a few people in  the thread had complained there weren't a lot of good options in my area...

He is a licensed Real Estate Agent, although I'm not sure what other avenues they use. (He may have told me but I don't remember.)

What other components should I use to vet PM's? 

 MIke,

Here is a blog that I wrote about how to select a PM:
Hiring a property manager is an important decision, and can be an asset for a property investor, but can also be a detriment if not chosen carefully and without some due diligence. Here are 10 tips on hiring a professional property manager:

1. Make sure that your property manager is a licensed Realtor or Broker, look them up on DBPR, the department of business & professional regulation.

2. Make sure their office is relatively close to your rental property. The farther it is, the harder it is to manage, show, find tenants, get vendors and inspect

3. Look at the experience of the Property Manager. They may not know the Fair Housing laws, take too long to fill the vacancy, have licensed vendors. How many units do they manage, or are they just doing this “on the side” for extra income.

4. What is their policy for dealing with evictions?

5. Are you willing to give up control? Most Professional Property Managers do everything; collect rent, schedule maintenance, pay taxes, pay mortgages & HOA dues, process security deposit claims, marketing , leasing , on call 24/7, handle landlord-tenant conflict. Its exhausting…..

6. Examine their management agreement, check to see if there is an out clause if you are dissatisfied, make sure it spells out the responsibilities of the owner and the property manager

7. What type of fees do they charge? Most companies will charge a management fee, leasing or placement fee and renewal fee. Ask if there are any any additional fees for maintenance, advertising, evictions, etc... and make sure they are outlined in the agreement. Do your homework, don't be fooled by low or flat management fees.

8. When and how will you receive your money each month? Will I receive a monthly statement?

9. Do they perform property inspections? What kind and how often?

10. How do they handle maintenance complaints or emergencies from tenants?

Property managers are great as a third party buffer or middle man, this is a business to us, it's not personal. Tenants understand they are dealing with a professional.

@Mike Redick I would've asked the question up front: "how long do you think it will take to get these units rented?" that would've given you an idea of A. a ball park estimate and most importantly B. whether or not they know the rental market.

I can't speak to your market and rehab times, but in my market that would've taken no longer than a month max. 2 months seems outrageous for those updates

The most important factor regarding having a PM is that it is your responsibility to manage them. Sitting back waiting for something to be done is not going to end well. If you do not know what he is doing or what  is happening you are not taking care of your business.

Get on it.

Originally posted by @Ariel Vincent :

@Mike Redick I would've asked the question up front: "how long do you think it will take to get these units rented?" that would've given you an idea of A. a ball park estimate and most importantly B. whether or not they know the rental market.

I can't speak to your market and rehab times, but in my market that would've taken no longer than a month max. 2 months seems outrageous for those updates

 I did ask and he said it could take two months, however that was not including the remodeling. It's just now nearing the two month mark...

I had other property managers say one month but they sounded like they were "hard selling" to me so I didn't really trust it. One also charged based on time spent rather than a percentage of rent collected which was worrisome...

If you wanted to control the schedule you should handle it yourself.  Most remodeling taking twice as long as planned.  We have this problem right now, there are not enough remodeling people available. All painters got long term benefitted job work with builders. Builders pay more than you can afford to pay them with health insurance. You should have talked your two tenants into staying. Did you try to raise the rent?  Tenants do not move easily. Remodel one and having another one filled is the right way.  I canceled a home that is just 1 year old told the home owner not to price it too high. 3 price reductions later(still too high if wanting to be filled) there are 0 callers.  In NY anyone wanting to move in when it snows?  So I think you need to price is below market and good luck to you.

Sometimes the rental may be priced too high or sometimes the management company may have too many rentals and not putting the time and effort in renting your place. 

When seeking out the management company, do not go with just looks good on paper, visit some of their rentals if you are in the same town, if not ask around. Also go with the smaller companies. They have more hands on experience and do everything to try to rent that place... lol

@Mike Redick a good rule of thumb from my engineering day job is think $1000 burn rate per crew a day. So as you can see the variability comes from the utilization rate.

I am concerned if a couple of weeks later you were searching online for the apartments and could not find it. Then after one potential tenant backed out the agent then listed it online. Putting all of your eggs in one basket is never a good idea. To me this agent seems to be either busy with other work and not prioritizing your apartment or is incompetent.

If you keep this company I would suggest micromanaging the agent and checking frequently to be sure this being advertised and then give the final ok the tenants before the lease signing in case the agent just decides to put anyone in there without doing a proper background check. You do not want a bad tenant whom will require an expensive eviction.

I agree with @Kathy Boyd and @Amy Beth .  Also, for it to take two months for those repairs seems a bit long for a experienced PM. Even if they are busy they should always have backups, but than again I don't know what sq footage were talking about. Its always better to have the unit completed before placing tenant. I would think it might be advantageous to have one unit done than focus on the other.

Is the rent at market or below? Are they following up with calls? I had a issue with this a few times. I ran a CL ad myself sent them to PM, and said here add these to your list of candidates to checkout. So between tenants just know you might have to step up your game, managing the PM. Focus on the issues not the PM, and if they get offended then maybe their not the PM for you.

Great job using your handyman to get an idea of whats going on over there.

Might consider doing a month to month or shorter lease to get you through the winter. Screen, screen, screen your tenants.

These are some of the costs that aren't talked about enough when factoring in the true costs of a PM.  10%?  Yeah, right.

Apathy fee.  Not a line-item in your cash-flow p&l, but each of your units takes at least a month longer to complete work and re-rent than mine do.  I'll err on the side of caution and only penalize 1 month.  Call it 1/12 or  8%

Lease-up fee.  This is what it is. Costs a month's rent to get your unit leased a month after I placed mine for free. There goes another 1/12, or 8%.

Maytag Man fee.  This isn't discussed either, but when the tenant calls to say that the toilet,sink, stove, a/c is 'broke', the Maytag Man is called vs someone asking a clarifying question.  While I speak to the tenant and they flip a breaker or snug up that burner element for me, you're out another $300. 1.5%.

Overrides.  That Maytag Man that came out to flip your breaker for $300? Well, there's a 10% extra fee for scheduling the work that wasn't necessary in the first place.  .5%, especially if they are turning units for you.  

So- basic PM 10% + apathy/slow a** fee 8% + lease-up fee 8% + unnecessary repair and overrides 2% = 28%.

But keep plugging in 10%!

I second the advice from @Kim Meredith Hampton and will include my list of things to consider.

They should have been advertising the unit during the rehab, not waiting until it was complete.  I start advertising 30 days before the unit is ready and generally have a tenant ready to move in after renovations are complete.

As for online reviews, it's common for a good Property Manager to get bad ones from tenants they've kicked out.

Go to www.narpm.org and search their directory in the upper-right corner of the page.

If you make a mistake and hire a bad Property Manager, it can ruin you for life. Learn the difference between a good PM and a bad one, try to interview at least three, and then make an educated decision. Remember: the PM with the highest fees may be the one that makes you the most money.

Things to do:

1. Review their management agreement. Ensure there are no hidden fees!

2. Calculate the total cost for a year. Some will charge a percentage of rent and nothing else. Some will charge a percentage each month but also a start-up fee, a leasing fee or lease renewal fee each year, administrative fees, maintenance fees, etc. Every fee should be fully disclosed!

3. Review their lease agreement and addendums.

4. Interview them about how they handle maintenance, late rent, unpaid rent, lease violations, evictions, etc.

5. Ask to speak to some of their current owners and tenants.

6. Google them and see what kind of reviews they have. If there are negative reviews, ask the Property Manager for details on that tenant. You may discover all the negative reviews are from disgruntled renters that were kicked out for bad behavior, which is exactly what you want!

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