Can Good Property Manager's Pay for Themselves?

General Landlording & Rental Properties
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Can Good Property Manager's Pay for Themselves?

Samuel Eddinger
Meriden, CT · Member since 2018 · 698 posts · 500 votes

I have a property management company which I am trying to grow. I started out 6 years ago as a real estate investor so I understand the philosophy of minimizing all costs to maximize your ROI. The question though is whether or not having the right property management company can actually increase your ROI (even after deducting their fees)? I believe it can.

Since we started as real estate investors, our companies focus on all the areas that rob ROI (mostly bad debt, vacancy periods, maintenance costs and monthly rents).

We lease prior to a tenant leaving to minimize vacancy periods (currently we close more than 2 weeks faster than average property management companies and that doesn't compare to investors who self manage).  

Since we already own a lot of properties, we work to partner with cheap and skilled tradespeople saving maintenance costs.

We are proactive in our maintenance so our tenants are happier and they stay on average longer than most tenant occupancy periods (which saves the owner on future leasing).

We set up leases to end during summer months where we have the most tenants looking for new houses to rent so we can maximize rental rates.

Even though we rent fast, we prioritize make ready repairs so that we can continually keep the property up to maximize rental potential and identify and get great tenants.

We are proactive in our collection of rent so we evict faster than self managing investors.

We perform inspections to identify how tenants are keeping the property to not renew leases to hoarders and people who break lease terms.

We perform move in and move out inspections by video to document condition to charge back tenants on security deposits.

For some investors, they are not as on top of all aspects of property management and they should get help (to improve ROI). There are some property management companies who are not proactive like us and they do not really add value.

What do you think, can partnering with a holistic property management company actually increase ROI (even after deducting fees)? If you knew you had a holistic property management company, would you consider buying more?

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Max T.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
8y

The biggest costs can be lumped into... tenant turnover.

How about not charging a lease up fee, and instead take a renewal bonus? Better to align your incentives to your clients.

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    A PM can absolutely improve a investors bottom line. The reason being that most owners that go to PMs are incompetent managers themselves. They realise that due to distance or their own inadequacies that they must use a PM. If not they would likely go out of business.

    Anything a good PM offers is likely far better than the owner would be capable of themselves. A bad PM obviously is worse than a incompetent owner self managing due to the additional financial drain of their fee.

    Additionally most owners have difficulty separating business from personal when dealing with tenants. A PM can manage tenants strictly as a business without the emotional baggage owners carry. 9 times in 10 that by itself is a huge money saver.

    One of the greatest advantages of a PM is they will issue paper work immediately beginning a necessary eviction the day after rent is due. Most owners would lose at least a month before they even begin the process. A good PM would shoot first and ask questions later. No room for delays or emotions in business dealings.

    All of this assuming you have a good PM and not one that simply takes your money and does not regularly monitor the property and tenants. A PM that does not do regular inspections is worse than self managing since a owner will obviously have no knowledge of what their PM is doing.

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  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    8y
    Originally posted by @Samuel Eddinger:

    @Mike Dymski.  I agree with that completely.  I actually hire a property manager for a property I inherited in upstate New York.  I now realize he is good at rent collection but not real property management (makes me do collections, etc).  I think one important question to ask is whether or not the owners of the property management company own any rental properties.  If they do not, I would strongly shy away as they do not really understand the emphasis and focus the company needs to put on getting that vacant property occupied (with good tenants of course).

    The focus of most management companies is on mitigating risk and on finding and keeping staff.  Property management is a tough business.  If you can handle those items and focus on maximizing returns for your investors, you will have a competitive advantage (and enjoy work more).

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  • Samuel Eddinger
    OP
    Meriden, CT · Member since 2018 · 698 posts · 500 votes
    8y

    You are exactly right.  I quit my high paying job in engineering because I enjoy everything about properties.  My current passion is helping make investors successful.  Property management to me is a necessary evil.

    0Reply
  • George M.
    Rental Property Investor · Albany, NY · Member since 2018 · 55 posts · 65 votes
    8y

    One of the strategies that has been successful is managing one property myself and using a PM for additional properties that I acquire.  I quickly found out that managing multiple multifamily’s was WAY too intensive while holding down a full time career. 

    The solution was continuing to self manage my best property since I had fixed it up and made it relatively maintenance free.  The additional properties are managed by a PM company.  Yes the fees are high and the profits much lower, but there’s only so much time in the day.  It’s also the only feasible way for me to grow to the number of properties I want.

    The PM has also allowed me to make additional connections with other lenders, insurance brokers, contractors, and private off market deals.  

    In summary PM is worth every penny.  The one house I manage allows me to still be hands on (which I enjoy) without stroking out from stress of more units haha.  

    1Reply
  • Samuel Eddinger
    OP
    Meriden, CT · Member since 2018 · 698 posts · 500 votes
    8y

    @George M..  I agree people should manage first so they understand if their PM partner is good.  My PM is in upstate New York in Lake Luzerne.  Is your PM willing to manage there?  I’m considering changing.

    0Reply
  • George M.
    Rental Property Investor · Albany, NY · Member since 2018 · 55 posts · 65 votes
    8y

    PM sent

    0Reply
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