Reason People use Property Management Companies

42 Replies

Can those of you who are investors that have property management companies tell me why you chose to use one? Doing some research and would love your insights?

If you chose not to, then tell me why?

Reapectfully,

I have systems in place and people/companies that I can depend on when something needs repaired. My tenants text me, I text somebody else. It takes less than a minute to deal with a problem. I know I am getting great prices from my handyman, contractor and HVAC people with no markup.

I keep the management fee which goes straight to my bottom line.

If I have to rerent a place I dont have to give up a months rent to a PM in addition to the 10% they are already getting. The 10% is off my gross not net. 

No one will get a new tenant in faster than me. I often have someone waiting to move in a few days after a move out so that I don't loose more money.

Most of my tenants stay for many years so I don't need money being siphoned off before I get it for doing next to no work.

I train my tenants to pay on time or their will be co sequences so I have very few issues with this.

My tenants all pay the rent via a couple different methods so I get it right away and I don't have to wait for a PM to send me my money minus their fee. I do not chase rent.

I take care of my tenants and my properties. I fix problems for them fast and they in return take care of me by paying the rent on time.

My systems and up front tenant training allow me to run my empire with very little of my time.

I own a property management company in Central New Jersey so I will obviously be biased but at the end of the day, it boils down to time value. What is your time worth to you? How far away from your investment are you? Do you know landlord/tenant law well? Can you deal with confrontation? Can you deal with rejecting sob stories or will you wither and let a bad tenant in a house because you bought their baloney? Do you have reputable vendors to make repairs? Do you know the true rental value of your unit?

If you have taken the time to learn all of that and build systems then yes, manage it yourself. I manage my own properties but I took a long time to build systems. Almost every client I get is struggling to manage their property because they thought it was easy, hassle free, not time consuming. A lot goes into it and sometimes the best way to understand that is to start off doing it yourself. 

I do the same things as @John Underwood , but my tenants don't even call me!  I use home warranties as my first line of defense.  My tenants call the home warranty company FIRST.  Then, if it is 'huge', I get involved.  

And no PM will get better tenants than I do.  I choose tenants, they don't choose me.  ;-)  My average stay is about 4-5 years.

I only see a few reasons you need a PM.  Some of those are as follows:

  • Large scale, I'd say over 30 doors.
  • Afraid of tenants, place purchased is in the hood.
  • Physically located thousands of miles from you (CA investor investing in Ohio, for example).

If you have decent properties you won't have to 'chase rent'.  

What's the first rule in real estate?  Location, location, location.  ;-)

@Lindsay Favazza

I don’t because if I’m only getting 25% of the total rents I am not willing to split that profit with somebody to do simple pArt time tasks like post up notices ,call a contractor and collect my rents . After all , I put up the money ,time ,work , and risk to acquire the property ,not them . I’ll sell it before I give away half my cashflow.

I use a PM company, my properties are in central PA, I live in NJ, 3 hours away. I do know a lot of contractors in the area there and have called them myself sometimes ( I am also a Contractor). That leads me to why I use a PM, Distance & Time. I have 2 other companies, I do not want to bother with day to day operations of my properties, I leave that to someone that knows more about it and the laws in PA than I do. I am not saying I give them full control, I check on them and my properties. My time is worth more to me and my family, for the once a month checking of property reports, statements, and occasional phone call from my PM also maybe a trip every 4 months to check the properties, it's well worth the 8% management to me. 

Originally posted by @John Underwood :

Reapectfully,

I have systems in place and people/companies that I can depend on when something needs repaired. My tenants text me, I text somebody else. It takes less than a minute to deal with a problem. I know I am getting great prices from my handyman, contractor and HVAC people with no markup.

I keep the management fee which goes straight to my bottom line.

If I have to rerent a place I dont have to give up a months rent to a PM in addition to the 10% they are already getting. The 10% is off my gross not net. 

No one will get a new tenant in faster than me. I often have someone waiting to move in a few days after a move out so that I don't loose more money.

Most of my tenants stay for many years so I don't need money being siphoned off before I get it for doing next to no work.

I train my tenants to pay on time or their will be co sequences so I have very few issues with this.

My tenants all pay the rent via a couple different methods so I get it right away and I don't have to wait for a PM to send me my money minus their fee. I do not chase rent.

I take care of my tenants and my properties. I fix problems for them fast and they in return take care of me by paying the rent on time.

My systems and up front tenant training allow me to run my empire with very little of my time.

 Hallelujah and Amen Brother!  You speak the unvarnished truth.  

@Lindsay Favazza . I have one property I self manage, and one which I use a property manager and I will tell you the PM is worth every penny. They take 10% of the rent but I don’t have to worry about collecting rent , scheduling repairs, or any of the day to day nonsense. They also did not charge a “tenant placement fee” some PM charge one months rent.

The property I self manage the tenant will txt me when there are maintenance issues which I can’t do anything about being 9 hours away I have to rely on her to get quotes, these repairs cost me ($450 and $1400 respectively) I’m sure a PM could’ve gotten this work done cheaper. I personally rather not deal with the tenants, but everyone is different.

@Lindsay Favazza I manage my rentals with the idea that one day I will turn them over to a PM. I enjoy learning and figuring things out, building my own systems and processes. How can you find a good PM if you don't know what one looks like?

Hi, @Lindsay

I currently have 20 units under a 3rd party property management and this has been the best decision for growing my business at scale. Theirs a saying out there “work ON your business not IN your business”. I consider owning and managing your properties working “in” your business which takes away from time you can spend growing your business. While it sounds hard to give up control over your tenants and properties you have to realize there are professional companies that specialize in this aspect of the business ( you just need to find the right one). Personally, I’ve fired a few companies from lack of production but over time came across the right one. Now my time has shifted towards managing the property management company, deal acquisition, investor relations, and of coarse free time with family and friends. If you have a few units I would recommend self managing, that way you can learn this aspect of the business which will allow you to be more knowledgeable down the road overseeing the property management company. Hope that helps!

I can 100% tell you why I use property management companies-

https://www.biggerpockets.com/blog/2013/06/29/prop...

That's a more dramatic scenario, but a more basic reason is- I hate landlording. I am the landlord on a local property to me that I own, and doing that has confirmed why I don't prefer landlording. I'm not sure if all my properties were local if I'd use property management or not-- the properties I have managed are all long-distance to me--but I know I prefer the stress of managers over the stress of properties.

@Lindsay Favazza

I have 33 units locally

I enjoy managing my properties. I have trusted repair people and use buildium to simply my business processes. I spend far more time aquiring and renovating than managing property b- to d+ neighborhoods

@Lindsay Favazza great thread. Over a decade of self-managing and I’ve fallen on both sides of this question: time vs money.

As John says, if you’ve got the systems, this stuff can be low touch, but depending on where your properties are, how long you’ve been doing it, and how well you delegate, can highly determine how you can handle this.

IMHO, doing it for at least the first year will put you in a much better position to hire a good PM a year later on since you know what will make a good PM, so long as that’s not going to be burn you out or slow down your investor journey.

I’ve also managed properties in C class areas I feared for my physical safety and that’s just not worth your time. Beyond just threats of attack, managing, C’s is literally is an entire other world than ones in A or B class neighborhoods. Most landlords have never experienced that (perhaps thankfully) and it’s something you either learn very rapidly or you end up in the hospital. Is that worth it to save 10%? Not a chance.

Hire a PM because they do the things like financial reporting, tenant relations, turnover, repairs, and lease out in < 30 days better than you while you’re executing in your next deal or spending time that’s more valuable invested elsewhere. Think of these things is per/hour rates: can you make $50/hr in your day job versus $25/hour spent in PM? Then Hire the PM.

@Cliff H. , did you find your C class properties to be more profitable or less profitable than your B/A properties?

I've looked at some C's due to lower cost to buy. But once I start considering ALL the costs, it seems like the ROI is lower.

Thx,

Alan

@Lindsay Favazza

I self managed my properties for 3 years or so but I switched to using a property manager and glad I did. Self managing was good to learn how the business works but for me, I don't want to be bogged down with tenant inquiries or re-renting properties. My time is worth more than that personally.

I gladly pay my property manager to deal with everything and use their systems that they have in place instead of me trying to reinvent the wheel.

I can easily make that 10% plus any fees by not wasting my time with tenant calls and focusing on other businesses and acquiring more properties.

That's just my take on it since I've lived on both sides of the coin.

Originally posted by @Alan Grobmeier :

@Cliff H., did you find your C class properties to be more profitable or less profitable than your B/A properties?

I've looked at some C's due to lower cost to buy. But once I start considering ALL the costs, it seems like the ROI is lower.

Thx,

Alan

Hey Alan, good question. There’s a common assumption that C class is categorically more profitable others, but that’s not considering local market conditions. In my case what profits that I had on paper were far overridden by real world expenses due to continual turnover and high management overhead from a demographic that simply moved every year and government assistance programs that, on multiple occasions, expected a bribe to pass an annual inspection. That’s just not something I could tolerate, so I exchanged short term loss, for a bit of humble pie and long term knowledge. Ultimately relocating investments to a different region where I could get 20% cap rates and chase the “3% rule” by focusing on niche investments (college housing, STRs, etc). 

@Lindsay Favazza

Hi Lindsay. Lot of good responses on here already. There's always a bit of a debate on the forums over self manage v. hire a property manager. For me, (brace yourself for sob story) I spent my whole childhood maintaining my father's rental properties and have vivid memories as a 7 year old and up of painting, sanding, mowing, laying carpet, and sitting in the courthouse lobby while my Dad went in to deal with evictions only to get a judgment for $25 a month. I remember watching the tenants' kids playing in the yard while I weeded the mulch bed and the late night service calls and the stress all of it put on our family. I was convinced that owning rentals was a fool's game until I learned of this crazy thing called a "property manager".

For me, I use a pm primarily because I'm out of state with my investments. But it's also because I have a decent W-2 and can get a better return there with a few extra hours than I could doing it all myself or micromanaging subcontractors. That being said, I would actually consider self managing if I ever pick up one or two B/B+ units locally. But I really think that there's no right or wrong on this and it's largely preferential if the numbers work.