Property Manager for Rentals?

Question

I'm currently using a property manager for my two rentals. However, I have colleagues/friends who do not use them stating, "they like to keep their money." My feeling is that I don't know all of the ins and outs and legalities associated with being a property manager. I'm seeing it as an investment in my property just in case I get a problem tenant, etc. I would love to hear other sides of the coin. Give me pros and cons of a property manager versus doing it yourself. My long term goal is to have quite a few properties (10+). Any wisdom is greatly appreciated.

Thanks!

Lisa

Thanks!

Lisa

Account Closed · Answer

@Lisa HenrichTwo important questions determine whether you need a PM. 1. How far away are the homes from you and 2. What is the class of property/tenant. For A class property and tenant close to you, there is absolutely no need for  a PM. For a C class property in another state, there is no way to not use a PM. All other scenarios depend on how much time you want to spend on managing the rentals and what else you could be doing with the time.

Kyle Penland · Answer

My thoughts are that I want a PM for several reasons.  The biggest being I want to keep my day job and not deal with tenants.  Also as I scale I don't want my phone ringing off the hook that something doesn't work, or whatever the need may be.  My other biggest reason is I am in a small town.   I don't want anyone knowing who I am or what I own etc...Just a personal preference for me.  I like the idea of passive investing.  I literally don't do a thing but purchase the property, pay the bills and hand my pm the keys...then I'm done.

Eric Li · Answer

If you owns Single family or small multi family, I would consider managing the property yourself if possible.  This is because managing PM is not as easy as you think.  There is a conflict of interest at some point.   I believe my PM will prioritize his energy to the large multi family (10+ units) home before my two family house.  This is because the larger unit is his larger source of income.  I feel like i always get the least attention.  Also, when the tenant move out, the PM has to right/responsible to find a new tenant.  This is how they make more money which they will charge the new tenant one month rent for their commission.  In this case, how can you be sure the PM will work for your best interest to keep the existing tenants and makes them happy?  Of course not as you expected.  They want a good amount of turnovers, so they can make commission, etc.  Most of the PM has their Real estates license, so they can help you to sell at the end which is another income source to them.   Therefore, I feel like a PM help you manage the property is getting the foot in the door for money and it will affect your cashflow......good luck!!

Zach Zimmer · Answer

Anish said it very well.

I have 11 B-C class properties (3 more under contract) and work a full-time corporate job 40 minutes away with 16 direct reports across three shifts, and am married with a 1 & 2 year old.   I have very little free time but it can be done.  As long as you have a good general handyman to call when something come up you will save a ton of money versus a PM.

Evictions / court stuff is a pain the first time or two...  But the civil clerks in my city were very helpful and it is not the bad or time consuming a process.

Zach

Alexander Felice · Answer

For 2 properties I don't personally see many benefits. No matter what, you'll have to manage your property manager. So basically you're paying out 10% per property and you are managing 1 person instead of 2.

With proper tenant screening and good automation of processes land-lording is pretty easy. When you get more properties it makes more sense to sub it out. Unless your life is really not set up to deal with tenant issues (weird hours, distance, etc) then I would try to manage yourself, you can always hire someone later.

That said, ALWAYS account for mgmt expense even if you are doing it yourself!

Account Closed · Answer

In my opinion, managing rentals is not rocket science.  You need to learn the landlord-tenant law, which is actually a small body of law.  You learn how to screen tenants.  If you screen for good tenants, you won't have a lot of problems.

I was a resident manager of 25 apartments, besides the one I lived in.  Even with 25 units, I did not have tenant issues every day.  And, I had them all trained to text me, preferably.  And I did not answer my phone - I let them leave me a voicemail.  I would listen to the voicemail right away, but it forces people to be concise.  And it gives you time to figure out your response, if they left a crazy voicemail LOL.

You will rarely be bothered by tenants, honestly.  And there are ways to avoid calls in the middle of the night.  Put deadbolts in all doors with no separate locking knobs, so they can't lock themselves out - often - ha ha.  They'll still lock their keys in their cars.  Put in your lease that if they lock themselves out, they have to call a locksmith if you aren't available.  And if you deal with it, there is a charge - or whatever option you want to deal with.

Ignore voicemails or texts that come to you that should be made to 911.  Don't get involved in any drama.

The only call you should deal with in the middle of the night is if the place is flooding or on fire.

Just find a handyman you can trust.  Get a bookkeeper if you hate bookkeeping.  Hire a tenant screening company to screen your tenants with everything check you can find.  Don't be cheap on screening - do background, criminal, credit, employment, eviction.

These are great books.  The California one was my bible:

http://www.nolo.com/products/landlord-tenant/landl...

They cover everything and include forms and contracts - from screening to avoiding discrimination issues, evictions, everything.  And they're easy to read and understand.  Their contracts are really easy to understand for tenants, too.

This won't be hard to learn, honestly.  Don't fall for sob stories or con artists - but that's not hard to do if you have good criteria and screening.  You'll really like someone and they'll turn out to be a hot mess.  You'll learn to say no.  Don't let tenants push you around.  You can be nice and diplomatic and still say no when necessary.

Unfortunately, many managers cost far more than just their 10% fee.  There are many hidden fees by many management companies.  I know there are great managers on this forum, but if you do go with a manager, really go over the contract with a fine tooth comb and if something doesn't sound right or fair, just say no.  Especially to any clause that says there is ever a time they don't have to call you, and can spend your money without your approval.  If a tenant can call you in the middle of the night for an emergency - so can the PM.

Congrats and good luck!

Paule Nagy · Answer

I have three properties and deal with them myself.  I began with good tenant screening so I feel secure knowing the tenants have been responsible for at least the last year or two;  also include your specifics in the lease agreement: they can email you for problems so your phone is not a fear factor.  When searching for a new tenant I would be specific at what hours you will be there to show the property.  That way all the people who want to see it can view it during those hours. Have plenty of applications and accept their screening fee with their application. My properties are on the other side of town so I try not to imply that I will be there but I do parcel out the work and expect to be notified by the tenant when the work has been completed.  It is not difficult, just takes a little pre-planning.  Good luck!

Account Closed · Answer

@Zach Zimmer you make a good point about evictions.  I learned that you can often negotiate a tenant out of the unit without ending up in court.  Especially if you use month-to-month contracts, which I highly suggest.

With a month-to-month contract, it's so much easier to get rid of a problem tenant.  It's easier to change rules if necessary, too.  And the truth is, that if a tenant wants to move out, they'll break a lease anyway.  And many tenants who really want to get out of a lease won't necessarily tell you that - but they'll start complaining and calling about maintenance issues and trying to convince you and whomever that the place is uninhabitable.  Whereas, if they could just give 30 days notice to move, they'd just move.

Lisa Henrich · Answer

@Sue Kelly...thanks so much for the information.  Thanks for the link, too.  I will definitely do more research.

@Anish Tolia...My properties are A/B and are close to my primary residence.  Thanks for your response.  It gives me a lot to consider moving forward.

@Zach Zimmer...thanks for the info.  Your professional and personal life sounds about as hectic as mine.  It's great to know it can be done.  Now I just need to figure out if I want to do it :)

Lisa Henrich · Answer

Thank you all for the input.  I am planning on purchasing a third rental before the end of 2015 and at least two more in 2016.  I think I'll consider it in the future when I'm ready to quit my day job and do real estate full-time.  My concern is mostly regarding the legalities of being a property manager and dealing with problem tenants.  I wouldn't mind the day-to-day of managing my properties; my real concern is having to evict tenants or go to court.  Any suggestions on how to feel comfortable with that end of the management spectrum?

Property Manager for Rentals?

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