My situation is that I am due to close on a property mid June and I am still looking for a PM.
Since I deployed overseas, I need someone to take care of things until my return in November.
I wrote to a few yesterday. The only response so far was from a David with Re/Max property management. After asking if I would want to select criteria for a tenant and the length of agreement I was informed we were not a good fit.
My criteria was not overly hard to fill in my mind. Verified income/background for 5 years, 620 credit score, verified income 3 times the rent, no evictions filed, anyone over 18 gets same checks and is on the lease, and no pets. I also wanted to use leases and such that are Cleveland specific that I got here on BP.
I stated that I would prefer a 6 month agreement to ensure PM was doing as agreed upon. I got a short ‘no thanks, not a good fit’.
I can possibly understand his not wanting only a 6 month agreement. But as he was not specific for his reason of ‘not a good fit’. I understand they make their money primarily by placing tenants and collecting a share of rent. The less criteria, the easier to do so.
I have no doubt some PM’s just want a warm body with upfront money.
Again, am I asking too much to set minimum standards?
Those are reasonable standards, but pretty strict. 600 credit score seems to be standard and I only look for 550 since I'm in a working class area. (Which is also true of some southern parts of Shaker - what area is the property?) I've never heard of someone looking for verified income for 5 years. How would you be asking them to prove that exactly?
And most PM companies want to use their own leases.
So you've got high standards which will be pain in the butt to fill, don't want to use their lease which they know inside and out and can work with easily, and for all that work may only be with them for 6 months?
I'd say "not a good fit" too.
@Gwen Fyfe Tank you very much for your input. Sorry, I did not mean income verification for the 5 years. Only current employment matters. Perhaps I made the same mistake in my initial email. Thank you for pointing that out.
I can appreciate their wanting to use their own leases for the exact reasons you mention. I would have no problem with that.
So, should I assume most will want a one year agreement? Again, if that is the norm, I’m sure I can accept that as well. Of course I would prefer shorter, but I can see their POV.
The property is in the Malvern neighborhood.
The issue probably isn't your criteria itself. More likely, it's the level of involvement you want to have. If you wanna cook the steak going to the restuarant isn't the right move.
By you wanting to be this involved, use different leases and create different terms than the rest of the management company's clients you'd be creating a logistical nightmare that most (if not all) large property management companies wouldn't be willing to deal with.
As the owner of a large property management company myself I can say that your account under those terms would also be a pass from us.
When I wrote that criteria yesterday I did not give proper time to form what I was looking for in criteria.
Please let me differentiate between what I would ‘like’ and what I would ‘require’. Sorry for the confusion and thank you to all who helped show me the errors of my post.
I understand my criteria is high. I am flexible on some things. Really, the only things not flexible would be:
*background/credit checks on anyone over 18 and they be on the lease.
*rental history of at least a few years and not just current landlord
*income 3 times rent so they do not over extend themselves
One mistake that was pointed out from someone else was the the implication I was looking for 5 years employment history, which makes little sense. I only need that income verified to be 3 times the rent a amount. Sorry for not being clear about that. Also a 620 might be high for that area. That is something I would leave to the PM as he knows the market far better than I do.
And, as all PM companies know their leases better than I do and as such can better enforce them, I have no problems with their leases. I would want to see it, but would most likely be ok with what they had.
I am sorry for not being clear with what I would ‘like’ and what I would ‘require’.
Thanks again for everyone’s input. It is very much appreciated.
Thank you for your input. After giving my criteria the proper reflection that should have been given prior to my posting, I agree with previous posters that I would indeed be asking too much if I insisted on all that to be a requirement. It was never meant to be carved in stone, just a starting point.
Please don’t take any of my response personally. It is meant only to help you think through your delemma.
Wise choice by the PM who said “thanks but no thanks”. With the short answer, he was simply being polite and honest. The easiest way to increase profitability as a PM is to be selective on what business we take on. The easiest way to lose money is to take on clients who are not a good match (the owner or the property or the location or the condition)
Buying a rental property as an out of state or out of country owner is a scary thing. Success or failure depends on a lot of things, with selection of the PM high on the list... but there are many other factors as well. (Selection of the property, acquisition cost, condition, location, owner expectations, owner philosophy, local tenant pool,etc)
Different PMs have different styles. The PM you refer to has more than 1000 doors. I can appreciate that asking him to change his processes for a new owner with one unit makes you “not a fit”
For that matter, I occasionally get referral business from a different Cleveland PM who turns down business from prospective clients who “do not fit” his approach.
I am sure the PM “read” you as a high maintenance owner. This work is challenging enough, without having an owner that knows your job better than you do. I recently turned down a fantastic and successful apartment owner who insisted that his PM follow an investment system that is outlined in his favorite book. It’s a great model, but not my model.
A PM places hundreds or thousands of tenants ever year. Why would you assume that some lease you find on BP is going to be better than the lease developed by the PM, reviewed by his attorney, and tested by the courts? Why would you think that you have a better grasp of tenant selection criteria than someone who does it every day?
I guess if I were just getting started as a PM, did not have any experience and was desperate for business I would take on a client with a six month agreement, who seemingly wants to micromanage the process.
Why would you assume that the PM just wants to put a warm body in your property? If I place a bad tenant, it becomes a nightmare... my nightmare.
The tenant selection criteria you request are somewhat standard, except for 5 year income verification. How long do you think it would would it take the PM to contact 5 years worth of employment for a couple of tenants who perhaps each had 5 or 6 different jobs over 5 years. I suppose you want to personally review the credit applications and criminal background checks. Also why a credit score of 620? What if the credit score comes in at 619? What if the reason for 619 is an unpaid student loan, or a medical collection for a $50,000 medical debt?
Perhaps a better question would be to ask the PM for his written tenant selection criteria.
What is a Cleveland specific BP lease? Is that a lease written by an Ohio attorney?
What if the tenant had an eviction 6 years ago, and a 700 credit score today?
Perhaps ask your real estate agent for a PM referral. Do you have friends or relatives who can help you out until you return?
Best of luck George, and thank you for your service.
Tank you so much Bob for taking the time to respond. I did PM you a more detailed response.
As you can see from a post I made above, I did try to explain that the original post was more of preferences with the few hard and fast requirements I do have.
And again, thanks to all offering their help here.
@George H. the stuff you listed seems pretty fair except the 5 years verified income. That’s likely not gonna fly. Also the minimum credit score could be an issue due to the area. I’ve got tenants with credit scores around 550 and they’re great.
As far as income level 3x, just have your PM give you what they make and do a quick math to see how it compares to the rent.
A PM/owner relationship is one built on trust. It takes time to develop. Most PM agreements have 30 or 60 day termination clauses on them so I’m not sure why you’d need a 6 month contract. Typically they just renew indefinitely until you put it in writing that you’re not using them anymore.
I’m guessing this is your first rental and therefore you want to be more hands on. Typically though if you’re using a PM that’s not recommended
Companies have systems built in that they apply when screening tenants. What your asking is for the PM company to throw out their system and cater to your's.
IF you don't see any company jumping up and down to take your business, I would say that is due to the reason. You need to find a PM company that does a good job and let them do exactly that, their job in managing your investment
After too many bad experiences with PMs in the Cleveland area, I self-manage now. It's not as hard to do remotely as one would think -- you really only need tenants that are compliant enough to follow your rent payment instructions (sorry, no cash) and a maintenance guy on the ground who you can send for calls. I also have a secretary who can call tenants at will, and you could easily hire a virtual assistant to perform this role. Even though I live around the corner, I haven't personally visited most of my properties for a long time, because the systems allowing me to send someone else to do it are now in place.
I've come to the conclusion that for 10% of rents, it is not possible to effectively outsource property management in Cleveland. The rents are simply too low to make it worthwhile for honest operators to participate. There are a few outfits around town that do it as a loss leader for their real estate brokerage, but even they are expensive and most of them aren't even compliant. I've yet to see a property manager's lease that doesn't violate the Cleveland landlord-tenant ordinance, even from the big brokerages.
If you have someone that qualified for the home under those standards, you hardly need a manager. You can just give them a rental number that you check once per day and you can deploy your own connections for repairs.
As for collecting rents, with tech today, you can auto draft and get paid via phone so easily.
I am assuming the house is REALLY NICE. if so, it will attract good people. if the house is questionable, it will attract questionable tenants.
I personally am not score driven on rentals. I look for stability. I hate habitual movers. I want to see they stay when they move into my place. I want to see long job time. Heck even a long marriage. Just show me something you have done longer than 6 months! I will not take prior evictions, and they must be able to afford the property by showing DOCUMENTED income. (not tips and cash under the table)
I do not think you are unreasonable, but I think that the wrong manager will strip all of the profit from that deal. I am very serious when I tell ya to get a "boots on the ground" assistant to help ya while your away and to self manage.
hope that helps, now let the haters begin with tearing apart my theory, LOL