Downside to having multiple different PM's?

8 Replies

I'm hoping to build out my portfolio in the coming years and may face situations where I purchase properties from different turnkey providers in the same market. Given that each turnkey provider has their own established PM, whether in-house or external, is there any downside to having my properties managed by 2-3 different PM's in the same market? Or is it better to consolidate and bring all properties under one PM? I am speaking purely from an operational / efficiency perspective assuming all PM's in question are equally effective and capable. Curious if anyone out there has any opinions on this. Thanks.

If you are buying a turnkey, check to make sure that using them as the PM is not part of the purchase agreement, if that's the way you want to go. If you put all your properties under one PM you may be able to negotiate better fees. It will also be easy for you to track and manage.

@Ishviyan D.

The downsides are:

More than one contact

You have to develop multiple relationships

Oversight is more problematic

No standard way of handling things across the portfolio

The more properties you have with a PM the better relationship you establish with their employees.  If have 1 unit with a PM you get a 1 unit type of customer service.  When you have more you'll get a higher level of service and have more negotiating power.

I would say the question isn't so much about whether using one or multiple PMs with your turnkeys is good or bad (it really doesn't matter...it's just up to you whether you want to deal with separate or consolidated statements and communications), the question would be about why buy from multiple turnkey providers. Certainly you can, but if you find one that is reliable and you really like, why take on multiples?

I guess where I'm coming from too with this is--truly, it's great when you can find at least one good turnkey provider and one good PM in a market. Just finding one of each is easier said than done. You're talking about finding multiple good ones, of both, in a market. Not sure why you want to deal with multiples, but good luck finding that many good ones. I've worked strongly with turnkeys in several markets over the last five years and I can barely hang on to one company in a market behaving properly, much less several.

Any particular reason why the focus on multiples? Usually people only go with multiple turnkey providers if they are buying in multiple markets.

@Ali Boone @Mark Ainley @Patrick Liska thank you all for your responses. Much appreciated. I'm going to need to make sure that the contract doesn't oblige me to use a specific PM...thanks for the heads up.

Ali- I'm going with multiple TK providers because each offers its own unique set of pros and cons. For example, one TK provider deals specifically in higher end properties with lower cap rates, while the other deals in class C properties with higher cap rates and lower price points. I am diversifying across different markets too, but the issue of multiple PMs applied to 2+ TK providers in a single market.

I am against buying turnkey properties that come with a PM. Personally, I think most if not all are scams.

That said, the upside to having different PMs is that if one of them is ripping you off, at least it won't involve all of your investments.

@Sue K. Can you explain your statement "I am against buying turnkey properties that come with a PM. I think most if not all are scams."

I've had great luck with this and feel that they have an incentive to do a better job with the remodel if they are going to manage the property.  There are plenty of reputable turnkey providers that are also PMs.  You just have to do your due diligence to make sure you're using a reputable provider. 

Originally posted by @Kyle Myers :

@Sue K. Can you explain your statement "I am against buying turnkey properties that come with a PM. I think most if not all are scams."

I've had great luck with this and feel that they have an incentive to do a better job with the remodel if they are going to manage the property.  There are plenty of reputable turnkey providers that are also PMs.  You just have to do your due diligence to make sure you're using a reputable provider. 

 Logically, it actually doesn't make sense that they'd do a better job if they are going to manage it.  PMs make money when there are problems.  Just look at all of the fees listed in your contract.  Fees to get tenants, fees to get rid of tenants, fees to supervise maintenance requests, fees to fire them...

Then, when you do fire them, after realizing you're not only not making money, but losing money on a regular basis, they are happy to help you sell it for a commission, and find the next sucker.

That's my take on it.  Others will disagree.

I gotcha. That makes total sense. And I like that idea! Would be curious what kind of deals fitting in those different categories you are finding all under one market's umbrella. Typically the turnkey stuff and companies I find in each market are fairly similar to one another on price point and property type/location/etc. Back in the older days, like the Atlanta days, there was a much broader spectrum but haven't seen as much of it lately. Would love to know what you find and if you end up liking the providers.

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