How do You Keep Property Managers from Screwing Up Everything?

Question

Greetings,

I'm buying my first out-of-state property (Iowa) and hiring a property management company to run it. I've dealt with a property management company for my local property and their work ranged from ok to semi disastrous. So, I don't have high expectations with the current company (KMB) I'm hiring, but do need a manager and management options were for some reason very limited around Iowa City. I'm mostly banking on hope and luck that they will be at least ok. Does anyone have thoughts on how to make property management companies functional for us owners? Any thoughts inside or outside the box much appreciated.

Thanks.

Nathan Gesner · Answer

How do you keep a tenant from screwing everything up? You learn what a good tenant looks like, you screen to weed out the bad ones, and then you monitor them. When they step out of line, you have consequences to get them back on track.

It's basically the same principle. You're talking about a city with a population nearly 10x mine. There are certain to be a few good managers.

AJ Leman · Answer

@Jesse Stein Greetings from Iowa city!

Just commenting to say that we had a difficult time finding a decent mgmt company in Iowa City, so we started our own! We only manage our properties. Happy to answer any questions about anything IC related.

Good luck-

AJ

Dave Poeppelmeier · Answer

Jesse, you seem to be setting yourself up for failure. First, if you expect a PM to be horrible, guess what... they're going to be horrible. A PM's job is to run a property for you and make you money. Are you going to pay for that service? Absolutely, and you get what you pay for. How you would run a property vs how they do it may not be the same. But again, if they've been around for a while, they probably know what they're doing.

You need to have a candid conversation with the PM on how they run a property day to day: maintenance requests, annual furnace maintenance, etc. How do they notify you of repairs and at what dollar amount? If they are a good PM, they have  a set of procedures and rules they follow, not just flying by the seat of their pants for every owner they work with. Now, if they are not living up to their Property Management Agreement, then yes you have a legitimate beef, and can look for someone else.

But remember, NOBODY is ever going to have as much love and interest in your property as you will, so if you want to be lightning quick with responses, getting everything as cheap as possible, etc: don't invest out of town. Buy properties around where you live and be a Mom and Pop until you can't anymore, and you're back in the same situation you're in now: looking at Property Managers.

Manco Snead · Answer

@Dave Poeppelmeier

Thanks for the lengthy response; good thoughts and ideas. I chose to buy out of state because the market where I live in western Washngton is, for me, unaffordable. The biggest issue I've run into with property management is that they are not very selective with the tenants, then the managers both don't stay on top of things and don't treat the tenant well. This equates to a bad situation. My experience is that by choosing a "good" tenant, then treating that tenant really well things go smoothly and everyone is happy in the end. And I agree with your point that nobody will ever care for a property as well as the owner.

Joe Splitrock · Answer

@Jesse Stein entering into a relationship expecting problems is going to lead to a bad outcome. It is like getting divorced, then assuming your new wife will have the same problems as your old wife.

Address your concerns head on with the new company. Explain the problems you have had in the past. Explain what you found works well. Have the conversation ahead of time instead and make sure their screening criteria matches your standards.

Also be aware that every city has different tenant standards based on property class. If you are renting a C- apartment in a low cost midwest city, the PM only has certain tenants to choose from. Expecting an A class tenant in a crappy apartment would be unreasonable. This is just an example. Your property may be A class, which makes their job easier.

Manco Snead · Answer

@Daniel Smyth  Thanks for the response Daniel. I would happily pay more for higher quality management; the small amount extra paid per month far outweighs the cost and hassle of poor management. My local property manager, who I really got lucky with, spends a ridiculous amount of time selecting the best tenant. This alone makes paying her a bit extra well worth it.

Scott Mac · Answer

Take away their screw driver!

"How many Property Managers does it take to screw in a light bulb?"

Only one as long as he doesn't need that screw driver you took away from him!

Drew Sygit · Answer

Being a landlord is not the passive investment many investors think it is.

There are many horror stories about Hollywood actors and singers that were put in bad situations with the IRS due to lack of oversight of the accountants.

Similar disasters can happen when a landlord doesn't monitor their PMC.

We believe you should do a weekly review of what's going on with your properties. This doesn't mean you bug your PMC for a weekly phone call, but you should be reviewing what they're doing via your owner portal and what they publish there.

If they don't have an owner portal or don't put much there (we've seen this many times!) you may not want to hire them.

Successfully managing a rental property requires CONSISTENT performance, which requires solid SOPs.

Find a PMC with those and you've won half the battle, consistently monitor them and you'll win the other half.

Daniel Smyth · Answer

@Jesse Stein

I am betting that you don't want to pay much for the guy who collects rent and checks on things. That property manager should love his job enough to do it for less than another guy, right?

Sadly, I have found that the managed properties that consistently look the best, are managed by companies expecting higher than minimum wage fees.

I would search out a PM company and interview them in person or recorded Zoom cast.

The company should be able to furnish you with some of the addresses they manage so you can look to see the properties at least from the roadside.

Every company does it a bit different. You actually do pay well to keep a nice property nice without it being that you are called for the toilets or that you need to run down the rent payments.

Full disclosure is what you require, and what they promise to deliver for a price.

I would start my inquiry by asking local realtors.

Once you figure out what you will pay for, you can add that cost to your expenses.  If the cash flows only without quality management, it will only flow until you get sick of being called to fix that leak again and again.

Bud Gaffney · Answer

SCREEN SCREEN SCREEN! References!

How do You Keep Property Managers from Screwing Up Everything?

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