All Forum Posts by: Kenny Dahill

Interesting thread for sure.  

Not sure I agree with the big vs small argument.  The way I see it, both have access to the same technology and with more advanced technology being released it can help optimize any business.  Regardless of size.

I've had the luxury of talking to a lot of different management firms.  It's interesting to hear their takes.

Why are you small?

• Capped Limit:  They don't want to manage that many properties as the broker, so they place a cap limit of X units.
  • Sales:  They still do regular sales but don't want to detract from this service
  • Quality:  They feel under their limit allows them to maintain quality.  Perhaps even charge more.
• Capped Area:  Especially in a large metro like Cleveland, they don't want to travel all across town all day address issues.  I know PM's who only manage in Medina, others who'll manage within a 30 min drive of their office in Akron.
• Growing the biz:  They recently started their business but are still growing their assets under management.

Why are you big?

• Franchise:  They have the operational support of a franchise behind them.  Although they need volume due to the sunk royalty cost.
• PM Only:  Their business is only management oriented, therefore they can apply all of their efforts into the same tasks and systems.  Which allows them to take on more clients.

The question shouldn't be if a small or big firm is the right choice.  Here's what I would focus on:

• What technology / systems do you utilize?
• What is your units to property manager ratio?
• What is your average tenant / unit turnover duration?
• What limitations are placed on the landlord: can I use my own lease, tenant screening, maintenance, etc.  **If this is important to you
• Is maintenance an internal or external team?
• Who is my main point of contact?  What is their preferred contact method?

At the end of the day every landlord has their own preferences.  Big or small doesn't matter, value does.  However you perceive value will indicate which direction you will want to proceed.

Hi @Krista Roodzant and @Michael Tighe, hopefully your search is going well.

Recommendations are always great but you want to make sure they're efficient recommendations.  Especially in a market like Cleveland where property management firms can be very selective about which sub markets and asset types they will manage.

To get better recommendations I would suggest including the following:

• Which sub-market(s) of Cleveland
• Property type
• If you're going with the lowest bidder, which fee rate you want.

Addressing those three simple questions alone can cut your potential list of PM's down to 10-30%.

@Miles Robinson, plenty of good property managers in Atlanta.  We're lucky to work with quite a few.

In a market like Atlanta, you'll need to be more specific on your end regarding the property type and location.  As you would expect in a large metro like Atlanta, there are hundreds of property management companies on Google alone!

While there are those who will manage throughout the entire metropolitan area, there are a lot who will stay to a specific area.  My observation is northern and eastern markets (Marietta, Alpharetta, Decatur, Stone Mountain) have more property management firms that specialize in their area.

Finding somebody who was interested in Stone Mountain and College Park was more of a challenge.  For example.  The management firms who were interested were those that tackle the entire metro-area.

Hope this helps and best of luck!

@Eric Littlepage, I'm not a lawyer so you will need to get legal advice.  But here's my take.

• Written notice (30) days prior:  Pretty straightforward, you have to inform them before 11 months and 1 day.
• Given at any time during the month:  There is not a specific date you must inform them, as long as it's before 30 days.  The opposite is "You may only give notice on the last day of the month".  You can do it on the 1st, 2nd, 3rd... of May.  You could even do it 3 months prior to the end of your agreement, you never would but it's allowed.  However the actual "30 day notice" won't apply until the end of the month.  So your May 15th date isn't June 15th termination.  You give it on May 15th, which would legally apply on May 30th that the termination clause is in effect, and terminates on June 31st.

To answer your other question:

• When can I terminate my management agreement?  This is different than not renewing, which only occurs at the completion of an agreement.  You can terminate your property manager any time but it may result in additional fees.  Common terms might state you owe them all their fees per this lease.  Said differently, if you fire them 2 months in then you will owe them 10 months of management fees.  After you pay, you have the freedom to hire another PM.  Expensive year!  Read your fine print.

There should be protection to the landlord in case the property manager breaches their own agreement terms.  It might require proper notifications for each breach and opportunity for correction.  But enough proper notifications helps you build a case if you were to go to court.

To recap.  Terminating and renewing are different.  You can give your "notice" any day of the year as long as it is prior to 30 days before agreement completion.  You can terminate your PM any time, but there might be fees associated.

@Scott Houin, sounds like you know the decision you want to make.  You've had additional issues with the property manager that upset you.  Time to move on.

How you move on is the better question.

First, admit to yourself this is a risk vs. reward situation.  

• What if you get a worse PM?  
• What if you have to get a more expensive PM?

If it's worse the risk, now consider the actual costs.

• Fire immediately:  Termination fees and set up fees for new PM
• End of Contract:  New set up fees.

How much value is there for you to fire immediately or wait for contract?  Figure out your plan of action before you suggest anything to the management company.  Last thing you want is inform them months before that you will not be renewing.

@Scott Houin, this can be a tricky situation, especially not knowing the condition and details of your property and tenants.

I am curious, are management fees based on rent collected or expected?  

• If collected, then they would have an invested interest to raise rents which makes their decision more validated.  
• If expected, there is no invested interested and your frustrations are definitely more validated.

Make sure you understand your management agreement.  Here are some considerations:

• Termination Clause:  Is there a fee for termination?  They just signed a 12-month lease and some terms state you owe the management firm all their fees even if terminated.  So you're forking up that 8-10% of AGI to end the relationship.  Plus the additional 8-10% you will pay another firm for the rest of this year
• Lease Renewals:  Confirm if there is language stating the owner's request for rental increases and the responsibilities the management company must take.  If it specifically calls out this situation, they could be in breach of contract.
• Breach of Contract:  What notifications must you give the management firm if they breach or are in breach of their contract?  This might be your exit without paying fees.  However, you'll need to follow contractual terms which might require written notifications and an opportunity to recuperate.

I think the most important suggestion and considers are :

• Besides this, how happy have you been?:  Finding a property manager can be difficult, especially if your property is not highly desirable class.  If everything has been great up until this, can you get over this mishaps?
• Can you negotiate?:  Consider a conversation with the broker and state that you have been happy with their service, if true, but this really bothers you.  If you've been happy, give them the chance to correct it.  While not ideal it ever occurred, perhaps they waive their renewal fees so you recuperate some of the lost revenue.
• What will it cost to get a new management firm?:  This is not just monetarily, but time and stress.  If this is the first hiccup, be reasonable and realistic that you might strike out on another 2-3 PM's before you find another great firm.  Plus the time it takes to find a new property manager.  Trust me, we work with landlords and finding the perfect property manager can take time!  Interviews, comparing rates, reviewing their agreements, etc.  That time adds up.
• How much it'll cost for new management?:  I indicated earlier in this post that you might be on the hook for termination fees.  Plus potential legal fees if that gets messy!  Or legal fees for reviewing the new PM management agreements.

If their service has not been bad and this is their first mishaps, be reasonable and give them the opportunity to correct it.  Plus it might show their true colors; good or bad.  Even if you do decide to get a new property management company, it might make more financial sense to wait for the current management agreement to end so you avoid the termination fees.

If the frustration is so severe that you don't mind paying all the extra fees and costs associated with it, then find a new one and move on.  Make sure this 'situation' is addressed in your interviews and, more importantly, called out clearly in the new management agreement to better protect yourself.

@Michael Raposo, I think Pareto's 80/20 rule should apply here.

80% of the maintenance items will cost 20% of your expenses.

20% of the maintenance items will cost 80% of your expenses. i.e. burst water heater!

If you wish to save money, the best bet is spending your time on the few heavy items.  BTW, I'm just like you but since launching my startup Burbz just how valuable my time is now!  In the last 2 weeks alone I've had 3 small calls for appliance electrical, electrical issues in my primary and landscaping issues.  I renovated my first 3 rentals completely on my own and nothing scares me.  Each cost me $125 and $225, but saved me plenty of time.

As I suggested earlier, if you want to do the small maintenance then have at it.  You'll have to settle for a PM who'll allow that or piece meal other vendors.

But don't expect any high quality management firm to want to work with you.  The better you are as a management firm, the more selective you become.  @James Wise and @Nathan Gesner can attest that the relation of PM/landlord goes both ways.  Not every landlord is worth the hassle, especially when their business isn't contingent on that individuals business.

@Michael Raposo, perhaps a full-time property management firm isn't what you need.  There are solutions that allow you to have some control of tasks you desire and hire out others.  Which might actually save you money, afterall you're paying the full management fee which typically includes coordination time for maintenance.

• Leasing Agent:  Hire a leasing agent whenever your unit is vacant.  If you want to do the tenant screening, there are options like RentPrep out there.  You define the service scope with the agent.
• Rent Collection:  There are several ways to collect rent these days.  Cozy, Zelle, Venmo, etc.
• Contractors:  For the 25% of the time you decide to hire out, you find easily find and coordinate with contractors through Thumbtack, Angie's List, Google.

Any top quality professional property manager hates owners that micro-manage or limit their resources.  Afterall, you're hiring them for a reason.  You could find a property manager who will let you do the maintenance, but you need to make sure they're a high quality professional.  Or else you'll be stuck with terrible service and paying more money than you realize.

If doing the 75% maintenance is a big enough decision factor for you, I say you self-manage and find vendors/contractors to help you with the other tasks.  It'll take a little more time but you'll save money and most importantly can do the maintenance.

@Samuel M. sorry to hear about that situation.  Unfortunately not too uncommon. 

We always suggest you first confirm with your property management company that your expenses are caught up, getting an updated set of records.  That helps to prevent any bitterness from the existing property management firm.

Did you ever resolve the 'Additional Repair Work' or paid to move on?  That's sad since $400 to them might have caused long term revenue loss based on this simple post alone.

Were there any termination charges you had to pay?  If you terminate early, you might have to pay the rest of their fees upfront before you can move on.  Not a big deal if you're at the tail end of the agreement, but could be a lot if you're towards the beginning.

If there's anything we can do to help please feel free to reach out, PM recommendations or advice.

@David Bardwell, definitely a lot of property management companies.  Then again, Cleveland is a large metro area and sprawls into Akron as well.

A lot of management firms are very picky in Cleveland, understandable. We've talked to some that only manage SFR above $1,500 in Medina and others who will manage anything/anywhere.

Cleveland is a market I would want to keep my assets similar in type and location.  Good list though!