All Forum Posts by: Michael Smythe

It's the most conservative investing strategy, but will take the most time to build wealth.

@Marcus Spencer

Recommend exploring as many sources as possible to get referrals AND cross-reference them to get as much accurate information as possible.

Check out NARPM.com, BP’s Property Manager Finder (BiggerPockets: The Real Estate Investing Social Network), etc.

Also, encourage you to learn from the mistakes of others - by reading posts here on BiggerPockets about owners not having their expectations met by their current Property Management Company.

To avoid going through the same poor experience, keep reading.

Even if someone gives you a referral here, do NOT make the mistake of assuming that the PMC will meet your expectations, just because they met the expectations of the referral source.

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – so, they often select the first PMC they call or that calls them back!

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

A well written management contract should clearly spell out what is expected of both the PMC and the owner, to PROTECT both and avoid misunderstandings. Why do you think purchase contracts are so long and have such small print?

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Good question!

You know what would easily address all this?

If PMC's could charge by the hour for everything they do and owners expect!

The majority of property owners incorrectly think that managing a property is easy and SEVERELY underestimate how much time it takes. 

Owners also want to pretend that it takes the same amount of time & expertise to manage any Class of property/tenant - when common sense dictates that lower-demographic properties/tenants have more tenant screening, maintenance and rent collection challenges (to name a few).

Also, most owners really don't value their own time! How many owners making $150k+ at their day jobs (which is about $75/hour) are doing PM tasks they could outsource for under $50/hour? If they don't properly value their own time, how will they properly value the time of a PM expert?

Unfortunately, charging by the hour would just create another problem - owners thinking they should only pay a PMC minimum wage rates, "because it's so easy to do".

Owners don't want to recognize that property managers have invested years in learning what they do - just like owners have in their careers!

These same owners also have no problem paying an attorney or CPA $150/hour or more.

Many owners also don't respect their PMCs and try to treat them like a personal assistant at their beck & call. They expect personal cell phone numbers and their calls/texts to be answered no matter the time of day and on weekends - even holidays. Yet, they have much stricter boundaries on their jobs. How is that fair?

Owner demands are forcing PMCs to hire cheap VA's from foreign countries, but it's difficult to train these VA's about industry knowledge and American customs.

Several VC backed PMC's have popped up in the last decade and have tried to create systems that VA's can execute with little industry knowledge. They also woo owners with flat fees and all-inclusive package pricing. So, why are there so many posts here on BP from owners complaining about their terrible service?

It's interesting that many of these VC-backed PMC's, despite having 10k+ properties under management, aren't doing well financially - one of them just merged with another industry-related company also not doing well.

Just for fun, here's a partial list of PMC expenses that owners pretend don't exist:

Office rent
Computers, printers & software
Internet & phone bill
Office furniture
Office supplies: paper, postage, ink, etc.
Office liability insurance
Auto expenses: monthly payment, insurance, gas, maintenance, registration/plate fees
Broker license fees: annual, monthly board & MLS fees, continuing education fees, E&O insurance
Equipment: lockboxes, signs, etc.
Business income tax preparation and payments
Staff payroll & payroll taxes

Time Tasks: answering phones, calling past due tenants, scheduling tours, taking marketing pics, processing those pics, writing ads, researching rent amounts, posting ads, explaining to owners how rent determined & showing where ad posted, opening & processing mail, posting payments, bank deposits, scanning documents & posting to owner & tenant portals, explaining accounting to owners so they understand their monthly statements, taking pics/videos of repairs, finding reputable handymen and contractors, confirming they're properly licensed & insured and tracking annually, verifying repairs done properly, processing invoices for utility bills, repairs, taxes, city inspections, scheduling periodic property evaluations/inspections with tenants that don't want strangers in their homes, explaining to owners why something is taking so long, and more & more & more...

OBSERVATION: many owners only want to pay a flat fee or 50% of a month of rent as a leasing fee - without realizing the repercussions. 

If a PMC only charges an owner a flat rate leasing fee of $500, what amount of commission can they offer on the MLS to an agent that brings them a tenant?

How many agents are going to want to work for 1/2 of a flat fee?  

So, many PMCs don't put their properties on the MLS or if they do (just to make an owner happy), they offer agent commissions so low they know few agents will bring them a tenant.

So, owners force PMCs to only effectively advertise their rentals on their own website, the Zillow group and whatever their PMC software provider syndicates to.

This wasn't a problem the last 5 years or so with the crazy demand for rentals, but consumers are getting tapped out and Days On Market for rentals has increased 37% in the last 2 years. 

How many owners are willing to pay higher leasing fees, so their PMCs can engage other agents via the MLS?

Looking forward to seeing where this thread goes...

@Sandeep Shukla how much time do you have to manage AND learn:

1) Fair Housing laws
2) Fair Credit Reporting Act
3) Consumer Privacy Protection laws
4) Local rental ordinances
5) State eviction laws and procedures
6) Etc...

Everyone thinks property management is easy until something goes wrong...

@Jackie Linne contact @Engelo Rumora

@Christopher Davis

Recommend exploring as many sources as possible to get referrals AND cross-reference them to get as much accurate information as possible.

Check out NARPM.com, BP’s Property Manager Finder (BiggerPockets: The Real Estate Investing Social Network), etc.

Also, encourage you to learn from the mistakes of others - by reading posts here on BiggerPockets about owners not having their expectations met by their current Property Management Company.

To avoid going through the same poor experience, keep reading.

Even if someone gives you a referral here, do NOT make the mistake of assuming that the PMC will meet your expectations, just because they met the expectations of the referral source.

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – so, they often select the first PMC they call or that calls them back!

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

A well written management contract should clearly spell out what is expected of both the PMC and the owner, to PROTECT both and avoid misunderstandings. Why do you think purchase contracts are so long and have such small print?

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

@Brett Dudley the inspector for any buyer should catch the roof needs replacing and any other major issues, which should lead to the buyer renegotiating/lowering their offer price to cover these.

@Mubarak Basha Buildium doesn't have custom fields, and Appfolio has limited ones.

You may want to look into DoorLoop, Rentvine & Propertyware.

@Amy Perry what are you plans for the place?

If you plan to keep, what arrangement does the caretaker have in place? 

Do they have a contract? 
---You may have to honor that contract.

If everything was done with a handshake, you may need to hire an attorney to assist with creating a lease and perhaps even starting the eviction process if the caretaker doesn't cooperate.

@Ken Chen what specifically do you need assistance with?