All Forum Posts by: Michael Smythe

Ok, what's the point of this post please?

@Michael Edwards

Even if someone give you a referral, don’t make the mistake of assuming that PMC will meet your expectations, just because they met the expectations of the referral source.

We also can’t believe how many owners hire the first PMC they speak with!

Then they complain their expectations aren’t being met!

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 – and they often select the first PMC they call!

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!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

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😊

@Greg Schreffler Fee would depend on the actual amount of service they provide.

If I were you, I'd want at least pics and a short writeup to review.

You should decide what you want pics of and on the writeup.

That will drive the amount of time it will take, which will drive the price.

FYI - we do narrated videos for our clients, so it's like they are walking the property with us.

What feedback is your PMC getting from the tenants leaving?

We have an auto-email that goes out when a tenant submits a MoveOut Notice. They rarely respond, but with this many leaving, your PMC should be aggressively calling the tenants to find out why not renewing.

Helps to know the problem, so you can properly address it!

Maybe your PMC is trying to raise rents when they market won't support?

Usually doesn't affect anything

What is the legal part of your PMC's approval process?

Technically, legally, just because an applicant is approved, doesn't mean a contractual relationship has been set up. 

Usually a lease would need to be signed to establish a legal relationship. That lease should have a MoveIn and Start Dates. If those have been exceeded, the lease should be worded such that it is no longer valid.

@Harmony Romano

Beginning investors need to STOP believing all the fluff about rental investing, especially with the overheated real estate market trending to historic norms. Many believe unrealistic assumptions and often apply those assumptions to the wrong property classes.

In our OPINION (always verify yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenants: Majority will have FICO scores of 680+.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenants: Majority will have FICO scores of 620+, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should often be used to also cover nonpayment & evictions.
Tenants: majority will have FICO scores of 560-600, many blemishes, but should have no evictions in last 2 years. Verifying previous 2-years of rental history very important!

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenants: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Guessing your tenant is upset.

Wondering how much communication you had with them to set expectations?

Even with the best communication, you can't make everyone happy. So, don't sweat it.

What a mess!

Sounds like you and your PMC are NOT on the same page:(

Recommend hiring a new PMC.

As to an attorney running a PMC - good luck.

Your challenge is, how are you going to be a successful investor without putting in the time to build your knowledge?

If you're not going to seriously make the time to do so, then go conservative to avoid making costly mistakes.