As soon as you start wondering if you should! Okay maybe not always but if you are wondering at all, you should likely think about pulling the rug out.
For me though, the thought of needing to fire my property manager as soon as I even wonder if I should holds true. I can reverse that thought to illustrate my point actually. In thinking of my favorite property manager, if I ask myself if there is any reason I should get rid of him I actually panic for a second at even the ‘fake’ thought of losing him! That means he is that good and truly the idea of not having him managing my properties sends a chill down my spine.
It sounds far out, I’m sure, to think you could feel so comfortable with a manager but it really is possible. So bringing that reverse illustration back around to the original point of probably needing to fire a manager at the first wonder if you should, maybe you see the point I was getting at now.
Not only do I not wonder if my property manager is doing a good job, it actually terrifies me to think of losing him! So if you are at a point of thinking your manager isn’t doing a good (or proper) job, you are probably right and you should probably start shopping around for a new manager before he (or she) costs you a lot of money.
I know that paragraph is a bit vague and may not have helped you in breaking down and evaluating your manager and his/her performance, so I’ll help you. Here is what I consider to be ‘red flags’ with a property manager and if one or more of these is an issue, you may want to consider shopping for a new manager.
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Red Flags to Watch For
- Lack of Confidence. If you are at any point concerned about whether or not your property is proactively being taken care of, chances are you should jump ship from your current manager. The whole point of having a property manager is so you don’t have to worry. To be clear on this one though, you are allowed to worry about your property, especially if something is actually going on with it (tenant not paying, sudden repair needed, etc.).
What you should not be worrying about is the ability of the manager to handle whatever is going on in the most cost-effective way possible. For instance, I have a problem tenant right now and while I’m extremely frustrated about the tenant and the situation, I have no doubt that my manager is handling the situation in the most time-effective and cost-effective way possible. I don’t wonder at all if he is doing everything he could be doing to fix it, I know he is. Whereas in the past I have had problems with some properties and it felt like absolutely nothing worthwhile was being done to fix the situation in a timely and cost-effective manner, I only knew about the problem because I saw it for myself on the internet (my property listed for rent when I had no idea my current tenants had left and stolen all the appliances!), and it felt like I could be doing more about it myself than my manager was (and I know nothing about handling that type of situation).
I want to feel like if I were to go backpacking in the wilderness for a year and have no access to communication with my property manager that I would feel trusting and confident that my manager would make the most cost-effective decisions for me while I was gone and I would come back in a year with minimal negative impact. I’ve had some managers where I felt like if I were to leave for even a month that my property would crumble out from under me and I would owe thousands for no good apparent reason. If you are lacking the former confidence in a manager, get a new one.
- Lack of Communication and Accessibility. Nothing stresses me out more than a manager who doesn’t communicate well. There are two pieces to what I consider to be successful communication: 1. they tell me when anything out of the ordinary happens and 2. they are easily accessible if I need them for anything.
For me that means I don’t constantly talk to a secretary who never knows one thing from another either. I personally, and this is only preference not a rule, don’t like calling a big office and talking to different people all the time. I want one guy who is my manager, not a big group. I feel like I accomplish more in a more timely fashion and with fewer headaches that way. But as I mentioned in the bullet above, I literally saw one of my properties one time labeled as For Rent on the internet when I was bored one night looking at Zillow values of my properties. When I inquired with the property management company about it (which took multiple phone calls and messages to finally get someone on the phone), apparently my tenants had left a month prior and stolen all the appliances. No one cared to inform me of that.
I had another property where on multiple occasions I wasn’t told that my tenants had stopped paying and the only way I found out was after receiving less than ¼ of what I should have in a payout one month, I called the company to ask what was up. The lack of communication is the biggest contributor, in my opinion, to developing a lack of confidence and trust for the manager. I don’t want or need to micromanage a manager at all (why even pay him if I do that?), but knowing basic levels of information should still be part of the relationship.
- Nickel-and-Diming. This one isn’t necessarily completely wrong by itself but it’s certainly annoying and to me it’s a sign of low quality, which is likely to result in a poor management experience.
I pay more than the standard for my current property manager, but I also get a lot of freebies out of that and way fewer headaches. I get minimal repair bills during the year, minimal everything bills. To me, that is a lot nicer than paying less per month and getting hit hard by bills left and right. Some of the things I’ve seen managers charge for is asinine, really. Plus, when you are getting nickel-and-dimed, I think it instills a lack of trust in what the manager is doing. Because in that scenario essentially he (or she) profits every time something goes wrong.
So why not continue to ‘have things go wrong’ to make more money? It’s a famous problem with property managers- they make up repairs and other issues simply so they can make more money off of you by ‘fixing’ the problems. If you are a long-distance owner, how would you know otherwise that the repair isn’t legit? You can’t. The other model, the one where you don’t get charged left and right, is great because I have a trust that when my manager tells me something is wrong with the house, it is legitimately an issue. Why? Because his labor is free to go check it out.
I get charged so little to fix repairs, if anything, how could I distrust it? The houses are in great shape, it’s not like he is ignoring problems, so it helps me trust the system and I know he cares and isn’t just sucking out every penny he can from me. It’s all part of the bigger picture.
You’re the Boss
Remember, when you hire a property manager to run your investment properties it is no different than if you were to hire an employee to work for you. You are the boss, not them. I don’t say that to suggest you can be a jerk and yank them around, but I do say that to encourage you to remember that if something isn’t working for you, you can do something about it.
I am in 100% disagreement of any property management contract that states you have to stick with that manager (or company) for a defined amount of time. Absolutely not! Because what if they really start to suck? A property manager sucking can cost you a fortune. No joke. With that much at risk, I’m not signing anything that says I’m stuck with someone. I need to be able to fire a manager. I’m the boss, I decide who runs my properties and when. If someone isn’t cutting it, cut them loose as soon as possible!
I can’t give you an exact tally of how much money I’ve lost on my properties in only two years due to bad property managers, but I can tell you for sure it is easily in the thousands. And the higher thousands at that, not just one or two thousand.
You run the show, it’s your investment, and they are your properties. Yes, I absolutely agree good managers are insanely frustrating to find but they do exist. Don’t give up! Hire and fire as much as you need to. You will eventually get to the good one who will help you make a boatload of money.
Any other red flags with property managers I missed?