When my partner and I bought our first investment property in 2008 in the city, our initial plan was to hire a management company. At that time, we had a management operation in the suburbs where we managed around 400 units and a couple million square feet of commercial space. The new location was away from our existing management operation and in an area that wasn’t all too familiar for us. Based on that, we didn’t want to deal with the everyday hassle of managing the property. We wanted to hire professionals who could handle them for us.
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Services That Property Management Offers
We planned to hire a property manager who could take care of these rental properties, allowing us not to be the “evil landlords.” We hoped to focus on our existing management and sit back and collect checks from our new found teammates in these managers. First, let me give you some bullet points about the services that these property management companies offer:
- They take care of finding and placing tenants in your investment property.
- They take the emergency and repair calls from the tenants.
- They coordinate with the handymen to get the repair fixed.
- They carry out regular inspections of the property to ensure that the tenants are taking good care of them.
- They take action against the tenants if they aren’t paying rent or adhering to the terms and conditions of the contract.
- They handle the eviction process if necessary.
- They collect monthly rents and deposit in your account.
So, basically they do it all and for that, you pay them a monthly fee. Based on the time it would take us and the learning curve we thought there was at the time, we felt it was a no brainer.
I know this sounds perfect on paper, but only if we could have found a good enough property management company to carry out this job. We met few companies and property managers, and they sound very enthusiastic out the gate, but when we tried them for some time, we weren’t satisfied. We were finding ourselves managing the property managers and still looking at every detail.
No One Cares About Your Properties Like You Do
Eventually, we figured out that we won’t be able to find any management company that cares about our properties the way we do and has the insight or maybe even the expertise that we quickly picked up on. We wanted to grow quickly in this area, and we knew the goals we wanted to achieve. At that time, we were forced to make a decision of leaving our properties in the hands of people we were struggling to trust or taking the plunge and do it ourselves. We chose the latter.
We built a management company around our Chicago operation. We opened a small office on the South side just to have a spot that the tenants and our new management team could go to. We quickly realized that we are far better off handling the management piece ourselves. There’s no one who cares and knows our property better than us at that point.
We bought it for a reason, we built it out of a certain way for a reason, and we put the tenant in there that we thought was best for a reason. No one knows that block or no one cares about that block the way we do in that sense.
The fact of the matter is that most of these property management companies do not have a vested interest because most of them don’t own any of the properties in that neighborhood. I still often meet property managers who don’t even own property or ever have. They are just doing their jobs of managing it. They’ll fix it, they’ll bill you — but at the end of the day, they won’t be committed to finding quality tenants or ensuring that the property is being treated well. They won’t be on their toes to help you make profits or inform you about good market conditions such as appreciation.
I am not saying that you have to start managing your investment property and stop trusting others. But you need to ensure that they have some vested interest and understand your objectives. Meet them, check their properties, talk to their customers, and decide. Most importantly, fire them if you feel they aren’t able to live up to their commitments or costing you money. You need to create your own boundaries and stick to them. Keep in touch with them on a regular basis and double check if you feel something isn’t right.
I can’t take credit for this quote I heard on BP, but it sticks in my mind:
“An average investment with a great property manager is far better than a great investment with a bad property manager. “ — Johnny C.
Are you working with property managers?
Share your experiences.