Ah, property management companies – the answer to anyone wanting to get into real estate without the headaches, right?
The thought makes sense. Rental properties are a great way to help diversify your investment portfolio and earn a solid cash flow.
The only problem… managing the properties.
Now, some folks like the idea of running the operation and handling any repairs themselves. The good news is that they tend to make more money on their properties every month since they’re doing all the work.
However, not all of us want to do this. The other side of the coin has the masses that just want the investment for the returns it can provide.
These folks want someone else to handle the day-to-day management. They don’t want to deal with finding and interviewing tenants to place the right renters. They don’t want the phone calls from tenants for repairs or complaints.
I’ll raise my hand – I’m one of those people.
The solution? Bring in one of the many property management companies out there to handle all those tasks and headaches.
That’s exactly what I did.
My First Run with One of Those Property Management Companies
I brought in one of those handy-dandy property management companies to handle my first rental house in 2009. The company charged me a straight $35/month to handle it (and a month’s rent to find new tenants).
What a deal!
It took a couple months for them to find the first tenants and that made me a little nervous. However, it was worth the wait – the tenants they placed were solid and they’re still in the house today!
Everything was great until the end of 2014. I’ll skip all the details, but the owner basically closed the doors one day and took everyone’s money (escrow dollars and all).
He was arrested and it ended in with him paying retribution payments to those who filed a case against him (I was one), but oh, what a headache for all involved. It left landlords scrambling and tenants confused.
Some property owners didn’t even know their tenants’ names or have a copy of the lease… ouch! Always, ALWAYS ensure that any management company sends you a copy of the tenant information and a copy of the signed lease with every renewal.
The Current Property Management Company
Personally, I jumped right into action and called a couple property management companies I found in the area. I clicked with one of them and she took a good hour to discuss everything with me and answer all my questions.
I signed on the dotted line.
Things went pretty well. They quickly got a hold of my tenants, explained everything to them, and were able to make the transition fairly smooth for all.
In fact, I purchased a duplex at the end of 2015, fixed it up a little bit, and then handed it right over to this new management company to find some tenants.
At first, things went fairly well. They were able to get new tenants in there quickly. They kept me informed of everything that was going on. Things were looking good!
Then my point of contact left the company.
That’s when things changed.
My monthly statements are for half the month. When I called to find out why, I was told that’s how they have to do it with their accounting system. Um, what the #$%^ kind of accounting system is that?!
So I only see a half’s month breakdown on each statement. And maybe “breakdown” is a bit too specific because it only separates things out to a degree. So, I might see $200 in repairs, but no further information.
When I called to ask why there weren’t any notes on what the repairs are, I was told that I need to request that separately. So each month when I have any repairs I have to email back and ask for information on what the repairs are? As I’m typing this, I’m wondering why I’ve stayed with them as long as I have!
However, the biggest problem I have with my management company is a lack of communication. They’ll contact me to let me know about repairs that need to be made and get my approval (that’s a good thing so far!). But then when I asked to be informed of the progress of the repairs… not a peep. I find myself always needing to follow-up with them instead of the other way around.
I had tenants that left after their lease was up and I didn’t hear anything from the company. They turned it around and brought new tenants in there pretty quickly, but I should have been kept in the loop regardless. That cost me a month’s lost rent and a month’s rent to the management company to find new tenants.
I was used to my old company contacting me a couple months before tenants renewed their lease so we could discuss if the rent should stay the same or go up. Not the case here – they just keep the rent the same. I was told that it’s the way they do it unless they hear that I want to change it. Um, I’m paying you to know and tell me what the fair market rent is!
So, after dealing with these problems for about a year, I’ve decided it’s time to fire them. Yes, this should have happened much sooner, but I tried to give them a chance to get their bearings after my contact who I was comfortable with left the company… my bad!
I’m now working on finding a new company and here’s what I’m after…
My Requests When Talking to Property Management Companies
I’m definitely ready to fire my current property management company, but before I do, I want to make sure that I hire a company who’s a good fit.
So to start this quest of finding a new property management company, I decided to lay out some of the expectations of what I want from them.
Sure, we’ll be discussing fees and other regular questions you should be asking your potential management company. But here are some specifics I’m after…
Communication – Look, I’m hiring a management company so I don’t have to… well, manage the property! That said, when something’s going on, I expect to be informed. I want the company just keeping me in the loop throughout.
- Call me if a repair is expected to cost over $200 to discuss it first (unless it’s an emergency – then just do it!).
- Contact me a couple months before a tenant’s lease is up so we can discuss what we should be doing on their rent – keep it the same, bump it up, etc.
- Email me if a tenant decides not to renew their lease and let me know what the game plan is for getting a new tenant in there.
- I want a yearly walk-through done on my properties. When I tell you this, note it in my account and add it to your calendaring system so it just happens. Send me an email letting me know that someone will be checking out a property and then follow-up to let me know the results.
Statements and Documentation – I need some changes to the information I’m getting…
- As stupid as it sounds that I even have to say this, my monthly statement should cover 30 days – not 15!
- If there are any repairs that happened, attach notes or invoices detailing what transpired. And if the plumber pulls a sock out of a clogged drain, bill his cost back to the tenant.
- Send me the tenant information and a copy of the signed lease with every new tenant or lease renewal. Don’t make me chase you down to get it either.
Tenant Retention – An odd setup is that most property management companies get paid a fee for screening and bringing in tenants… many times it’s a full month’s rent! So, this seems to be a slight conflict. What’s the incentive to keep a tenant around if they know they could be getting a bonus every time they get a new one instead?
- I’m going to try to work with the property management companies I’m interviewing to try the opposite approach. I’d like to find someone that I can reward for keeping a tenant instead. Not sure yet what that incentive would be, but maybe it’s a bonus that gets increasingly bigger for each term a tenant stays.
Other Fun Stuff – Some other things I’ll be looking into with these companies…
- I’ll be checking into any reviews I can find on them. If I can get any referrals from other property owners, even better.
- Are they licensed? Kind of a gimme, but I don’t want any problems down the line.
- I’ll be asking for a sample statement before I sign on. I want to see what I’m getting beforehand.
- What’s the out with the company? Let’s talk about the exit strategy from the beginning. If I feel I need to bail on them or vice versa, what’s the termination process to make this happen?
I hope to have a new (and better) company in place and the current one fired sometime over the next couple of months. Wish me luck!
Have you ever worked with any property management companies before or do you intend to if you purchase any rental properties?
Thanks for reading!!