Needle in a Haystack: A Property Manager That Doesn’t Suck

first jobHey, guys, today we have another fantastic Q&A lesson! Our Insider, Cris from Chicago, asks:

“What are the ‘smart areas’ to investigate when retaining a property management company?”

Or a better way to put it is…

“When I’m evaluating a property management company, how do I determine the veracity of their claims?”

That’s actually a great question, Cris. Thanks for asking. I think we have some equally-as-great advice to give you. Let’s dive in and answer it…

patrickPatrick’s Perspective

Well, there’s one strategy that really helped me find awesome property managers that I still use today. First, go for a referral. I found that the best team members that I’ve added (for the most part) have been from referrals.

For a long time, we did all of our management in-house and it got to the point where we sought out a property manager. We definitely found a couple of managers that did not hold up to their promises…

So, secondly, when you hire a new property manager, get them started with only one property to help you gauge how good of a job they’ll do.

With the management company we’re with now, I went through a cycle of vacating or reselling properties quickly, and they were on it. Then I gave them another property to manage. And then six months later, I gave them another. A year later, I gave them three more. They continued to do well and gained my trust, so I continued sending them more properties to manage.

And I think that’s a great way to do things with anybody you work with the first time. Test the relationship before going big. That’s definitely a good piece of advice.

jpJp’s Take

Yes, I agree with everything Patrick said. I’m going to add a little bit, just to season it and sprinkle in some from my own experiences as well…

Just to give you guys a little background, I do not currently own any rental properties. I’ve sold them all and even lost some to foreclosure quite some time ago. When the market turned, a lot of things went wonky. I made a whole lot of mistakes. I’m telling you guys this because I know how valuable it can be when people are honest and REAL. I believe sharing the trials and tribulations we’ve all been through are the most important lessons to be taught.

So anyway, I got out of the rental property business (I wouldn’t say I’m necessarily out of it permanently, though). But, if I go into the rental business again, I will have definitely have some very different criteria when it comes to managing it.

Currently, my business is strictly a flipping-centric business, but I have had a lot of experience with self-management of my rentals in the past and with using management companies. And, I can tell you, you have to manage your management company. You cannot just trust that they will do everything that they’re supposed to do… there are certainly some aspects of this business that you can let go – this is not one of them.

managerYou have to manage them like you would a contractor. You have to make sure that they follow through. You have to make sure that they are doing what they say they’re going to do.

They’re not going to care as much about your investment as you will because they don’t have as much as risk. If you have a month’s vacancy and if you have a mortgage on that property, you’re eating that mortgage payment that month. They’re just not getting their 8% or 10% cut – a much smaller sting.

Here’s little side note:

This whole conversation is understand that you have to be willing to manage your management company. And also, I think it’s important that your deal should work even if you have to self-manage. In my opinion, until you’ve mastered the management thing yourself, you should not do deals that hinge upon a management company being involved.

You should be able and willing to self-manage until you get the management scenario you need because bad management is like having the wrong tenant in your property. It’s actually a lot worse because it costs you a lot more than waiting for the right tenant and dealing with the vacancy…

Same thing with a management company – having the wrong management company manage your properties will cost you a lot more in terms of money and in terms of duress. I strongly encourage you to spend the time to find the right management company, and you manage the property yourself until you land the right company.

Now, if at all possible, I highly recommend that you look for a management company that’s run by investors. Why? Because people who invest in property themselves are sympathetic to your business and your priorities in a way that a regular management company is not. If the people running it don’t invest in real estate themselves, then… THEY DON’T GET IT.

It took me a lot of years to find a management company here in the Memphis metro area that fits that description and stands up to the reputation that they say that they have. The company I use is made up of investors and they cater their entire business to investors. They’re more than just a management company. And, honestly, those are hard to find.

The Takeaway

I guess I’m trying to kind of scare the pants off of you a little bit, because it’s a big decision – you don’t want to make it quickly when it comes to a management company. There are good ones out there, but you’re going to have to follow Patrick’s advice: start with one and give it a trial run to let them prove themselves, then give them more to work with. It should be a gradual process.

What Do You Guys Think?

So who else out there has something to share from their own experiences? We’d love to hear from ya! Comment below.

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