Property managers are some of the hardest-working most underappreciated people in our industry.
Today we’re doing a deep dive let’s roll and it’s absolutely true I think property managers have some of the toughest jobs out there and you get absolutely no Pat’s on the back for being a property manager.
It’s very rare you’re gonna pick up the phone and say hey nothing’s wrong I just want to make sure you know you’re doing a great job most of the time when you’re communicating with your property manager. Something has hit some kind of fan and you were dealing with an issue I think it’s pretty obvious that not all property managers are cut from the same cloth.
There are a lot of great fantastic property managers out there and there are some that are just not so much what I’d like to do is talk about some of the pros and cons of hiring a property manager.
Some of the things to look out for when hiring a manager:
1 – number one is integrity and it’s not something you can really screen for on a job application. You have to meet the person you have to deal with and you really need to get referrals from other people. Any time I’ve ever looked for property managers in a given area I’ve interviewed multiple managers and it’s not to be pedantic or annoying it’s legitimately to try to find somebody that you gel with.
You might find a manager that is a perfectly good manager but you and him or her just don’t see eye to eye, or your personalities don’t jive, that might just not be the property manager for you. Try to talk to a few of them find ones that you feel that you connect with and you’ve gotten referrals from other people they have integrity. That they’re honest, because at the end of the day this person better be on because they are managing probably your most expensive asset, kind of a big deal.
2 – number two. are they familiar with the asset type that you have? If you have managers in an area and they only do student rental investing and you’re asking them to manage a retail strip plaza or you’re asking them to manage an office building it might not be the perfect fit, so try to figure out what their area of expertise is and make sure that they know the area and the asset type.
For example the student rental game is somewhat different than the normal multi resident game. The managers that are in that area often specialize with student rentals, they understand how to deal with students and ultimately that’s gonna be key for you when you’re hiring a manager to look after your investment. You want to know that they’re an expert in that area.
3 – number three flexibility. I can’t tell you how many times I’ve had managers that have been just difficult in adopting the systems I wanted them to adopt in the management of my properties. What I asked them to do is to upload the financial statements into a cloud drive and I would have them get fed into my accounting system.
Another thing is he would have his own bank accounts and he liked to move money from his bank account and then pay out what’s left over to me- I didn’t like that system as much I rather that he put all of the rent into our business account and from our business account we allowed him to have access to a small management account and I say small because we’d only keep a certain amount of money in there.
Anything above a certain amount or certain repair he’d have to get an okay from us. Anything below that he could utilize that amount so he could take money out and spend it on certain things that were under, that threshold that we needed done so that worked out for us. So having that flexibility was just extremely important to us and I’ve had managers in the past that just they won’t budge on things and if that doesn’t work for you find a different person.
Again this is somebody that’s managing one of your most expensive assets you’d want to feel comfortable and you want to feel that they’re serving you so that’s three of any things I look for in a property manager. But in terms of why you would want a property manager, a couple things come to mind fairly easily. A manager ultimately is going to save you time and energy and if what you do and where you add the most value is finding properties acquiring or doing something else.
Say you have an actual day job, then having a manager is probably worth it to you. Somebody that’s affordable and that can take care of your asset.
4 – Another thing is stress. It’s very stressful to manage properties, that’s why these people are in the business of it. The average person, even the average investor can really take a toll on them to have properties that they are worrying about and getting that call at 2:00 3:00 in the morning.
Instead hiring a manager and delegating that to professionals might be the best thing. Another reason you hire a property management is because you might be scaling your business and when you do scale your business you might be able to utilize that manager to look after multiple properties. If they’re looking after multiple properties you know you can start having economies of scale where the percentage that you’re paying and management goes down.
Another big reason I like property managers is that they have their finger on the pulse of your market. If you do manage your property and even if you do routine inspections you’re not gonna get a feel all the time for things that are happening at the building, so having a manager there that actually is doing this for you you, know if something’s wrong.
If there’s issues with tenants, you know what’s happening in the building and you’re just informed, that’s crucial. Another thing I like about property managers is they are this wealth of knowledge that oftentimes people don’t tap into before I even buy a property.
If I’m in a market that I’m not familiar with or I’m somewhat familiar with but not completely, I will go into that market and I will look for the property managers and actually take them out to coffee and talk to them about the market. I’ll say, hey I’m looking at buying this property. I’m looking at these type of rents. What do you think? Oftentimes they’ll tell you right away, I think this is too high.
I think this is too low. So they are a great piece of knowledge because they see what’s happening in that market even more so than some brokers in that market because they’re the ones that are dealing directly with tenants.
They see where deals are falling from the leasing perspective and that’s crucial information for yourself. You really need to take advantage of that. You’ve probably gathered from the how I’m a little biased. I do like outsourcing management. I think if you hire them properly and you maintain a good relationship they’re such an asset, but there are some cons with management the first one being the obvious cost you know. Depending on the market it can be as low as 4% of the gross income of the property.
The gross rent all the way up to 12% I’ve seen in some markets. So you really have to take that into consideration often times when people forget though is there’s the percentage management fee- In addition to that there’s leasing up costs and you know if they’re going out to find new tenants for you that could run a month’s rent half a month’s rent and those numbers can actually really start adding up so that 4% all of a sudden is the 7% if you do the calculation over the year.
So it’s definitely something to think about but if you can manage that cost it’s just another expense item. It’s tax deductible expense obviously running through the business and again in my opinion I think it’s worth it.
One of the reasons I think that is especially the commercial properties you know offices apartment buildings, they’re being underwritten assuming that there is property management you know. Most people don’t think 100 unit building or 50 unit building is being managed by you, that might be perceived as a con and I think if it’s managed properly there really is no issue with it.
The fact that this person is not going to love your baby as much as you do that’s just the reality of it it’s your property it is a totally different type of relationship when you own something as opposed to manage something so it’s something just to keep in mind. That person you know even if they’re a good manager they might go that extra mile but they won’t manage it or care about the acid in the same way you do.
In my opinion that may be perceived as a con but I think it’s just a reality that can be managed and the real thing about that is you have to manage the manager. You’re technically the asset manager so you’re managing the property manager and you’re making sure that that relationship is good. You’re not disrespectful that person you’re honest if you have a good working relationship good things happen.
I can’t tell you how many times over the years I had a property manager that gave me a little bit of a gold nugget in a market.
He found out you know an owner was potentially selling or there was a conflict with ownership and that’s what happens when you have these good relationships. You get rewarded over time, you’ll get little pieces of market information that ultimately might result in a purchase for yourself. So be good to the managers they’re good to us, the good ones are doing God’s work out there.
To get in touch with me, you can write to firstname.lastname@example.org