I would like to state at the outset that this particular post is very different from my past posts. In the past I have tried to educate readers about various aspects of landlord-tenant law. I will not be doing that this time. My goal with today’s post is to generate a discussion and to have you, the reader, provide me (and the other readers) with your thoughts and concerns regarding the topic of professional management companies and when a landlord should consider hiring one to handle the daily management of rental property.
You may be curious as to why I am writing a different type of post. The reason is quite simple and straightforward — in the last month or two I have received several phone calls from landlords that are frustrated with dealing with their tenants and the daily management issues. My response to these calls is often along the lines of “welcome to being a landlord,” but I have refrained from such comments lately as I have noticed that these are not just the usual rants about irresponsible tenants. Instead I am noting real frustration and a wish to get out of “landlording.” Many of the individuals that I have spoken with have been very upfront in telling me that if they could afford to sell their rental properties that they would but since they cannot they have decided that they want to hire someone else to take over the management. They then ask me if I can provide them with the names of some professional property management companies that I would reccomend.
After giving the caller some names of property management companies, I make a point of explaining to the caller that hiring a management company does not make all of their problems disappear. I explain to them that there are a lot of different management companies out there. I point out to them that just like landlords, property management companies have different styles and ways of running their respective businesses.
Giving up the daily management of your rental properties is a big decision. The decision should not be made lightly. A landlord needs to find a company or manager that s/he feels confident in and comfortable with. It is important that you interview any managment company that you are considering hiring. You will be trusting this company with the care of your real estate investment – take the time to get to know them and learn how they will handle their job. Some management companies are more “hands on” then others. Some are more “service oriented” then others. Some follow applicable landlord-tenant laws more than others.
Most management companies will handle everything that you can possibly think of if you want them to, such as:
- Finding tenants for your vacant units
- Showing the units to prospective tenants
- Screening applicants and vetting their applications
- Fielding complaints and maintenance requests
- Accepting rent
- Hiring contractors to make repairs or making the repairs themselves
and much more.
If you find the right property management company, it can be the best decision that you ever made. The exact opposite can be true if you choose the wrong company.
Even if you hire a company to manage your properties for you, it is important to understand that you — the owner — may still be held responsible/accountable if the management company does something wrong. If the management company does not understand fair housing laws and runs a discriminatory advertisement for your vacancy, both the management company and the owner could be sued. If the management company doesn’t make adequate and timely repairs and as a result a tenant is injured, there is a strong chance that both the owner and the management company could be on the hook.
Some landlords wish to retain some level of control even after they hire a management company. I know of landlords that still choose to be involved in the tenant selection process but leave everything else to the management company’s discretion. I have met other landlords that want to personally approve every repair that is made to their income properties. There are no “typical” situation. It all depends on what the owner wants and what the management company is willing to do.
Some management companies consist of 1 person. Others have hundreds of employees. Some offer their services on an a la carte basis while others offer various packages that the owner can choose from (kind of like a trim package for cars). Some only manage apartment complexes; others may take on the management of duplexes and single families.
I personally do not feel that there is a “right” time for each and every landlord to give up the daily management of their rental properties and turn it over to a professional management company. Its not like there is a certain “cashflow magic number” that dictates the hiring of a property management company. The best time to make that change — or even if the change should be made in the first place — depends on the specific landlord and his/her situation.
I believe that there are three issues that often casue the topic of hiring a property manager to the forefront for landlords. First, the landlord no longer has the time to properly manage their rental properties. Second, the landlord realizes that they are not “cut out” to handle daily management of rental properties. Third, a landlord gets “dinged” by a tenant. This could run the gamut from having an eviction action dismissed because of improper service of a 5 Day Notice, or getting sued by a tenant for making an improper deduction from their security deposit, or any other number of situations. These situations often arise becasue the landlord does not know th ebasics of landlord-tenant law for one reason or another. We have all met landlords that don’t have a “clue” what they are doing . . . they usually are the ones that are not members of an apartment association, do not attend seminars, and don’t read my blog : )
In my years as a landlord-tenant law attorney I have read many good articles that discuss what you should consider when hiring a property management company. One recent article that I came across is entitled What To Consider When Hiring A Property Management Company. Another article adressing the topic is entitled Should I Hire A Property Management Company For My Rental Property? What are the 10 Questions You Should Ask Before Hiring A Property Management Company? There are many more articles on the web that discuss this issue. I would suggest that you take the time to read these articles and others as they are very good at raising issues that you should consider when making this important decision.
If you have just finished reading the above paragraph and have now realized that this is the end of the post and are about to click away . . . DON’T. Please post a comment. If I don’t get any comments on this post then I will be forced to just go back to the boring old lecture format. Nobody wants that, do they : )
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#1 by John (Dr Rent) Fischer on April 27th, 2010
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I am asked often if I would be willing to manage someone’s property, and the answer is almost always no – I have my hands full running my own.
However, I do try to get a feel for why people are looking for property managers. The two most common things I get is that they inherited a property (most often from parents), instead of selling it, want to make it a rental, and don’t want to deal with it – they just want the cash flows that come from the tenant. The second most common reason are people who have been long-time landlords and are now ready to retire and would like someone to oversee the day-to-day tenant issues so they can travel or do whatever else it is that retirees do.
To date, the only properties I have agreed to manage are for a landlord whom I have known for a very long time and is in failing health. I took these 5 properties (8 units) on because of their inner-city locatition. They are in a very troubled neighborhood and I wanted to get a first hand experience if a property owner’s actions with proper screening and upkeep can help change the course of a blighted area. (so far, yes they can)
However, the comment I want to make goes to both those who are looking to have their property managed as well as those who are thinking about becoming a fee property manager. You both need to realize that your reputations and image in the market place will become one and the same.
You could have very nice, well kept rental properties. But if you choose a management company that has a reputation (among tenants) to not do needed repairs – your property will now inherit that reputation.
On the flip side, if you as a management company have a reputation for making sure that your properties are well kept, and then you take on a property to manage where the property owner refused to do repairs or updates that you think necessary, that reputation on that single unit could spread to your entire management inventory.
That is why I turn down most management requests. I keep my properties at a certain standard – I am only willing to manage a property if the owner agrees to my standard. I am not going to recommend to an owner that they replace the carpet and get into some type of argument about it – I am going to replace the carpet and send the owner the bill.
To be honest, if the reason you are looking for a management company is you figured out that dealing with tenants is just not for you…. you may want to instead just consider selling the property and using the money to invest in something that produces a similiar return that doesn’t involve tenants.
A rental property is not just another investment – you are providing a service – an important service. You are providing housing, a basic need of life. That is a very important service… you need to take this obligation seriously, or you need to step away and leave it to someone who will.
My 2 cents…
#2 by Tristan R. Pettit, Esq. on April 27th, 2010
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Great points John — thanks so much for taking the time to share that info. I learned a lot that I did not know or even consider just from reading your comment — which was my goal with this post.
By the way if you get any speeding tickets driving all around the state talking to the various associations that I read about on your blog — I do handle traffic law as well
jk : )
T
#3 by Ruth Parker on June 22nd, 2010
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I am very interrested in finding a position that will express my talent and capabllities with a team or group. I have 5 years experiamnce in property management , and I am willing to travel 100% of the time, If anyone can elp me with this lead. I t would be a amazing experiance and you would not regreat it Thanks for your time my yahoo is ruthparker5107@yahoo.com or you can reach me at 405-863-6968 (Cell Phone) Thank you again
June 21st 2010
#4 by Kevin on July 28th, 2010
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I live overseas so I have to have a property manager. I have had mixed experiences. I think it varies by city, because I have had a great experience in Dallas, Texas but horrible experiences in Washington DC.
#5 by Tristan R. Pettit, Esq. on July 30th, 2010
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Kevin — Thanks for your comments. Yes, people’s experiences with property management companies do vary greatly. I feel that every management company has a different philosophy as to how they manage a property and you must find one that is similar to how you would want your property run.
There is a great difference even within the same city – I have several management companies within Milwaukee that are my clients and there is a wide variety in how they all manage their properties — not that one way is wrong and the other is right, but rather there are different ways of handling things. Teh difference in management style is affected by many things such as overall philosphy, personal philosophy, type of property, the tenants themselves and how they react to management etc. etc.
#6 by Jason on August 17th, 2010
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Tristan, I think your blog is fantastic and I wish I would have found it sooner!
I have been struggling with this exact dilemma recently. I am a homeowner on the south side of Milwaukee that will be moving to Pittsburgh and have heard nothing but bad things about most management company experiences, so I am going to try a go at it myself. I am not adverse to hiring one if things just get to be too much.
Some advice that I received from a friend to give tenants incentive to pay on time and take responsibility for the property is to offer them $150 off of rent if they pay by the 1st of the month and handle any repairs/maintenace that would be less than $150 to fix for the month. I’m also paying a contractor that lives across the street a small fee to be available for calls.
Any thoughts on this?
#7 by Tristan R. Pettit, Esq. on August 17th, 2010
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Jason – thanks for your compliment. I am glad that you find the blog helpful. Please pass it on to others that you know that own property. My goal is to educate as many landlords about landlord-tenant law as possible — even if it is by one blog post at a time : )
My first thought about your plan to manage your rental from another state — was concern. But you allayed my concern somewhat because of the fact that you will be having an individual across the street to handle certain calls from the tenants and emergencies. That is key. In my opinion someone needs to be nearby that can field maintenance related calls.
My other thought is that you may have difficulty finding a management company willing to manage a single family or duplex rental just based on the economics. Which would leave you with a smaller property manager — not that that is bad, but you should be aware that the larger mgmt. companies will not be an option.
#8 by Don on September 13th, 2010
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I have sixteen rental properties. For a year or two I did everything. I have never enjoyed life more than after hiring a property management company. They are magnificent. I have few worries and the bottom line is they have made me money.
#9 by Tanya on March 25th, 2011
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I hired a property management company due to moving overseas. I have had problems with the company being unwilling to address myour concerns and the specific manager’s complete disregard for communication. They have also refunded full security deposit with damage to home and unpaid utility bill. I recently (2 days ago) gave notice of termination to mgmt co. stating they are not doing their job. Mgmt co has told me they are doing their job and I am held to the contract I signed stating I would give 90 day notice before I can terminate their services to me.
So for 3 more months I am stuck paying a company that is unorganized, rude and not doing their job.
#10 by Tanya on March 25th, 2011
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P.S. I read your blog that explains utility bill coming after 21 day notice. I also read about WE energies trying to have owner pay bill. In my case the Village my home is in told me that if the bill was not paid that it would go on our lein on our house taxes. I did not want that on my credit history. House in located in WI.
#11 by Ellen Zern on September 6th, 2011
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My father had a condo that he was renting out and he did all the work himself, out of state. I saw how much trouble he had trying to keep the place in order and also had trouble collecting the rent on time. A property management company can really ease the process and free up time for the owners.
#12 by GoRenter LLC on October 13th, 2011
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Nice post. It is interesting to read and it is very useful for the readers to get an information about real estate.. Anyway, thank you for the information. I really appreciated your blog. I will check this out. Thank you and keep it up.
GoRenter LLC
#13 by Real Property Management Nampa on October 26th, 2011
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Great idea, I agree with all your thoughts. I understand the difficulty in handling your rental properties, keeping the place in order, collecting the rent on time, and doing all the work yourself, out of state. A property management company can help and take over the management of your business so you could free yourself from all the troubles brought about by managing your own rental properties. But always remember that you are still the owner and still be held responsible and/or accountable in all management company actions.