Property Managers, The Downside

Property Managers (PM) that do turn-key management have goals that are often opposite of an owner.  This is especially true of inexperienced PMs.  A PM makes money when they fill a unit.  A PM makes money every month when rent is collected, sometimes even if it is not collected.  A PM makes money when your place needs maintenance.  A PM makes money on an eviction.  A PM makes money when they turn the unit.  A PM makes more money when they have to evict and turn a unit, than when they are renting it to a long term, good quality renter.  A PM makes more on subpar renters, than solid ones.  You make more money on a long term, good quality renter.  Remember, great tenants manage themselves.  It is cheaper to lower your rent, and get better tenants, than hire a PM.

Want a good PM Contract?  Make the PM pay you your anticipated rent, every month, unless the tenant moves out in accordance with your lease.    If the tenant is evicted, make them pay for the eviction costs, and the re-filling of the unit, while still paying you your portion of the rent.  Let the PM get reimbursed for any damages from the tenant themselves, instead of you trying to collect the damages.  That PM contract will never happen, as a being a PM is a no-risk venture.  A PM has no ‘skin’ in the game, and they want to keep it that way.  100% of the risk is the owners, yet the guaranteed profits are the PMs.  If the PM was subleasing the property from you, they would have a different methodology.

Many PMs are failed realtors, turned PM.  They typically do not even own rental property, and are getting their landlord education at your expense.  There are good ones too, know who you are dealing with and make sure you drive the show, not them.  Set up your rental criteria.  They are the professionals; a professional PM should be able to match a tenant to your specifications.  When a PM brings in tenants that do not match your criteria, reject the renter and look for a new PM, the task is obviously too difficult for them.

A PM needs to be more than just a rent collector.  They need to be a tenant manager.  Collecting rents is easy; the banks have already figured that out with automatic Bill Pay.  Fixing the property is just a phone call to a reputable firm that specializes in the problem you have.  You do not need a PM.  You are going to pay for the fix anyway; the PM will just add their fees to the bill.  The PM rarely goes to the property themselves; they send a maintenance crew.  A call can be received anywhere in the world, maintenance firm phone numbers can be found on the web from anywhere, and invoices can be paid automatically.  A PM takes a few calls, and coordinates the effort.

Even an average PM will know when your lease is being violated and how to enforce it.  They will be able to inspect the property, and know when the tenant is causing excess wear and tear.  They will require the tenant to fix the item, or bill the tenant for it.  They will be able to get your damaging tenant out, before they cause too much additional damage, not after several leases when you have thousands of dollars of damages.  A good PM is a tenant manager first, and a property manager second.

But actually managing the tenants takes work for the PM, and the ability to know how to work for you, not themselves.  Often, extra felon guests will arrive when a subpar tenant starts to rent your unit.  The PM will look the other way, knowing they would not get paid if they prevented the extra tenant.  The PMs are not on site, they do not know what goes on.   These are the things that lead to police incidents, and will lead to an expensive situation for you.  Never rely on a PM to do the diligence it takes for you to succeed, unless you do the diligence ahead of time.

Are you a property manager? Have you ever used one? What was your experience with them?