I am a property manager (PM), I own one property, and manage 75 houses (single family
, duplex, 4-plex) professionally. I am a member
of NARPM (narpm.org). ANY PM you look at, in my opinion, make sure they are active in NARPM....what a great organization!
I have seen it all. Good tenants, bad tenants, tenants that bail in the middle of the night, pet damage, adult damage, stable people turn unstable (I call divorce damage), great tenants who take care of the house as if they owned it. It's all out there....the question is....how do you minimize your potential downside?
Tenant provide their own credit report? NO! "professional tenants" and crooks WILL forge it. As an individual, you can't run a credit report on someone. Some say the credit report really doesn't tell you about the tenant. I totally disagree. Let's examine:
-I require that there be no property management company in
collections on credit report.
You would be amazed how many applicants look great on paper till
you see their credit report....2 or 3 other management companies in collections?
-Utilities in collections? This means they can't have the utilities put into their
name. When will you find this out? Typically after you have had them sign
-Evictions? Are you going to do this from 2,000 miles away? Blindly hire an
attorney to do it for you? What about move-out inspection
after? Clean up
- Middle of the night emergencies? Is you Sat phone
Property management fees
- Typically 7-10%
- PM company can't survive on 7%. There will be hidden fees
- In my opinion 7% companies are cutting too many corners.
- Leasing fees on top? Most states this is typical
- Advertising fees
- $3,000 / year is high? That's a plane ticket a year? What about a tenant
who bails in the middle of the night and you have to fly home unexpectedly?
What about a poorly managed vacancy
causing it to take too long to re-rent? 1 month's missed rental income
you $2,500. It doesn't take long at all for that $3,000 savings to be chewed
up in plane ticket, hotel
, stress, missed vacation
time, relatives who dread you
calling asking for "another favor".
- "Dropping the price
gets it rented faster" - And encourages the lower class to
rent your house....causing more problems. Slightly higher rent (in our market)
gets you better tenants without longer a longer vacancy.
Owners managing their own properties:
- Are you retired, or starting a new business? PM is a business, it takes
- Owners have too much "skin in the game". You become emotionally involved
You will be more lenient and take the excuses and the next thing you know,
the tenant will owe you several thousand dollars and you will NEVER collect.
- PMs have procedures and execute them regardless. Your tenants know they
can't buffalo the PM company, it's procedure. Pay by XX date or be evicted,
it's that simple.
- "Professional tenants" seek out individual owners to rent from and avoid PMs
- "Professional tenants" prey on your greed. "I have cash...today!" "I have to
move in tomorrow" Then you don't have time to check out their background.
Let me ask you this- If you where paying $100/night for a hotel
get back to your wife in sunny places and an applicant walked up with 2 months
rent cash and "had to move in tomorrow"...wouldn't you be tempted? A PM
won't be....we will get the best tenant and run them ALL through our screening
process. Dangling carrots doesn't do any thing for a PM.
Ok, I am going on and on..... Finally some things to ask a PM as there are many bad PMs out there.
- Are you a NARPM member
? How active in NARPM are you? (find them at narpm.org)
- Setup fee? Monthly fees? Advertising fees? Fees while vacant? Leasing Fees?
Fees added to maintenance
- When is rent due? When do you serve notice of eviction? What are the rules
for eviction in XXX state? How often do you evict? Do you have policies in
place to help avoid evictions (reasonable grace periods, etc).
- What's your screening process?
- 3 references
- How many units do you manage? How many employees do you have?
A small company can manage ~75 units per employee.
Look at their website, look at their vacancies online, look at the quality
of their advertising, pictures, etc.
- Call them anonymously as a tenant. Look at 1 of their rentals, experience
how they handle potential tenants.
- Call them after hours. Is there an emergency
contact available after hours?
- Do you submit bad debt to collections (regardless of collection success, this
is VERY important because it let's the next PM know this is a deadbeat tenant).
I have managed my own property as an individual before I started doing this full time. I lost
$3,500 due to back rent and repairs
from a single
tenant...because I got emotionally involved and took the tenant's BS stories. I now run everything through procedures, same policy for EVERYONE, no exceptions.
It is possible to get a good tenant and have no problems for years, but it's just as easy to get a bad tenant or a string or short-term tenants moving in and moving out, all causing you problems while you are trying to enjoy life. It's a question of how much you like to gamble.
Will a PM avoid all the stuff I have talked about? No, but using a professional full time PM company will give you better odds.
Choose your risk level
Be at peace with your decision
Go cruising....worry free
That's my advice.