property managerYour real estate business depends on who you have managing the property. If you manage the properties yourself, great, more power to you. I personally do not want to manage my own properties so I hire a Property Manager (PM) to manage it for me. I would rather spend my time on the things that I want and pay my PM to manage the property for me.

When I first started investing, I went with a PM who did a great job for about 8 months.  After a while, I started noticing charges on my statement without having receipts to go with them.  Then I had many major repairs back to back on properties that were eating away my profits.

She told me that one of my properties needed a new main drain which cost $1,000 and would not produce a receipt for the improvements!

So, after being patient for far too long, I finally fired her and found a new PM.  I took the experience from that horrible PM and tried to learn as much as I could from it.  The lessons I learned from that first PM has helped me to develop my rental business to be even more profitable and successful because I learned from my mistakes.

The 6 deal breakers Property Managers

Here are some key items to look for when finding the right property manager. The items in this list are non-negotiable for me. There are other things I look for in a PM but I will not do without these.  The only way to find out if your property manager has these qualities is to build a relationship with them and ask them many questions.

Since I invest all over the country, I always meet with a few property managers in person while they show me the area I am going to start investing. I like to meet with at least 3 different PM’s so I hopefully find one, and a backup, that will take care of my business well.

Trustworthiness

You must be able to trust your PM. Remember, they are your employee, and they are working for you. One property manager I had was not trustworthy, and I had to fire her. There were missing receipts, unexplained expenses, upset tenants, etc. Don’t put up with a bad property manager. Get rid of them quickly. Like an employee, hire slow, fire fast.

Don’t put up with a bad property manager. Get rid of them quick. I treat them like any employee I have ever employed. If they are good, I treat and pay them well. They are running my business for me and if it was not for them, I would not have a business. But if they are a bad employee I get rid of them as fast as possible. Like an employee, hire slow, fire fast.


Accountability

Everything the PM does should be ran through you, and you should be able to verify what they do. I give my PM’s the authority to spend under $100 per property per month without my approval. I don’t want to be bothered with a $5 toilet leak, but I do want to be bothered about a $300 water heater or a $2,000 furnace replacement.

I review every statement and every expense/income that I receive. If there are any issues or questions, I ask them right away. If the PM is unable to adequately answer my questions, I start to get suspicious of them doing their job well and how much I can trust them. Once the seed of doubt is planted, it takes a lot of time for the PM to build that trust back up in me so I am able to fully trust them.

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Communication

The PM should be able to return your call/text/email within the same day, or at the latest, within 24 hours. This is a non-negotiable. Only with good communication can your real estate business run well and keep you and your tenants happy. I have had bad PM’s in the past and they make your life too hard to keep them.

I find that the main problem with a lack of communication is that I start to worry about my properties and imagine the worst possible scenarios for my properties. I employ my PM so that I don’t have to think about the property and if he/she is not communicating promptly; my properties are all that I think about.

When I am screening out PM’s before I invest in a new area I expect the PM to be on their “A” game and be in constant conversation with me because he wants to get my business. If the PM has horrible communication timelines and abilities while he is trying to get my business, I can only imagine how much worse it would be when I actually hire him to do the job. I have passed on many PM’s because of their lack of communication in the hiring period because it will more than likely get worse, not better.


 

Quality of Work

When you have a good PM, the quality of the rehab or repairs she will do should meet your standards. You should be able to rely on your PM to make the property desirable to tenants and get top dollar for the rent. If your properties are run down the rent amount would be much lower than if you took care of the properties because they are not as desirable. Your PM is who makes sure the property is desirable. If you are not able to get the same market rents as the properties near you, look into the quality of product your PM is selling to the prospective tenants.


 

References

Just like hiring any other employee, check their references, and see if they have a good track record with previous/current landlords they are working for. If they have good references you have hopefully been able to get a leg up on finding a good PM.

I never understood when PM’s do not give references. I had one potential PM tell me that he will not give any references because his other landlords are confidential. This was a huge red flag for me. No matter the reason for him being secretive, this goes against points 2 and 3. It shows that they do not want to be held accountable and that they may not be trustworthy enough for me to hire them. I moved on.


 

Commission Percentage

The amount that I pay my PM is based on what I contract with them for their services. Some areas 8% of rents is the going rate and in others 10% is. If it is hard to find a good PM in a specific area, you may pay an awesome PM 12% because you are getting awesome service for your money. I have an area where I am paying 12% for my PM, but he is worth every penny.

The biggest thing I can leave you with is this: When you get a good PM, pay them and treat them well. The PM whom I pay 12% of the rents, which is rather high for a percentage, is worth every penny. One day I thought to change the terms of our agreement once and bring the % down to 10%.

After I considered the change, the amount of money I would save would not compare to the amount of dissatisfaction my PM would feel. The decrease would lower his desire to do the job right. Just imagine if your boss came to you and asked you to take a pay decrease all while you are the one making the money for him. That wouldn’t be good at all.

Again, when you find a good property manager, pay them what they deserve.

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6 Deal Breakers to Look for in a Property Manager
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