Help me be rich!

May 10, 2006 11:32 AM

Any rental property owners with experience using a property management service?

I would like to buy properties (specifically duplexes, triplexes, etc) in a city that I do not live in and have them managed by an operation in said city. I have absolutely zero experience with this, and was wondering if anybody had any tips, tricks, advice, etc. on this process.

What should I be looking out for? What are important considerations? What are typical rates and roles for these property managers?

Many thanks for any replies.

posted by eas98 to work & money (11 comments total)

Their role is to take a percentage of the rent (I guess this might vary-I forget-) and handle all repair requests, etc to be paid out of your part of the rent, assuming that amount covers it. It is smart to have any repairs over a certain dollar amount approved by you directly.

You will want them to screen tenants carefully, run a credit check, things like that. They are supposed to at least drive by and check on these houses occasionally.

I highly recommend you be very picky about who you have do this. I would want to talk to people who already use the service to see if they are happy. A good service is a godsend, a bad one will be hell.
posted by konolia at 12:03 PM on May 10, 2006

I am curious on the same subject also...
some one please add how one should go about finding one of those management co.. also...
posted by curiousleo at 12:35 PM on May 10, 2006

Fwiw, a long time ago, and in London not the US, I got badly burned by a supposedly-reputable property management company. I ended up with big legal bills to get squatters out, who the management company had let in and not taken care of. It's unlikely to happen, but it can. (I admit to not having been diligent enough in checking the management company's references.)
posted by anadem at 1:04 PM on May 10, 2006

I went through my local Century 21 guy, who has since branched the business off into a separate entity (called Carolina Management, iirc). I found the guy through a friend at work. Overall, contact local real estate firms and they should be able to point you in the right direction.

My experience has been very positive. My situation was that I was moving out of state, had owned the property for less than 2 years (hence not wanting to sell), and didn't have the resources to manage it well. The company handles all aspects of management - credit check on potential renters, rent collection/late fees collection (which go straight to me), and are authorized to make repairs up to $250. As an example, my tennant's main drain line got backed up and raw sewage came up through the toilet and tub drain. I got a call from the company letting me know what happened and telling me they called a plumber. It cost only $150 to fix everything.

In my case, the company charges 8% of rent, with a minimum of $60 a month (so I get charged $60 a month for my $700/month condo I'm renting). It's been worth it to me to not have to worry about anything with maintenance or collecitions.

A few things you want to make sure are crystal clear: Make sure they make ZERO dollars from any repairs/maintenance. Their cash flow should come from your 8% alone.

Make sure you reserve the right to choose your own repair contractors if you know some good ones. When I moved out, I had all carpets cleaned for $85. The renter saw the place a day later and mentioned he wanted them cleaned again (there was a faint permanent gray are in the living room). The company said they could bring someone out to do it for $200. (!) Seeing the results of the cleaning myself, I said no, pass on the guy if that's a dealbreaker for him. He ended up moving in anyway.

Overall it's been very much worth it for me. Make sure to pick your own repair guys if you know good, trustworthy ones, and make sure to read the contract through thoroughly before signing.

Good luck!
posted by skechada at 1:09 PM on May 10, 2006

(Sorry this is so long).

I used a leasing agent (licensed realtor) who sidelined in property management when I rented out my condo for a year. She listed the property, showed it to potential renters, vetted them for me, dealt with the lease paperwork, collected the rent from the tenant each month (& forwarded me the rent on her corporate checks which was nice, because then I knew the tenant's check didn't bounce), and acted as the middleman (-woman) for any tenant issues/repair issues that came up.

If something needed fixing she had a network of plumbers, handymen and the like who she could call on short notice. I also kept an appliance maintenance contract just in case the tenants decided to blow up the clothes dryer, or put rusty nails down the garbage disposal. It worked out pretty well, but there were a couple of occasions where the back and forth between me, her, and the tenant got to be cumbersome during a major repair and I just started dealing directly with the tenant to save time -- that was the exception to the rule.

For this she charged me 15% of the annual rent. Keep in mind that a portion of that was her take for leasing it in the first place; she did not necessarily have to be the one providing me the additional services. She did not take her cut in monthly installments. Instead, she took it off the top from all incoming rent checks until her 15% was paid, and from there on out I got all the rent each month.

All in all it worked about as well as I could have hoped. I definitely recommend that for any repairs (oh, there'll be repairs...), that you be billed directly and demand to see an estimate first no matter how big of an "emergency" it is - in the year 2006 there are fax machines and email, and there is no reason for anybody balking on that one.

Also re: repairs, I wish I had thought of this to add to my lease agreement -- if the tenant calls requesting something to be repaired, and then blows off the repairman & they can't keep the appointment because of that, you'll still probably get charged for an hour of the repairman's time. You can either think of this as your expense at tax time, or write it into the lease that if the renter agrees to meet a repairman that THEY request, and they blow it off, they are responsible for the no-show bill.

I can't really think of anything else. I suppose if I had had a really horrible experience this might have been much longer (shudder).
posted by contessa at 1:32 PM on May 10, 2006

As a tenant, I assiduously avoid renting from set-ups like this. As an owner, you'll be responsible for making sure that the company actually does send the maintenance people around, actually does get the grass cut/cleans the pool, as opposed to just charges you for it. I know people who have had problems with florida beach rental management companies charging for things they didn't do. Ultimately, unless your management company is absolutely flawless and of the utmost integrity, you'll lose property value much sooner than you would if you were there to manage the property yourself. Depending on your profit margin, this may turn your proposition from income to money pit.

_{If you're thinking of doing this in the New Orleans area, you're already too late.}
posted by Mr. Gunn at 2:42 PM on May 10, 2006

Mr.Gunn - FWIW, I went the route described above because I had no experience whatsoever in being a landlord, I wouldn't have even known where to begin on my own. Not to mention the absolute impossibility of my taking off time from work on a whim to show the place to whoever might have been interested in renting. At first I did feel a little uneasy having that kind of 'remove' from the management of the property, but it wasn't all that bad. I do realize that some people (here in Florida at least) play the absentee landlord thing and are probably getting screwed over. I was (still am) nearby, just inexperienced. Hence bringing a 3rd party into the picture.
posted by contessa at 2:58 PM on May 10, 2006

I'd go thru a real estate company's rental department if I were you since they have a vested interest in doing a good job (they want your listing if and when you decide to sell.)
posted by konolia at 6:11 PM on May 10, 2006

I offer this as a former landlord who now moves every few years and rents.

As a renter who likes privacy, I prefer professionally managed homes. However, some put on too many conditions. In the UK, one insisted on quarterly inspections. I'm sorry, but no way. Come by with an appointment after a few months, you'll see I'm not destroying the place. 4 times a year is harrassment.

However! I'm in South Africa currently. The landlord is great, the house is fabulous. The management company is worthless, but supposed to be great. They've inspected once, but only after the landlord complained because they hadn't. To their credit, perhaps they realized the difference between highly-visible professional household vs. folks too poor to purchase. (we rent because we move too often).

When we asked that something be looked at, it never happened. When the lease was up for renewal, they attempted to change to a lease which met the management companies "new policy". Our lease was explicit (I rewrote most of it) that there could be no changes. Since the rent increased (per agreement) they attempted to require additional deposit, which was not addressed.

It's been 7 months into the 'new lease'. I never signed the document, I never paid additional deposit (nor will I pay). Nor have I heard from management since. We operate on the assumption that our registered letter regarding renewal simply extended the exisiting lease. The point being, what is the landlord getting, besides his payment?

A good management company is fine, but you need to have a line of contact open to your tenant directly, to help oversee the management company. People are good at creating the appearence of professional conduct. Looks don't count!
posted by Goofyy at 12:48 AM on May 11, 2006

Thank you all for the replies!
posted by eas98 at 7:39 AM on May 11, 2006

One suggestion: Test the management company as if you're a tenant when they're in service. The previous management company managing the apartment I rent had be running for the rent ads and the housing tribunal (courts) within 3 months (illegal $250 charges for air conditioning [They had the gall to actually "negotiate" it down to $150, even though I was told it was free... of course I refused to pay anything], wouldn't even provide the handles to go on the cabinets, the place is an absolute pit [although I knew that from the start] with paint splashes and missing tiles EVERYWHERE, broken closets and doors, latex paint on oil paint, the list goes on.)

When called, nobody would ever answer the phone at the management company (which was long distance!!!). Ever. We're talking calling six or seven times a day during normal business hours. After leaving a message it would take DAYS for a response (although I learned I could get a response in a few minutes if I started to quote the Tenant Protection Act). Routine, non-emergency repairs to the water mains (which involved turing off the water and replacing old meters with new ones when a tenant moves in, due to some weird local bylaws on this) would result in either notice that it would happen in 3 hours, that it had already happened (that was a fun shower), or just no notice at all. The best of the worst was illegally entering our apartment (less than 24 hours notice given) for inspections (that resulted in me installing a chain lock on the door). I won't even go into the fact they REFUSED to give out rent receipts...

The other tenants were working on setting up a tenants association (union) to sue the new management company into compliance with the laws. And tenants that had been there for DECADES (literally) were moving out because of them. The only talk in the hallways and outside was where else one could rent and get a better deal (wasn't hard to find...)

...Enter the new management. The mangement company changed halfway through my lease. The new company is actually repairing and renovating the place (They have pictures of the newly redone units online! These are serious repairs involving completely redoing the entire flooring, etc, probably enough to raise the rent 30% or 40%). They have NEVER done ANYTHING major without at least 24 hours notice (very important). Rent receipts given without any trouble (even faxed, if I like). Oh, they answer the phone within 1 or 2 rings -- and the person answering is actually able to do things.

So, the answer is: Bad management company == ghetto hellhole dump in zero time and I think I should be *paid* to live there. Good management company == landlord is able to raise my rent 2.1% this year and *I* feel *I'm* the one getting the better end of the bargain.

Just a tenant that's experienced both sides of the fence. Please, to keep your property actually maintained, test the company well. You do NOT want your apartments to end up like these.
posted by shepd at 2:13 PM on May 11, 2006