Why Property Managers Get a Bad Rap
We’re in an active growth mode at Panzera Realty, searching for real estate investors who need residential property management for units in their investment portfolio. Needless to say, we’re networking. We’re doing our research.
We’re finding out a lot about why property managers get a bad rap.
Here are some things we’ve heard when we’ve talked with investors who decline professional management services—now, and maybe forever—and what we do differently here that makes us stand out in a crowded service marketplace:
“My company can’t manage my small number of units economically for me.”
It always depends on what an investor means by “economically.” If they mean free or nearly free, as in a management company charging a fee less than 5%, then that investor should be self-managing. Property management is a business, and anytime in business that you undervalue your services, your services are going to have no value.
However, if a manager is charging an 8% management fee—making, say, $64.00 per month on an $800 rental, or $768 per year—and they’re not performing standard management services like running frequent site visits on the property, they’re not scanning for issues that cause investors money in the long run. We drive our property route frequently, and when we’re out on maintenance on one unit we’re driving by the others in the area. We’ve found such things as missing roof shingles and replaced them before more expensive water damage occurred, threatening tree branches that we arranged to have removed before they fell on a house, and damaged downspouts that we replaced before heavy rains.
“For months, my manager took $1000 less per month in rent than the going market rates, and I missed it because I had hired them to do that work for me.”
True story. Someone told us that just last week, and of course, we had to scratch our heads. It told us a few things. First, it told us that the manager had no idea what the market was bringing in rental rates in the area and must have had no desire to find out (which is nuts, considering that higher rents mean more management fee money if they’re calculating via percentage). It spoke even louder on the theme here: that management company has somehow been in business for years, giving a bad name to property management in general—even for those of us who are constantly analyzing the market and ensuring our rental rates are competitive in the area, doing the work the investor hired us to do.
“My manager takes a month’s rental fee with minimal tenant screening and puts in the first person they can so they can collect their fee and move on.”
We take a rental fee when we rent a property on a tiered scale depending on the number of units owned, because we work our tails off to screen tenants, show properties, and get the exact right person in the unit so that they will stay. We don’t complete this process in two days. We complete it when we find a good tenant who passes our rigorous screening process and seems to be the right fit. When good tenants stay long term, everyone’s happy.
“A handyman could have done less expensive maintenance, and that eats at my cash flow and bottom line.”
We hear this from many investors and don’t disagree that it can be true. But again, there’s an analysis you need to perform as an investor. How many units do you have? Do you even know a handyman? Is he trustworthy and reliable? Does he show up for appointments and do good work? What will you do if you need specialty work? Do you have those relationships and resources in place? If so, then maybe you’re a better candidate for self-management.
However, there are companies out there who visit properties and search for issues on which to create work orders with the goal of generating more revenue via unnecessary work. Good, ethical managers should fix only what’s broken. They should have skilled maintenance workers who do great work and strong relationships with subcontractors for specialty work. At Panzera, we work with contractors whose rates may not be the lowest in the city, but who are reliable and simply do good work.
Do you have any property management horror stories you’d like to share? If so, we invite you to reach out to us via our website’s Contact Us page with the subject line “PM Horror Story” so we can keep learning as we grow.