The 5 Biggest Issues with Property Management Companies
In 2008 Justin and I started investing in single family rentals. Soon we realized we couldn’t handle the management of our properties anymore. We looked around at property management companies in the Grand Rapids area and were not impressed with the professionalism in the industry. Thus, Access Property Management Group was born.
Even though we are property managers, each team member at Access Property Management Group is also a property owner. We know there are problems with hiring a property management company.
Before you decide on us or any property management company, I want to go over the top 5 problems with property management companies. In this post I will discuss these problems so you can decide if hiring a company to manage your company still works for your situation.
Problem #1: Lose Control of Your Property
You spend countless hours researching, analyzing, making offers, being rejected, and finally closing on a property. Most people self-manage for a year or years before looking into property management. Even if you are an accidental landlord, your property is extremely important to you. How can you just hand over the keys and trust this company can manage it even half as good as you can? Mitigate this problem through research:
- What do reviews (BBB, Google, Facebook, YELP) say about the company?
- Network and ask other investors who they use.
- Research and interview at least 3 companies before making your decision.
Problem #2: Expensive Maintenance
When you hire a property manager, you will see maintenance expenses increase. It doesn’t matter if the company has in-house maintenance or third party contractors. It’s going to be more expensive than if you do it yourself. As a self-manager, you can go and replace a lightbulb or fix a toilet with only the cost of parts. A good property manager hires a licensed and insured reputable contractor which costs you parts and labor. BUT what you aren’t factoring into the equation is your time to
drive to the store…
buy the part…
drive to your property…
fix the issue…
and drive back home….
To help yourself with this dilemma, ask yourself these questions:
- Is the extra costs in maintenance worth having more time in my life?
- Can I factor in the extra maintenance costs into my investment and still make money?
- What can I do on the front end to prevent extra maintenance repairs?
Problem #3: Poor Communication
Almost every client we take on that came from another company states this problem with their prior management company. You hand over the keys, and come disbursement day, only a quarter of the rent amount shows up in your bank account. On your statement you see charges for management, leasing charge, a couple work orders….
When did all that happen???
They are probably legitimate charges, but you were depending on that rent check. Why weren’t you told about them? Property managers are notorious for forgetting that their clients don’t like surprises. They are also known for avoiding calls and emails when questions arise. Everyone wants to have a different level of involvement in their property, so you need to decide how much you want to hear about your property.
You can understand a property manager’s communication level by asking these questions:
- At what times in the management of my property will you communicate to me (new tenant, move out, rent not paid, new work order)?
- How will you communicate to me (email, text, phone call)?
- How can I get ahold of you if I need to (cell phone, email, text)?
Problem #4: Hidden Fees
Property management companies get paid through a variety of revenues sources. Most companies also have a selection of services so you can choose how you want it managed. It isn’t a one-time transaction like when a real estate agent buys or sells a home. This is fine as long as the company discloses these fees to you and you are prepared to pay them. For instance, if your property manager fails to mention a yearly inspection fee, it can completely throw off your planning.
Your property management company should be able to answer these questions for you:
- What is your management, new lease and lease renewal fees?
- Do you have any ancillary services? Are they optional?
- What other costs can I expect to have from your company throughout the management of my property?
Problem #5: Undecipherable Accounting and Reporting
Whether you are an investor or accidental landlord, you need to know the numbers. If a property management company cannot provide you with a monthly report and year end accounting that is clear and readable, don’t use them. There is any easy solution to this issue. Ask up front to see an example of their owner statement and Year End Report. Also, you should not hire a property manager that cannot offer you an online portal to see your property information in real time.
To learn more about their accounting process, ask these questions:
- Can I see a sample owner statement and year end report?
- What does your online portal look like? Can I see real-time information?
Now Time For Research
These were the issues we experienced when looking for a property management company. I hope that by sharing our problems with property management companies with you, it will allow you to choose the best company. Each company will be a little different. Ultimately you need to work with someone you like and trust, so take the time to do the research necessary to find the best fit for you!
Here’s some more additional resources for choosing a property management company:
- Property Management Problems and How to Avoid Them
- How to Choose a Property Management Company in Grand Rapids: Contacts and Contracts
To learn more about how we manage properties, download our Owner Handbook. Its a comprehensive guide to our we handle
- Financial Reporting