Why Property Management May Not Be a Simple Solution (part 1 of 2)

OK, you are reading the books, you went to the seminars, you have saved some money up, and now you are ready to buy.  You have chosen your strategy and if you are successful, you are going to end up owning some real estate.  Hopefully sooner rather than later.

What I have noticed is that all of the guru’s tend to gloss over the part about what happens once you actually own the real estate.  The mantra seems to be “Oh, well, you can just hire a property management company to take care of it for you.”  Let’s explore why that not be such a simple, or even desirable approach.

  1.  Property management companies cost money, often 10% of your gross rents.  When you are just starting out, you may not have those kinds of margins.
  2. Many property management companies will not take on smaller properties, or they will require that you hire an additional on site manager (who you will also have to compensate)
  3. Property management companies often charge extras for things such as evictions, unit turn overs, and yard maintenance
  4. Property management companies do not share your self-interest of filling vacant units—they get paid regardless of whether or not the units are filled—you do not get paid unless there is some actual cash flow
  5. If you have never managed a rental property and maybe it has been a long time since you lived in one, how will you know if your property manager is doing a good job?  Could they be improving their performance?  How do you even have a baseline to judge from?
  6. Have you ever dealt with a property management company?  Did they leave with a warm and fuzzy feeling?  Were they a source of joy in the world?

So, whether your reasons are financial, developmental, or personal, you might need to think long and hard about the realities of putting your property under management.

Check back tomorrow for some specific questions to ask potential property management companies.

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About Learn to Be a Landlord
I currently am a real estate investor in Spokane, WA. I own and manage 79 rental units. My background is not in business, but in social services and community organizing. I also had way too much liberal arts education. Somehow that all fits together to make me a landlord!

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