Management One Property Management

Property Management Companies – Why Use One?

By Steve Hembree

There are two sides to the property management question: the owner side, and the renter side.

 

Why use a property management service for your rental? I’ll break it down for you from a unique perspective, using my years as an inspector since 2010 for bank REO properties, doing insurance company inspections, and as a property inspector.

 

There are articles on this site dealing with this topic in varying ways. Since you are already here, it would be awkward to self-promote this topic again, so instead, I will share with you some of the things I have seen in the field as to why you should use a property management company in general. Further, you may well be outside of an area we cover, such as, I don’t know, Calcutta, India, for example; however, the basics ought to remain the same regardless of region.

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What Types of Property Management Companies Are There?

 

First, there are different types of property management companies. There are:

  • Home Owner Associations, HOAs, which I deal with some of the time, and I’m excluding them here as they are not relevant. However, I will say there are advantages and disadvantages to HOAs, a topic for another day.

 

  • Companies which wholly own the properties they manage, some of which I have dealt with back after the housing bubble burst. These entities are typically investor-owned and do everything the next entry does, but they also personally pay all the bills, be it property taxes, costs for repairs and property rehab costs. A property owner cannot have their property managed by them, and renters are largely at the mercy of the office and repair personnel, as pretty much everything is done in-house.

 

  • Companies that manage properties which other private folks own. That is the category in which we fall.

We hire licensed and insured professional contractors to complete any maintenance, and we have a fiduciary responsibility to all parties.

 

If one was looking into a property management company like ours from the outside, they might think that all a PM company does is collect rent, separate a fee, and pay the property owner the balance. I can tell you, in our case and from the inside, that there is a whole lot more there than meets the eye. I’m busy, literally, from the time my day starts until the time my day ends, every single day. Why is that?

 

Because people and properties need time and attention on a continual, and daily, basis.

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What About Self-Managed Properties?

I’d say that is all well and fine, so long as owner and renters understand a few things:

 

  • It takes time to fix things. Sometimes fixing this, that, or the other thing is best done by the occupant. There’s a light bulb out? Put in another one.

 

  • Repairing stuff does cost money, and money is not an inexhaustible resource.

 

  • Not fixing stuff is not an option. A door that does not lock right? That pipe that leaks, but only now and then? It simply is not optional to NOT fix these items. That badly peeling paint on the fascia boards? Fixing this prevents the cost skyrocketing and a diminished property value. That stuff is not strictly cosmetic. And the insurance company can either raise the owner’s rates or cancel their policy!

 

  • What is your temperament? Can you deal easily with the occasional difficult person? This cuts both ways, and there is more information on this aspect is at the bottom of the article.

 

Sadly, many people with self-managed properties are without a clue on some of this stuff. I have seen it firsthand.

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Actual cases of self-managed properties that ought to have used a property management company.

Bank case, exterior only, nice, newer two-story home, well kept, next to a pocket park. Normally I would avoid speaking to the occupants because if I am there for a bank, odds are the occupants know they are in foreclosure, and any interaction can turn volatile instantly. Outside their house taking pictures, should an occupant see me, the most I would state is, “The bank sent me. They don’t tell me why, they just say go and do such, so I go and do such.”  Invariably the occupant would nod and walk back in the house, their argument deflated. In this case, the occupant was driving off, came back and asked me what I was doing, and I gave the usual response. Turns out he was renting the house, and the owner was taking the money and keeping it rather than paying the mortgage. Occupant did not have the owner’s contact information.

Invariably the occupant would nod and walk back in the house, their argument deflated. In this case, the occupant was driving off, came back and asked me what I was doing, and I gave the usual response. Turns out he was renting the house, and the owner was taking the money and keeping it rather than paying the mortgage. Occupant did not have the owner’s contact information.

 

 

Insurance case, exterior only, Banning, <1000 square foot house, near a rural area, approximately 55 years old. Rental, which I knew before arriving. I arrived to find the 62-year-old occupant in the front yard. I could tell on pulling up that there was a lot of deferred maintenance, the man likes his beer, as beer cans were scattered all over the front yard.  The man told me he had lived at the house for about 15 years. The owner was VERY absent, so much so that the occupant NEVER called the owner for anything. In fact, he hadn’t seen the owner for nearly 10 years.The occupant was on public assistance. He couldn’t afford his rent to go up, he told me, “that wall that fell apart inside due to water damage? Why, I rebuilt it myself, at my own cost. Added another wall too, made a bedroom into two bedrooms while I was at it. And the fence? Well shoot, I’ve replaced that 3 times in 5 years. I may be cheap (spit, ding) but I ain’t no carpenter.” I think he said “Heeyuck” after this last bit.

The owner was VERY absent, so much so that the occupant NEVER called the owner for anything. In fact, he hadn’t seen the owner for nearly 10 years.The occupant was on public assistance. He couldn’t afford his rent to go up, he told me, “that wall that fell apart inside due to water damage? Why, I rebuilt it myself, at my own cost.  Added another wall too, made a bedroom into two bedrooms while I was at it. And the fence? Well shoot, I’ve replaced that 3 times in 5 years. I may be cheap (spit, ding) but I ain’t no carpenter.” I think he said “Heeyuck” after this last bit.

 

Each would have benefited from professional property management.

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More Endless Money Holes Sans Property Management

Now I’m going to tell you something that I have very rarely spoken about publicly. Discretion is important, but so is the need to pass information.

 

I performed thousands of inspections for insurance companies, and about 70% of the time I encountered rental properties. Of those rentals, less than 10% had professional property management. All in all, those properties scored much better than self-managed properties in terms of minor concerns, and major/actionable, concerns.
Of the 90% remaining, about 15% were in overall good condition, with no, or very few flaws. I checked only about 20 properties of any kind, total, where I found no items that could result in an insurance claim.
More than 40% of all self-managed rentals had serious (major, or actionable) problems which could result in lawsuits, and/or policy cancellation. That number could be as high as 60%+, to be honest.

 

When I received a case from an underwriter, the first thing I checked was if the resident was the owner. If not owner occupied and not managed by a property management company, my job got much harder.

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Property Management Rehab Expertise

I cannot speak for other companies because I have not worked for them; however, I have worked with some rehabbers and checked their work after. I can say, no qualifiers needed, that we have excellence in spades when it comes to rehabbing properties. This means the house is habitable, functions, is secure and is done both in a speedy and cost-effective manner. We use only seasoned pros for rehab projects.

 

Here’s how I see it, as I explained to an owner recently who objected to the cost of rehabbing his property:
We want you to get you the best resident we can, quickly, and for the least money spent we can do it for. However, sometimes you have to spend some money in order to make some money.
A quick example is a gentleman who recently bought a house that one of our other owners sold, and he snapped it up. $14,000 of rehab later, he’s making income, and his property has gained about $20,000 in value in 4 months down the road. Pretty darn good!

 

If you’re afraid to spend money to make money, then, by all means, manage your own property. My cousin did it, made millions. Oh, that’s right, he was a tax attorney and spent money, so, yeah, there’s that.
Or you can have Shaky Jake manage it. You know the guy, he hand writes cardboard signs with a sharpie and tapes them to stop signs around town. “$99 property management. Been doing it two whole years. My friend can paint.”
My best advice? GFP: Go Full Pro.

 

The rehab also ought to serve the purpose of raising the property’s value.

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Last words on Property Management

This is either your former home or your wisely acquired investment we’re talking about here. At the same time, do understand that we get it, we live in this world every single day. We understand the value you place on your property.

Regarding temperament

A friend of mine, we’ll call him Willie, lived in a house in San Diego County. Willie admits that he and his family were not the ideal renters, they were frequently late on their rent, and the owners, a couple who self-manage, would let it slide. What’s $25 here, $50 there? Just make it up later,” they would say.

As I told Willie, that would not fly in our business, the rent is the rent, it is based on a legal document and agreement between the landlord and the renter. The renter has their obligations, the owner theirs.

Years ago, the plumbing went bad. The owner’s solution? “Here’s a large Folgers can. This is now your toilet until I can raise enough money (we’re talking weeks here) to fix the plumbing.”

A few years later the 30-year-old water heater began leaking. Willie paid over a $1000, to replace it, which happened to be the monthly rent. The owner

debited this amount from the rent, yet, as I understand it, came back on him later for this cost.

Occasionally, and unannounced, the owner would show up to “inspect” the property. What they would do is ask to be invited in, as it is illegal for a landlord to enter a renter’s dwelling except in very proscribed circumstances in California.

On one such visit, the wife walks into the bathroom and sees a bucket in the bathtub. She begins shrieking, “What! What! That is a bucket! What is a BUCKET doing in the tub?!?
Willie and his wife are baffled but not surprised, she would often make snarky comments and moves furniture when she shows up.
Willie’s wife explains they that, at present, they cannot afford the laundromat up the road, so they are hand washing their clothes.
The wife owner shrieks again while walking out of the house to leave, “I can’t believe what you horrible people are doing to our house!” All of this transpires in front of the children.

Clearly, these owners do not have the temperament to self-manage.

No matter what, always stay cool. Hold your renters accountable, get your rental amount, don’t permit damage, but do so in such a way that they can keep that which is really the only thing that anyone truly owns, their dignity.

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Professional Property Management Companies

That is something a property management company ought to excel at. Ditch the headache of self-management and call Management One Property Management for your property management needs. With over 30 years’ experience in property management, we have encountered pretty much every situation that comes with managing properties.

 

Related Articles:

Professional Property Management VS Self-Management: How Best Manage Your Property

DIY Home Repairs vs Using Property Management Vendors

 

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