When you first start out as a landlord, you may think a property manager is a property manager and it’s just a matter of interviewing and hiring the right one. However, with a little more experience you will see that Property Management is far from a commodity. Not only do different managers offer different kinds of services for different pricing, but that there are at least 5 main kinds of managers out there. Knowing what kind of manager you are talking to and what kind fits with what you need will help you research and interview a great match.
1. The “Favor” Property Manager
Individual agents doing it on the side for their customers. It is not the persons main job or even viewed as a job, as they are just “doing it on the side” almost as a favor. These managers can look cheap, but they offer little to no reporting, expertise, or guidance. Just because someone is licensed doesn’t mean they know what they are doing. Many agents may not be operating legally under their brokerage and 9 times out of 10 operate without insurance. They have limited to no experience, expertise or even the desire to learn more about properly managing a rental. Anyone is better than this kind of manager as their “management” can hurt your investment more than help and in many cases, you are better off not paying anything to them and self-manage. This kind of manager typically doesn’t even know how many homes they manage, but usually between 1 and 50.
2. The Property Management Side Business
Usually a distinct department that is part of a sales brokerage. Property management is not featured on their website or marketing as the department is run as an afterthought, a “holding pen” for future listings, and a potential farm to capture tenants looking to purchase. Pricing can be all over the map with management fees, leasing fees and up-charges on maintenance. There is typically little consistency and minimal reporting as the company’s focus is on the 5 figure sales commissions vs. 3 figure management fees so no resources are invested. Usually there are one or two administrative staff that handle all the actual management while an individual agent is the face to you as the owner and may only be responsible for leasing whenever needed but is not involved with the day to day management. These brokerages, on average, will typically manage between 50-200+ homes.
3. The Lone Ranger Property Manager
Highly hands on, communicative, usually pro-active, up to date on laws and practice as it is their main or only job and focus. Customizable to your needs and can be creative with solutions to save you money. These kinds of managers can be excellent but may be more expensive. For the level of skill and attention this kind of manager gives though can be very worth it, creating or preserving more value than they cost. There are cons however, they are a one-person show. If they get sick, go on vacation, or just get busy, what happens to the needs of your property? A single person can only manage so many properties effectively, so a “Lone Ranger” typically manages between 30-100 properties. This makes it harder for that manager to have as much leverage with vendors for speedy repairs or more preferred pricing. Otherwise, this kind of manager may be an excellent option if you find a great one.
This is how BlueHome started, and we continue to operate with the attention this kind of manager can offer, while taking away the cons of operating like this by growing into property manager type #4…
4. The Small to Medium Portfolio Property Management Company
Hands on with usually one main point of contact that knows everything that is going on with your property, with an admin team behind them for backup. This ensures sickness or activity spikes don’t affect service and performance during the busy leasing season, high maintenance times, etc. Organized well, these managers are just as if not more pro-active than the lone ranger offering clear accountability to you and your property. Typically, they are active members of NARPM (a national organization for the education and training of property managers) and are constantly honing their skills and keeping up to date on changing laws and practices.
Most can be somewhat customizable to your needs while still maintaining the advantage of having one person oversee all aspects of your property, allowing that person to see creative solutions to save you money and increase value. These managers can be equal to or less expensive than a lone ranger but have greater efficiencies, more consistency, and leverage over vendors to get better quality, speed and pricing from them. Their depth of knowledge and experience is usually the highest of all manager types as the company is small. Allowing shared experience between managers and with the time available to invest in the cutting edge of management and investment maximization. Typically, these management companies manage between 100-500+ homes as a company, with individual managers handling portfolios of 100-200 maximum.
BlueHome is organized to be this kind of manager and to never grow so big or so fast that we lose the one on one touch that we believe offers the most value to Landlords.
5. The Large or Departmental Property Management Company
Many national brands or companies that manage 500 to 1000+ properties fall into this category. These managers can have a lower “sticker price” for their management as they can use their size for greater efficiencies. They however can never be as flexible as other manager types as to get their efficiencies from size they must have rigid systems to coordinate the different departments and the several different people that handle different aspects of management. One person will never oversee A to Z with your property, this works well for routine management, but causes missed opportunities to save money, avoid problems proactively, and increase property or investment value. Accountability can also be an issue when inevitably something falls through the cracks between departments. Some do offer a single point of contact for owners, but communication can take some time as your point person must consult with all the different departments to find answers. There is nothing wrong with this kind of manager, but the danger is of becoming just another number lost in a large pool of other, bigger clients.
There is nothing wrong with any of the kinds of property managers out there (well 2-5, stay away from manager type #1). You should just know the different models, benefits and cons that each of these types offer. That way you can make a better-informed decision and know a bit more about what to expect with whatever kind of manager fits you best.