Case Study
We just got a phone call from a prospective client who had been with a budget property manager for 10 years. It was an interesting case study because, while this client had saved some money in management fees, they lost money in the long run.
This video breaks down the difference between price and cost.
Price = What you pay a property manager.
Cost = What you pay a property manager + all of their mistakes.
Common Mistakes
When we take over properties from budget property managers we see five common mistakes.
1. No Rent Increases
Increasing a resident’s rent is difficult. It’s hard to tell someone that they are going to have to pay more money next month. It creates conflict. Why would a budget property manager with a flat fee increase rent? After all, their management fee does not depend on how much the rent is.
2. No Lease Renewals
Most budget companies don’t charge for lease renewals. Why go through the work of renewing a lease agreement if you don’t get paid for it? We often see leases that are 10 years old and they don’t have any of the TPA exemptions that would protect an owner from rent control and just cause evictions.
3. No Local Presence
Calling plumbers on Yelp from 500 miles away does not add any value. A high quality property manager has a local presence and maintains relationships with high quality local vendors. A good property manager is going to save you money on maintenance requests. Now, that doesn’t mean we look for the cheapest vendor, we look for someone who can do the job well in a reasonable amount of time for a reasonable price.
4. No True Expertise
The old saying, “you get what you pay for” rings true when it comes to property management. From a business standpoint, it is expensive to hire, train, and retain well qualified property managers that are experts in their field. Budget property managers and realtors who do property management on the side are usually not the experts. Would you hire a budget dentist to fill a cavity? If not, why would you hire a budget property manager to oversee one of your most expensive assets?
5. Not Proactive
Most budget property managers are not proactive, they are reactive. They are there to assist when something goes wrong. You might save some money in management fees, but how much money did you loose when the safety inspection wasn’t done and the leak under the sink wasn’t caught and now you have a mold abatement issue?
Summing It Up
Make no mistake, I’m all for saving money where I can. I cut coupons, shop at discount stores and look for deals. However, I am thoroughly convinced that hiring a budget expert is not going to save me money.
Ultimately, hiring a cheap property manager is one of the most expensive mistakes you can make.
