You might not guess this but four years ago, I was all about hiring a property manager rather than self-managing my properties. I was the biggest proponent out there.
My parents had self-managed for my entire childhood. I grew up painting, showing the house, etc. They were the ultimate DITY role models. I learned a lot from them, but being the typical young adult, I thought I knew it all. I had a general idea of the requirements, at least in the eyes of a kid. I had a full-time job, a husband, etc., and didn’t think that self-management was for me since we were going to be investing in property out of town.
After deciding to hire a property manager, I did what everyone does. I started to research and search for a new property manager. I made a spreadsheet comparing all the different companies and coming up with all my questions. I then sent my questions to a potential property manager and requested he send a copy of the management contract. He answered all my questions and sent over a copy of the contract.
This was when my world got rocked and my view on managing properties completely changed.
After closely examining the contract (I read contracts for a living so I was comfortable reading fine print), I found so many things that bothered me that I ended up throwing the contract across the room!
The Problem with Hiring a Property Manager
1. The Fees
Oh my gosh, I was SHOCKED about the fees they were charging. There was the normal monthly fee of 10% and the placement free of one month’s rent, but it was all the other hidden fees in the contract that bothered me.
- Pet Fee – They kept all pet fees.
- Late Fee – They kept those too!
- Maintenance Fee – They charged 10% for any repairs they organized.
- Project Management Fee – If there was a huge repair, they got a percentage of the cost of the project for having to organize it.
- Selling Fee – They required 6% to be paid to the management company if the tenant buys your house.
- Eviction Fee – Any eviction work regarding the tenant was $25 an hour.
- Renewal Fee- This was half of the monthly rent.
- One-Time Paperwork Fee – This was around $300.
- Yearly Contract – No matter what, you were required to keep the property management company for a year –even if they were awful.
I was astonished. These fees add up really quickly. I felt like I was paying someone to place a tenant and then just a really expensive retainer fee.
The fees weren’t all I was not happy with. The answers to my questions pushed me away even further.
- Replacement – If the tenant broke the lease, we were still required to pay another placement fee.
- Installation – It would take 30-45 days to place a tenant, so you would lose at least a month of rent because your house would be empty!
The nail in the coffin:
When I started to complain, he said everything was up for negotiation. He said he would happily negotiate a better deal! Now, I know I might be old fashioned but I do not like to negotiate. The idea that I had to figure out what was unacceptable and what was acceptable to me was the final straw! That broke my trust as I found that dishonest and shady. I felt like I was talking with a used car sales man!
Managing My Own Properties
On that day, I said forget this! I figured hiring a lawyer to bail me out would be cheaper, and I have been right so far. Three years later, I have successfully self-managed my homes from all over the country and even when I travel overseas!
On my houses, I save over $15k a year just on placement and monthly fees.
Contray to the rumors and thoughts I have heard, I am all about realtors! I only buy houses off the MLS (the professional listing service that realtors use). I have a trusted realtor in every city I buy properties in, and I love them!
Realtors and property managers are just tools in your land lording belt. This article is about my story into the land of self-management. My goal is for you to be able to make an educated decision. If you decide to go with a manager –as they say, there are different strokes for different folks.
Use this article to know what to look for and how to negotiate the best contract ever. Remember you want everything in writing because otherwise it doesn’t count.
What is your story? Do you self manage or hire a manager for your properties?24