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What Makes Property Management Soo Difficult?

By
Services for Real Estate Pros with Rentec Direct Property Management Software

I posted a recent blog, and while it didn't get a lot of comments I did receive one about how property management is so crazy difficult.  Frankly it surprised me because, while there weren't many comments on this post, the one comment explaining how difficult property management was was a large percentage of overall comments.  It makes me think, there must be a lot of people out there with the same opinion.

frustrated landlordSo that leads me to wonder why.  We all know the general pitfalls of property management.

  • Dealing with poor tenants
  • Maintenance & repairs
  • Anything "legal"
  • Showing the property when it's vacant
  • The possibility of negative cash-flow
  • Taxes

Now that those are out in the open, are there any more - anyone?  These factors above can be significantly minimized if not eliminated, well except taxes, that's a fact of reality. 

Addressing the items:

Poor Tenants - This boils down to being choosy in the first place.  If you rent to that single mother who really really needs a place to live because she got evicted from her last place you're asking for trouble.  Granted it might be really nice of you to let her rent from you even though we know she can't afford it, but in the end it doesn't do her any favors.  Eliminate poor tenants by thoroughly screening, verifying references, and doing an analysis on the tenant to see if they can afford your property.  No more than 50% of their paycheck should be going towards rent as a rule of thumb.

Maintenance & Repairs - I've heard this a lot, and yes older properties require a lot of maintenance and repairs regardless if they are rented or not.  Newer properties (which there are a lot of on the market really cheap right now) don't have so much maintenance problems.  Repairs are going to be there whether somebody is renting or not, and if the tenant caused the problem, the tenant pays for it typically.  The hassle is eliminated if you have a reliable handy-man, which is very easy to find on craigslist these days.

Legal Stuff - I agree here, if anything legal comes up it puts a dent in the pocketbook.  Stay far away from lawyers.  Their job is to create conflict to keep themselves in business.  If you can spend $2000, even if it doesn't seem fair, to stay out of court, by all means do it becuase it'll amount to a substantial savings in both dollars and time.  But the point is to avoid legal issues in the first place, and that all begins with tenant screening.  Be sure to run a comprehensive criminal as well as bankruptsy, lien, judgements, and eviction reports on anyone you place.  This information will help you select a tenant who isn't litigious or a general troublemaker.

Showing the Property - This is a necessary evil.  I typically show our properties 5-10 times before I find a renter I'm OK with and who likes the property.  It's about 30 minutes a pop and happens on average about every 18 months.  While it's a big deal when it's going on, it ends up being an actual 2-3 hours per year total per property which all in all isn't that bad.  This process alone can be hired out to a property management company for about $150 also if the 2-3 hours are trouble finding.  I believe it's a far better option to meet the prospective tenants in person than sub it out to a property management company though.

Negative Cash-flow - This all begins with the purchase.  You are deciding whether your going to have positive cash-flow on a rental at the time of purchase.  You don't have the option later.  So choose wisely.  I have an excellent formula for picking investment properties I would be happy to share to anyone who wants.

Taxes - We all hate them, we all have to pay them, and they will never get any cheaper.  The good news is, you have to make money to pay taxes.  So if you're complaining about your tax bill it means you are making money which is better than a lot of property owners these days!  If you are using a good property management software application to track the ins and outs, taxes take a matter of minutes for each property instead of hours.  In general, accounting is quite simple for rentals given the proper tools.

That covers the uglies of property management.  Perhaps my experiences are different than others, but property management in itself is actually pretty easy.  A well chosen single-family property can bring in around $4800/yr profit (just from rent) at a cost of 2-3 hours of your time.  That is $1600/hr.

I would love to hear about your experience/opinions on property management.  Please comment.

--- about the author ---

Nathan is a member of Rentec Direct who provides property management software, tenant ach payment processing, and Rentec credit reports

Comments (9)

Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

I've been a property manager for 45 years, 3 state broker licenses, CPM designation, started 2 pm firms from SCRATCH and each day I go to the office presents a new challenge. 

Most RE agents who want to segeway from sales to PM FAIL because they think that just because we both have the same RE license/ticket from our respective states, we have the same knowledge......NOT.

I was fortunate to start my career as a secretary to a large, area RE developer who wanted to maintain the large estate homes on the acreage he was purchasing.  I started the property management program from scratch and LOVED it....I consider myself fortunate to have found my calling in real estate early and been SUPER fortunate to have mentors during my career. 

Education, experience and property management systems are the key!!

Jul 09, 2009 03:59 AM
Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

Wallace, your blogs are simply extraordinary!  For anyone wishing to jump into property management, there simply is no better teacher than Wallace.  You can find his amazing information on the group: 

FOR RENT

Jul 09, 2009 04:17 PM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

Mirela - thank you for your kind words; however, Wallace is a SHE....Wallace is an OLD SC family name....

Jul 10, 2009 11:00 PM
Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL
SFR, SRES, CNC

Hi Nathan.  I must add that in addition to experience, training, and screening, one must have a niche for Property Management!  Those that have a negative tone regarding this field are just not cut out fir it.  Those of us that do, like Wallace, can't seem to get enough of it, and view Property Management as a career that is necessary and needed even though challenging!

Jul 11, 2009 12:57 AM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

The future of our profession are the Kat Malones....she comes from a real estate family, got a COLLEGE DEGREE in Residential Property Management and has a GREAT JOB that she loves fresh out of college.....Kudos for her learning her passion early in life and being fortunate enough to live in the PERFECT state where she could get her education 3 hours from home......

Future property managers will decide EARLY in their life that they want a career in property management and they have many more opportunities to work in the field working for large commercial or residential property owners or getting RE licenses and going into fee-property management.....

Jul 11, 2009 11:02 AM
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

Your comment on legal issues is simplistic.  If a person could buy out of legal problems with $2000 or avoid them in the first place a lot of attorneys, insurance companies,  and the entire court system would be out of business. 

Problems in property management are more often than not "people" problems.  Too much is paid for a property, the tenant fails  to report a leak and gets sick from  mold, someone falls, a tenant loses their job, and owner thinks they know better on some repair to name a very few issues that come up. 

Property management is difficult and if anyone could do it us PM's would be out of work as well.  The fact is that property management takes a lot of effort, skill, and education all properly applied.

Jul 25, 2009 05:50 PM
Nathan M
Rentec Direct Property Management Software - Grants Pass, OR
President (Rentec Direct)

@ Robert,

Yes, it was very simplistic.  To explain anything related to our legal system 1 paragraph has to be. ;)  I agree with your people problems statement.  It takes a level head to manage your own properties, it's not for everyone.  But it's also very attainable for many property owners as well and if it's the difference between a profitable property by doing it yourself, or an unprofitable one using PM, it can be very compelling.

Jul 26, 2009 03:44 AM
Jo Newton
Rentals Made Easy Mgmt Group - Conyers, GA
Realtor & Property Manager

Great post! Property Management is not for everyone.  It's something new everyday however, experience and dedication can get you through it.  You learn to weed through most problems by it's root.

Good Reading!

Jul 30, 2009 01:43 AM
Tracy Lee Parker
RE/MAX DFW Associates - Royse City, TX
Buy*Sell*Rent

Thanks for the post ! Our agents want the monthly income but not the monthly headache...you have to be able to not let a repair request or a late payment upset you. You deal with it and move on. 

Aug 03, 2009 01:18 PM