To work with a property management company or not, that is the question. And honestly, still a really hard question to answer for us. When we started out everyone was saying how you have to work with one to scale your business. There are tons of books out there that specifically tell you to delegate the work others can do well, while you focus on the work that expands your business. However, I am of the mindset that you have to feel the pain to know what it takes first before outsourcing. Otherwise, how will you ever know if you have picked the right management company?
When we started out with our triplex in Tipton, we remodeled and managed it ourselves. I am lucky to have a contractor for a father but we should be clear; I was abusing him as my property manager and he has a pretty firm stance on rentals. He is extremely uninterested in self managing them (I would avoid the topic with him if I were you).
When you buy a building that is over 100 years old, everything breaks. Nothing was maintained in this property. That first few months the renters called me every week. Luckily all were great and never needed to call at 2 AM, but I work an 8-5 job and their air conditioning was out in 90-degree weather. Oh, and the roof was leaking into one unit flooding the floors, and the water heater went out, and the electric was shotty, and I think every single breaker tripped… I can go on, but I will spare you.
Needless to say, my dad was there a lot and I wanted him to continue to like me as a person so I decided to start researching Property Managers. One big thing I never considered when I decided to focus on smaller markets like Tipton and Muncie Indiana is that smaller markets have fewer options. This is clearly very obviously, but I never even considered it. I assumed there were companies out of Indianapolis that would reach that far. Wrong. Fewer companies make it easier to research upfront. However, it also means you have less options to switch to if you are unhappy with the service.
Another thing I should have done was asked my circle of investor friends more questions. I did not ask the right questions and while I don’t think the Property Management company had good (let alone any documentation to skim through) I should have done more research. I felt VERY nickel and dimed at that start of the transition and some of that was because I didn’t know what to expect. There were fees to onboard the units, there were fees to inspect the units so I could keep their security deposit if the tenants destroyed the unit. Which personally, seemed weird to me since I bought the place through the Property Management company… There were fees for EVERYTHING.
I didn’t get a lot of input from the Property Management company on how the transition would go or who would own what. I was tossed from person to person for a while. I really regret not being more direct from the beginning. If you know me personally that sentence is confusing considering I am pretty direct. However, I didn’t know what to ask or when to push. The first month in Muncie no one reached out to any of the brand-new tenants, so no rent was paid… Surprise, expenses must be paid even when rents don’t come in. So again, we were loaning the business money. Lucky for us, Tipton was still paying us directly. I let this type of stuff go on too long and finally it boiled over. I went to a lawyer to see if I could just get out. I went to the owners of the Property Management company and shared my extremely detailed thoughts. I was spending more time micromanaging someone I paid 9% of my gross income to then I was before we hired them, and that was not going to fly.
The reality of this situation is the expectations were not set. Yes, they slipped up but I let them. I let them for way too long. Now I know what to look for and what to ask for. I still think some things are just overpriced and we may still do big things on our own to save money when we can. However, it is worth it. I don’t have to ask my dad to go put in window air units, I don’t have to chase the government aid checks, I get that time back. Now that I know what to expect I can plan and focus my energy elsewhere. Do I still ride an emotional rollercoaster when it comes to this topic? Absolutely! However, I truly believe we couldn’t scale the way we want to without that partnership. Who knows how I would feel if I lived closer?
Loren & Mike 