When you work with a property manager, the buck stops with you, the investor, however, the primary responsible party is the property manager. You’re paying for a service. Don’t do it yourself.
Who’s On First?
The investor is the wholesaler. The property manager acts as a broker and mediator. The tenant is the customer.
You find a property manager that has a set of policies that are in line with the way you want to run your rental business. The two of you agree that; because you’re of like mind, the property manager is the right entity to take care of the property for you. This sets up two legs of a three legged table.
It Takes Three
The table becomes self-supporting when a well-screened tenant rents the property. This works because all three parties work in conjunction with each other.
The tenant needs a quality place to live and someone available to keep their home in serviceable condition in exchange for rent payments. The property manager needs to earn a living in exchange for providing a service. The investor has multiple needs. Investors need their properties to be maintained. Their rent needs to be collected every month. In addition, investors need to receive the maximum market rent for their properties.
The Person In The Middle
What unifies all three parties is the property manager. The property manager collects the rent, ensures policy compliance, and assures maintenance of the rental property.
When either the tenants or the investor have a concern or question, the property manager is the mediator and problem solver.
Don’t Leave Us Out.
The relationship of these three entities can be damaged by the investor becoming directly involved with the tenant. This bypasses the property manager who has the investor’s and the tenant’s proxies.
There are multiple scenarios where we have seen this play out.
He’s My Brother.
We’ll have an investor who is helping out a friend who needs a place to live. The investor figures; “I have an open rental. They need a place to live. It’s a perfect fit.” This situation would work fine if the investor allowed the property manager to take care of it.
Instead what we have seen is investors cutting their “buddy” a “deal” outside the agreement between the investor and the property management firm. The investor doesn’t consult with the property management firm. The investor may tell his buddy that he or she can relax about a certain fee or charge. When there’s a falling out between the buddy and the investor later, the bills don’t get paid and the investor loses ROI. This leaves the property manager in the middle of something they didn’t create and the investor with unpaid bills. Nobody is happy.
It’s a Jungle Out There.
An investor sees the yard at their property in ragged condition. Instead of asking the property management firm to take care of it, the investor approaches the tenants about the yard. In this scenario the tenants push for compensation for taking care of the yard. The investor is unhappy about being prodded for compensation. The tenants feel as though they have a right to compensation despite signing a lease that gives them responsibility for the upkeep of the landscaping. All of this could’ve been avoided if the property manager had been allowed to fulfill their role as proxy.
…A Deal You Can’t Refuse
A variation of the first example is the investor cutting the tenant a deal in the form of waiving late fees. The tenant feels lied to when the rent bill comes from the property manager. What has actually happened is that the tenant is actually owes insufficient funds fees. The investor couldn’t know this because they didn’t consult the property manager. The tenants are disappointed. The extra charges didn’t go away. The investor is also disappointed. The charges still exist and he or she doesn’t understand why.
Get What You Pay For.
If you have elected to use the services of a property management firm; do everyone involved a favor and let them act on your behalf. You are paying for a passive investment experience, enjoy the benefits of that expense. Your involvement in the process is going to waste the expense, your time and diminish your ROI. If you allow the property manager to have your proxy you will enjoy the benefits of being a real estate investor without the hassle. Don’t do it yourself.
To learn more about how Jacob Grant can improve your Passive ROI by being your advocate, call 208-795-8218 or schedule a call Schedule call