Property management companies...Are they a wise choice? - Posted by Jetsmith (FL)

Posted by Tim (Atlanta) on April 23, 1999 at 09:05:16:

I am in pretty much the same situation as you. I have several rental properties, and have been interviewing property management companies for about a month. I have found that fees vary widely. Older more established firms in my area charge up to one month’s rent out of each years lease, plus 9% of the rent. That is pretty steep. Other smaller, leaner operations charge a flat fee of $450 to place a tenant, and 7% of the rent. The second one is a much better deal if your tenant stays for a couple of years. You only pay the placement fee once, not for each lease agreement.

When you are looking, ask the property management if they own rental property themselves. That experience will help them see things from your side. Do they have a staff to handle minor repairs or will they have to call high-priced subcontractors each time something goes wrong? Can they handle evictions for you?

If you want to stay in the rental business long term, I feel that a property management firm is a must. They will free you up to go look for those other deals.

Just my .02

Property management companies…Are they a wise choice? - Posted by Jetsmith (FL)

Posted by Jetsmith (FL) on April 22, 1999 at 19:00:20:

I have been thinking about using a property management company to manage my rental properties. I am more interested in doing rehabs and don’t want to mess with the rentals. I do get a good positive cash flow from them and don’t want to get rid of them. Since I hire people to do the work on the rehabs, I thought, why not do the same with the management of my rentals. This frees me up to put together more rehab deals.
I haven’t personally heard good nor bad about management companies so I wanted to know if this is a wise choice? Could you give me some personal pro’s and con’s from previous experience with them? Maybe things to look for or look out for when choosing one or whether to use one at all?
Thanks for the help.
Jetsmith (FL)

Re: Property management companies…Are they a wise choice? - Posted by Dave T

Posted by Dave T on April 25, 1999 at 13:30:07:

Conclusion: Assuming that you hold rental property for the long term, I would recommend professional property management if your cash flow can support it.


You don’t deal with tenants or toilets, the management company either has a maintenance person on staff or has a working arrangement with local contractors. Ask the management company for a list of their on-call maintenance contractors.

The management company never takes a vacation, they usually have an after hours emergency number when tenants have problems outside working hours. To a large extent, your time is your own.

The management company knows the landlord-tenant law in your area and knows how to enforce the lease terms and protect your interest in the property. The management company is experienced at screening potential tenants, and should be well versed in the eviction procedure.

You can move out of state and not worry about your rental management.

A good management company will require you to give them a maintenance escrow on each property (anywhere from $100-300). This will allow them to make emergency repairs and to pay the bills without first having to be reimbursed.

Management costs are deductable on Schedule E.


A small company may not have the staff to adequately deal with multiple simultaneous activities. Hint – call the company during business hours several times throughout the day. Note how mamy times you were able to speak to a member of the staff, and how many times you were forced to leave a voice mail. If you can’t get to them, your tenants won’t be able to either, and maintenance problems may end up unreported and unfixed.

The management company that is an arm of a realty office does not have to make its living on property management. The staff in this operation may be smaller and less experienced than a management company whose only business is property management.

Fees and incidental costs eat into your cash flow. Look for a company that will at least give a multiple property discount on the monthly management fees.

A good management company will require you to give them a maintenance escrow on each property (anywhere from $100-300). If you have multiple properties, a large escrow deposit is idle and earns no return on investment.

Property Management Agreements often have a clause requiring a commission on the sale of the property if you sell to a tenant. This may be an issue if you want to L/O or owner finance your property to a current tenant.