How much difference can there really be between property managers?

How much of a difference can one property manager make in net monthly cash flow, and total overall returns over another?

The answer is quite a bit more than most real estate investors realize. All serious real estate investors recognize the need for a property manager. Of course, this hasn’t stopped many new investors attempting to skimp by bringing in their own amateur managers or picking the first name they can find on the web that sells them on an under market rate. However, these perceived ‘savings’ can all too often wind up being obscenely expensive.

Here are six risks of skimping on property management to be alert to:

1. The Houdini

Believe it or not there has been more than one case of a rogue individual property manager running off with the rent.

2. Financial Stability

Building on the above, does your prospective property manager really have financial stability? Will they be around in a year, or five, ensuring continuity in your income?

3. Adding to the Burden

A full service property management firm normally easily trumps the lone ranger because the cover more services, functions and roles which would otherwise require investors to be actively involved in managing a whole team of vendors and staff, and juggling multiple payrolls.

4. Not Invested in Your Long Term Profitability

There is a massive difference even between sizable full service property management firms. Most are just hungry to sign up every account they can and bring in every dollar they can today with little thought of the future. A few really plan and put emphasis on the long game. Those that want to be around long term are those that care about negotiating strong leases and doing good business every day that will ensure the property owner’s long term financial security and profitability. This can be specifically evidenced in the details of the leases being written.

5. Third Party Costs

A property management firm, or any real estate professional for that matter needs to have been in business for a while and have proven themselves with a book of business in order to forge industry relationships that can deliver significant cost savings across the board from vendors and on materials.

6. Inexperience

Those lacking enough hands on experience, can be ineffective in preempting issues and finding the right balance in crisis times or ensuring income and defense from legal issues.