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Real estate can be a fickle industry. Particularly, those working in property management can attest to the fact that the industry can be both hard and thankless. Most investors get into real estate with the grandiose idea of making passive income with little to no downside, only to realize it takes more time, attention, and resources than most investors care to spend.
While it’s not absurd to think that owning rental properties can be lucrative, the fact remains that the only real solution to make the process truly passive is to outsource the management of owned properties to a property management company.
When real estate is performing, complaints are few and far between. But amidst market and tenant challenges, property management companies often are the first to be blamed for poor performance. And there, in essence, is the disconnect.
Property management is one of the most challenging aspects of real estate. Most of the time property management firms are burdened by the whims of tenant actions, as well as how the market performs. If the industry itself is experiencing challenges, many clients misplace the fault of underlying property performance on the property management company, and its staff, rather than on the market or tenants.
For example, situations can arise where tenants fail to make timely rent payments. Some clients believe that sending a letter to delinquent tenants, reinforcing the need for them to pay their rent on time, is a simple and effective remedy. But they don’t realize that the property management company is already chasing rent payments on their behalf.
These types of situations are not strictly black and white. Sending a letter may have very little impact and sometimes clients fail to see how little control property managers have in situations like this. Tenants lose jobs, move without notice, and even pass away. It’s not the fault of the management company when a tenant doesn’t pay rent (despite efforts to collect), yet they will often receive the ire from the investor for it.
Similarly, if mortgage rates drop and demand for rentals goes down, it’s not always on the management company if vacancy rates start to slip. Property managers cannot control underlying market trends. They can simply react and mitigate issues as they arise.
Ultimately, good property managers do everything they can to advocate for their clients. The reality is that it is not an easy job. If it were easy, all tenants would pay on time, follow the rules, and nothing would ever need repairs or maintenance.
But tenants don’t pay on-time (and frequently don’t pay at all), they break things, they lie, they fight and play loud music, they have pets even when no pets are allowed, and they smoke even amidst non-smoking policies.
There is risk with all businesses and real estate is no exception. While property management company’s try to minimize these risks for clients by properly screening tenants, communicating rules and regulations, and ensuring properties are properly maintained, unforeseen things can still happen.
Furthermore, all these unforeseen challenges come at a cost. For example, capital improvements will always be a necessity – things break down or become obsolete. Owners often misplace frustration toward property managers for having to replace a hot water heater or HVAC system when, in reality, these situations are often outside a property manager's control.
Honestly, an article like this just wouldn’t be complete without bringing the receipts. When asked for feedback from property managers on the things they find frustrating, they came up with a handful of common challenges faced on a daily basis.
Trash Collection – both tenants and non-tenants dumping junk and unpermitted items into receptacles, regardless of when deterrents, including cameras, locks, or fencing, is installed.
Parking – people parking in tenant reserved spots or public projects restrict street parking during specific dates or times.
Homelessness – properties may reside in an area with large homeless populations outside a property manager's control. It’s hard to get police to respond and the governor, mayor, or even city council often don’t offer a solution to deal with this out-of-control problem
Tax Reporting – complaints about the issuance of 1099 reports for prepaid and gross rents are very common, even though the IRS mandates the reporting of these items as a requirement.
Tenant Screening Laws – certain processes are legally permissible while others are not. Property managers are often bound by what the state deems legally permissible, which can be frustrating.
INFLATION – I just had to add this one as more recently, the shock of inflation has caught many of our staff and investors by surprise. With the cost of everything going up so much so fast, it has been overwhelming to say the least.
If these issues sound familiar, that shouldn’t surprise you. Landlords probably have a very similar list of issues frustrating them. The point is that both landlords and property managers are on the same team and need to work together to push through and address these problems.
It’s also important to maintain perspective and have confidence in your property management company, remembering that the value they provide is taking these difficult processes (tenant management, rent collection, marketing, building maintenance, and so much more) off your plate – making the process as passive to you, the investor, as possible. The issues do not go away, the headaches of dealing with these challenges remains an everyday reality that the property management company “manages” on your behalf.
We truly appreciate the clients we manage for and the understanding and trust that they have in us and we will continue to work diligently on your behalf.
