I was talking to a consultant this morning about property management software, and the conversation turned into something I think every rental property owner needs to hear.
See, I’m part of a lot of property management company owner mastermind groups. Nationwide, technically worldwide, but we just call it nationwide because most of the folks are in the country. These are highly successful property management company owners. Some are frankly more successful than my property management company here in Philadelphia, which is the top reviewed one in the city. So I’m always paying attention to what they’re doing. That’s the beautiful thing about being in a mastermind group — you can ask, hey, what are you doing about vacancies? What are you doing about this or that?
The Mindset Difference Between Business Owners and Property Owners
The consultant and I got into a conversation about how the most successful property management companies tend to use the top-notch vendors that service the industry. Top-notch website provider that specializes in property management websites. Top-notch accounting software — which is really the foundation of a property management company. It’s what handles the accounting, the security deposits, rent collection, late payments, leases, all of it.
And the successful companies are the ones that leverage these other entities. They’re spending X and getting Y. They’re looking for a return on investment. That’s what a good business owner does. A good business owner doesn’t care how much they’re spending. They care about the leverage. What am I getting in return? I don’t care what I’m paying you — what am I going to get?
And that’s where the conversation got interesting, because there’s a huge difference between the mindset a business owner has and the mindset a property owner often has.
Why Most Owners Hire a Property Manager (And Why It’s Only Half the Picture)
A business owner or investor wants a return on investment. But a lot of property owners come to us not looking for a return on investment. They’re hiring us for one reason and one reason only — they’re trying to avoid hassle. They’re trying to avoid pain.
- They don’t want to get up in the middle of the night to fix a leak.
- They don’t want to deal with legalizing their property with the City of Philadelphia.
- They don’t want to chase down late payments.
- They don’t want to deal with tenants, period.
Those are all valid reasons. I’m not knocking them. When you’re interviewing property management companies, absolutely ask those questions. What involvement will I have to have in all this nonsense? Totally fair.
But very few owners are actually thinking about leverage. Very few are thinking, is this property management company going to give me a return? Am I paying them X and getting Y? Are they going to reduce my vacancy and put more money in my pocket? Are they going to reduce my maintenance costs through their relationships and buying power? Are they going to get me more rent through their marketing?
If You Own a Rental Property, You’re an Investor — Act Like One
Here’s the hard truth: if you’re going to own a rental property, you are an investor. And to put it bluntly, you need to act that way. It’s not about your emotions. It’s not about how it feels. It’s about the return on your investment.
So when you’re evaluating a property management company, yes, ask the hassle-avoidance questions. But also evaluate the ROI. If I’m going to pay X to this property management company, what can I reasonably expect Y to be?
Now, I understand no property management company is going to give you an exact number during the sales process. Of course we’re going to say we’ll reduce your vacancy, increase your rent, and reduce your expenses. But the reality is any of the top-reviewed property management companies you find online — and online reviews are a pretty good way to vet them — are going to give you more value than they cost.
You’re Not Just Getting the Property Manager for Free — You’re Getting Paid
This is going to sound like a stretch, but stick with me. When you hire a good property management company, you’re not only getting it for free — you’re actually getting paid to have it.
Nine out of ten owners come to us looking to avoid hassle. What they end up getting is all that hassle taken away AND a huge return on investment on top of it.
Take our buying power with vendors as one example. We give the contractors who work on your property six figures of referrals a year. By the time a contractor walks into your home to do a repair, that person has been in hundreds of other properties we manage. We have a very good idea what the outcome is going to be before they even step foot in your door.
It’s not like we’re calling a plumber who did a job for a neighbor once and got recommended. Our plumber has been in hundreds of properties. That’s real buying power, and that translates into lower maintenance costs on your rental property. Same story for leasing — a good property manager is going to reduce your vacancy time in ways a solo owner just can’t match.
The Bottom Line
Hire a property management company to eliminate hassle if you want. That’s fine. But don’t stop there. Hire one because it’s going to make you more money than it costs. Evaluate it like an investor evaluates any other line item — what am I spending, and what am I getting in return?
That’s how you actually treat your rental property like the investment it is.
But what do I know? I’m just a humble Philadelphia property management company owner doing my best to answer your rental property investing questions. As always, happy rental property investing.
