Want to maximize your ROI?
Choose the right property manager.
Property management is no different than any other industry. ‘How much is it going to cost?’ seems to be the first place we all want to go when purchasing a product or service. But is this the best approach in hiring a property management company?
Investment property is an interesting place because you bought it to get the highest return possible, I get it. When buying other products, price plays a role, but there is no ROI per say on a pair of shoes.
“Hey Rick, check out this graph, 8.3% return on my 2017 Nikes.”
Where price and value meet is where and when we typically purchase products. When investors look at PM companies, the more a firm charges, essentially the lower their return is, so they put more value in price over quality. So they hire the inferior company to save on the monthly expense thinking it will help their ROI, because hell, if that’s what it says on paper then it must be true, right?
A few months ago I was interviewed by an investor named Steve to manage a newly acquired property. Steve was excited about his new venture and he put in a lot of time interviewing local companies to manage his new home. I thought my interviews went well and I could tell he liked what we had to offer. In the end Steve said he would like to hire my company if I would match another competitors rate, saving him $20 per month. As not to come off as soft, weak, and desperate to my family, future grandkids, and many generations of my posterity, I held firm to my price. So Steve decided to go with the other company to save the money.
Several months went by and I got a call from Steve. Their property had not been rented yet and they decided to make a change and hire my company. I won’t get into the all the details of why the first company failed to deliver, but I’m confident to know that this would not have happened under my management. To put it simply, the first company over promised what they could rent this property for and never adjusted. If there is one thing I know in rental property, it is that the market never lies! So when it speaks, you listen and adjust. We had his property rented within a couple weeks.
Now I’m not at all saying don’t pay attention to price, obviously it matters. My advice to any investor would be to locate the best companies without the influence of price, then see what the price will be at that point. If they are competitive, then hire the right company! By not asking price first, you will have an unbiased, clear path to who will provide the best care for your investment which is what matters most.
So what did saving $20 a month actually cost Steve? About $6000 in lost rent based on four months of vacancy. As you can see by this example, the company that provided the best ROI on paper was not company that provided the best ROI in reality.