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Turnkey Real Estate Investing

3 min read

6 Reasons Property Management Companies Fail

Tue, Aug 16, 2022


Experienced real estate investors know the value of quality property management. Even non-investors are cognizant of the stereotypes and horror stories surrounding incompetent, bad, and downright mean property managers!

If you're a passive real estate investors, your partners are of utmost importance. They’re your first line of defense, your risk mitigators, and your informants. They’re responsible for making sure your streams of passive income are minimally interrupted and—even more importantly—maintaining your residents' quality of life. 

With a job that important, why do so many property management companies fail? Here are the six of the most common reasons...

They're Reactive

You want your property management team to be proactive. Instead of putting out fires, they should be making sure they never start in the first place. Reactive property management waits for minor issues to become big problems before they do anything about them. This costs owners in unnecessary repair and rehab costs, where the problem could have been a simple maintenance issue if tackled earlier.

Reactionary managers lack the diligence – and foresight – to protect your assets to the best of their ability.

They Have Lazy Systems

In the realm of science, reproducible data is key in the development and discovery of scientific laws and theories. The same is true in the business world, property managers included. Results need to be able to be duplicable and consistent if the business wants to succeed.

Too many property management companies lack strong, proven systems needed to reproduce quality results across multiple markets and teams – particularly as the company expands.

Systems must be well-established and tested to support growth and quality!

They've Grown Too Fast

Investors are warned against scaling their portfolios too quickly. It can spread your resources too thin and create an unfocused hodge-podge of a portfolio. The same thing can be said of property management companies. So many of them are just too big and they try to move too quickly.

Just as a tree can’t grow tall without good roots, these companies must be well-established before the aim for bigger teams in more markets. Growing too fast creates a) gaps in essential market knowledge b) unqualified and untrained employees c) compromise and corner-cutting.

Beware of a property management company that is relatively new with fingers in many proverbial pies! You want a property management team that is focused, experienced, and intentional.

They Cut Corners

When investors think of cutting corners, they usually think of quick-fixes and measure-once-cut-twice contractors. Cutting corners doesn’t just have to be a negligent or greedy act. A property management company can cut corners by not charging enough.

Competition is stiff in their industry, and a desire to be competitive – or to undercut – rival companies can put them in a tough spot. If they’re not charging enough, they won’t have the resources or experience they need to get the job done right.

They might try to save the owner money by going for cheaper repairs, too. While it seems frugal, it can backfire when a cheap repair fails to stand up to the test.

When you’re looking for a property management company, you don’t want to go cheap!

Their Communication Skills? Not Good.

Communication is essential to the passive real estate investor. You don’t have your boots on the ground day-in and day-out. If your property managers don’t communicate, you can find yourself blindsided by big problems. Communication demands more than just a month-end spreadsheet.

Value property management teams that communicate not just with you, but with your residents, too. You want your managers to be open, approachable, and honest above all. A lack of communication breeds distrust among investors and their rental residents.

That’s bad news for the stability and longevity of your investments!

They Put Profit Over People

Investing in real estate is a people business first. As easy as it is to look solely at the numbers in a ruthless, utilitarian way, this thinking misses the mark every time. Property management companies that are only in the business to turn a profit – often at any cost – don’t last.

These are the kinds of companies that have high turnover. They’re the ones who end up in lawsuits.

As an investor, you want a property management team that cares about you, your assets, and the people that live in them. Considerate, compassionate, people-centered business is the only way to go!

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Chris Clothier
Written by Chris Clothier

Entrepreneur, writer, speaker, ultra-endurance athlete, husband & father of five beautiful children. Chris puts these natural talents on display every day. As a partner at REI Nation, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Chris is also an active writer, weekly publishing real estate, leadership, and endurance training articles.