After nine years of self-managing, I hired a property manager for the first time in 2019 on my first short-term rental. I made a lot of mistakes. It took me too long to correct these mistakes. My failure results in a poor guest experience, lost money, and unnecessary stress.
I’ll share my story and what I’ve learned to help you avoid the same fate.
For the first nine years of my investing career, I invested where I lived: Denver. Then in 2018, I bought a short-term rental in a Colorado ski town a few hours outside of Denver. Knowing I wouldn’t be driving to the properties on a regular basis (and local regulations required each STR to have a contact person within an hour), I started hiring a property management company.
Everything started going well. I contacted nearly 10 different companies, all with varying levels of service and pricing. I interviewed them multiple times, looked for references, and read every review I could get. I actually did pretty well on this part.
In the end I chose a nationally renowned company. You may have heard of them. Their rates were fairly low (which they attributed to technical efficiency) but provided the full-service experience I was looking for. I can’t discern which pricier companies provide services worth charging more for, and I’ve spent most of my (non-real estate) career working in the tech space, so the idea of tech-driven companies resonates with me.
For the first few months, everything went smoothly. They do have some great technology installed, do a great job with listings, their reporting is top notch, and I love the dynamic pricing. I immediately started making a decent income.
Problem starts
After a few months, cracks began to appear. Well, I guess I should say the dirt is starting to show. There are also complaints from guests. There are also piles of garbage.
After only three months of working together, I went to visit the property and it was not in good condition. The furniture was in a mess, everything was dirty and it was obvious that the cleaning staff was not doing a good job. I talked to my contacts and they assured me things would get better.
Three months later, the same thing happened—but worse. Red wine spilled on the 18-foot ceiling (what to do?!); dozens of bags of trash and recycling piled high in the garage; broken furniture. I called the company and spoke with a new contact person who promised that the problem would be fixed and that we would hire a new cleaner.
Then, I moved to Europe. My wife is relocating at work and I am no longer able to visit the property regularly. It’s also 2020, so I haven’t been able to visit for over a year.
When I finally returned to this topic in 2021, I was shocked. The floors were stained with dirt, several beds were missing duvet covers and pillows, and there were no utensils in the kitchen. The TV and all outdoor furniture were gone. It’s a mess.
Mind you, this is a luxury property—or it should be. I called the company again and spoke with another new person who assured me they were hiring more people to resolve the situation. I was angry, but also lazy─so I chose to believe them.
My big mistake made the problem worse
This is where I should cut the bait. There were enough red flags and difficult conversations that failed to bring about change.
But I still made a decent amount of money. Moreover, the thought of finding new partners from Europe during the pandemic was overwhelming. So I buried my head in the sand for another year or so.
But eventually, as always, the bill comes due. I can’t ignore my problems forever. In early 2023, negative reviews continued to pile up and bookings continued to decline. Everyone loved the house but said the cleaning, response times, and other basic operations that the PM should handle were not enough.
I flew to Colorado to check it out, and when I toured the property, the front door was unlocked and one was even open. There is no doubt that rodents have gotten in.
This time, I took action
I ended up firing the company and hiring a new manager, but it wasn’t without pain. Perhaps the biggest mistake I made in the beginning was signing a contract that would allow my former manager to cancel my reservation if I canceled the contract. They had my listings and reviews, so when I started with a new product manager, I started with a blank calendar and no reviews. It hurts. a lot of.
Despite being located in a ski town, about 60% of the reviews for this home are actually generated during the summer. Last summer, I made about $2,000, about 5% of what I made the year before. If I had done it earlier and scheduled it for a slower time of year, it would still have hurt, but I’m back on my feet and not losing as much money.
five lessons
I learned many lessons from this experience, but here are five of the most important:
1. You (usually) get what you pay for. If a supplier offers prices that are much lower than their competitors, it may be because they skimp on the quality of their service.
2. It doesn’t matter how good the company is, what matters is being down to earth. I still think the company I fired was a good value. I’ve heard great reviews of them from other investors. But where I am (a small town with a small talent pool), they can’t hire and retain good people, so even if the company has great technology, it doesn’t matter. It’s a revolving door of irresponsible people.
3. When you see a red flag, address it immediately—even if you’re making money and it’s an inconvenience. The sooner the better.
4. When you know it’s not going to work, rip the Band-Aid off. I really messed this up. I knew about two years ago that I had to fire this company. Postponing the inevitable cost me real money and caused extreme stress.
5. Property managers don’t always succeed. Don’t sign a contract that will make the breakup more painful.
final thoughts
Many other investors would tell me that the only way to truly mitigate this problem is to self-manage, but I disagree. I wanted full service management and my new company was great. I was being paid almost double what my old company was making, and I was excited about that. The house is in great condition, I should have done this two years ago.
Luckily for me, the deal is still great. I bought a bargain and we have gotten the property back up and running and generating real income. Hopefully within a year I’ll be back to the level of bookings and reviews I had before this disaster.
But I did a lot of wrong things here that I regret, and I should have known better. Hope you learned something useful from my failure!
Find freedom in a property management partnership
The Property Management Finder helps you discover reliable property management partners and make confident recruiting decisions.
Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
