3 WAYS Third Party Managers Can Break Your Deal

When we first started in real estate syndication, we were advised by many experienced syndicators to hand over the management and development of our properties to third-party managers. The idea was that by doing so, we could focus on what we do best, acquiring more properties and making money. However, this advice never sat right with us. We quickly realized that relying on third-party property managers doesn’t always deliver the results we were hoping for, and we made a decision that would set us apart from others in the industry.

Why Third-Party Managers Don’t Always Work

The truth is third-party property management companies often struggle to keep costs down and maximize rental income. Over the years, we’ve tried both small and large property management companies, but none of them were able to manage costs or collect rent as efficiently as we could. Why? Because third-party managers aren’t as motivated or invested in the properties as the owners are. Their focus is typically on managing multiple properties at once, and it’s difficult to give each property the attention it deserves.

This doesn’t mean that we’ve completely ruled out using third-party managers. In areas where we don’t yet have enough units to justify building out a local management team, we do use third parties. But this is always a temporary solution until we scale up or decide to exit that market. The bottom line is that property management is an essential part of a syndication, and it’s an area where you can’t afford to cut corners.

The “Easy” Button Doesn’t Exist

Many syndicators opt for the “easy button” and turn everything over to third-party managers. But, in our experience, this leads to lower profits—or worse, losses. When you hand over control of a property and remove yourself from the day-to-day management, the property suffers. This is why we chose to build our own property management and construction companies. It gives us control over costs, allows us to better serve our residents, and helps ensure that the properties are aligned with our mission.

How to Make Third-Party Managers Work for You

If you do find yourself in a situation where you must use third-party property managers, it’s critical to be very specific about your expectations and stay engaged with the process. The first step is to be thorough during the interview process. Ask the right questions and ensure that the manager understands exactly what you need.

Once you hire a third-party manager, it’s not enough to just let them do their job. You need to stay involved. We have weekly calls with the second-largest property management company in the county to ensure that everything is running smoothly and that they’re meeting our standards. This level of communication and oversight is necessary to make third-party management work.

Be a Strong Asset Manager

One of the biggest mistakes we see other syndicators make is stepping back too much from managing their properties. While it’s easy to want to delegate everything to someone else, remember that your job as an asset manager is to actively oversee the success of each property. You can’t afford to be passive when it comes to the day-to-day operations. Strong asset management is key to maintaining profitability and ensuring that your investors are happy.

Final Thoughts

Don’t fall into the trap of thinking you can just hand everything over to a third-party manager and forget about it. While using third parties may be necessary in some situations, it’s not a set-it-and-forget-it solution. Your time and attention are crucial to the success of the property. Whether you manage the property yourself or use third parties, make sure you are actively involved and managing the property effectively to avoid costly mistakes.

Remember, the "easy" button doesn’t exist, but the right level of focus and control will pay off in the long run. As an investor and syndicator, your success depends on staying engaged and making sure the property is being managed the way it needs to be.

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