Avoid headaches and vacancies by choosing a property manager who knows what they are doing.
- make sure they specialize in property management
- check website for amount of current leases
- avoid the one man band management shop
- confirm where your property will be advertised
- look over the agreement
- choose based solely on price
- choose based on their location
- call the office every day to check
- ask to help screen perspective tenants
- hire if you intend to manage yourself
It seems like every real estate agent is jumping into the property management side of real estate these days. The prospect of managing investment property was thought of as a nuisance and a lot of hassle for very little money and in many ways it’s true. Although managing a property may not be as lucrative as selling a home there are many important things to understand about property management and it truly requires an operator's complete focus and attention.
Make sure to avoid companies who do property management as a supplemental part of their real estate business. You can easily tell this by viewing their websites and identifying the main focus of the page. Is it listing homes or representing buyers? If so, chances are they will not be focused on leasing and managing your home and you risk longer vacancies, and lack of attention to repairs or tenant issues. This is not what you want.
The easiest and most accurate way to tell if a company is truly focused on the property management side of real estate, or is even a legitimate company, is to see how many rental homes they currently have for lease. If there are only a handful of properties for lease something is not right!
A busy and flourishing property management firm who is actively conducting business should have plenty of inventory in their immediate area and surrounding cities as well. Of course there are large companies and so lease inventories will vary, but as a rule I would say if they have less than 30 rental homes for lease at any one time in their portfolio they are probably not a management firm that you want to trust handling your investment property.
A company without inventory is either very small, and chances are they won’t be around for long, or property management is not their focus and you won’t get the attention your rental home requires.
It’s important to know who will be handling your investment property during different scenarios and who is in charge of which functions. There are many facets associated with property management and it’s impossible for one person to do it all properly or in a timely manner.
If the individual who is selling you on the property management services is also the leasing agent and the collections department and the customer service center and the accounting division…watch out! Prepared to be frustrated and annoyed when this individual doesn’t have the bandwidth to handle every issue for every client at all times, doesn’t call back in a timely manner and doesn’t tend to your investment home as needed. This person might mean well, but it takes an entire team with varied specialties to manage a portfolio of rental homes effectively and professionally.
Many real estate investors approach a property management company with a vacant rental home that needs to be leased. And in most cases, the investor wants that property leased as soon as possible. This requires the property to be advertised in as many places as possible to get the most exposure in the quickest amount of time. Real estate firms who do not specialize in property management often do not take the time to advertise in the places that matter, or do not have adequate advertising campaigns to ensure the properties listed are featured at the top of the page.
Having your property featured means it is highlighted above all the other listings and usually this is not a free listing. A professional property management firm will ensure that all of their homes are featured on all the major websites such as Zillow, Trulia, Realtor.com and others. And don’t just take their word for it, make sure you Google your property to see what pops up.
The property management contract is what is going to bind you legally to the company you choose to do business with and for how long. Make sure you pay attention to the important points of the agreement including fees such as the property management fee, any hidden fees that may be included such as lease renewal fee, cancelation fee, additional advertising fee, etc.
You should take note of the term of the agreement and how much notice you need to give if you wish to exit the relationship. A reputable property management company will have a clean and clear contract and will take the time to explain it line by line, including all of the fine print. Watch out for any company who uses a generic contract that has not been specifically tailored to their company. This is a sign that they have not put the same amount of thought or effort into their company, which means they will put the same thought and effort into your investment property.
I always think it’s ironic that investors want the highest rental price from the tenant but want the cheapest management fees from the property manager. Of course price is important but it’s not everything, and most times you will get what you pay for. You want a company to want your business because your business is going to be profitable for them. Profit is what keeps businesses in business. It's what motivates them to do a great job for you to keep you happy and coming back. Profit is also what stimulates our economy and causes small businesses, like most property management firms, to grow and flourish.
The market and the competition should dictate the fees and the costs associated with managing an investment property. Many times investors try to strip companies of making any money at all in the name of value, but it’s not a good thing. Or the investor tries to cut corners by trying to do their own repairs or source their own eviction services, etc. A good management company should not be cheap, but it should offer a competitive price paired with great service.
A property management firm does not need to be minutes away from your investment property to effectively manage the asset. If this was the case, the geographical vicinity of where property management firms could service clients would be extremely small! It’s usually not financially beneficial to manage a very small geographical area or necessary to set up shop in every city where a property manager does business. In addition, regardless of where the property management firm is located it is not necessary to drive to an investment home on a daily or even weekly basis.
In the age of high speed internet, digital photos, auto-pay and other technological wonders an investment home can be serviced from anywhere in the world. Of course, for leasing and service repairs you need local contractors and professional services, but this can be achieved with local teams based in strategic locations.
For investors that are buying in multiple locations and multiple states, it’s very efficient and practical to use a property management company that can service all the assets from a centralized location and provide local services and a consistent level of support for the entire portfolio.
Although it’s vital to understand what is happening with your investment property, you do not want to become that client who calls each and every day asking the same questions over and over. This usually means one of two things: you are a micro-manager who is paranoid and doesn’t trust the company to do it’s job, or you are financially unstable and really, really need the property to be leased so you don’t face foreclosure. Neither one of these scenarios is good for you or the property manager. Your pestering may cause the property management firm to lease your home to the first person who applies, just to appease you, who may not be the best tenant for your property.
A client who demonstrates this type of behavior is counterproductive to creating a good relationship between the investor and the property management company. Before you retain a property manager, find out what type of communication you can expect from the property manager, and detail your expectations so that you are both on the same page. As a general rule you should limit your calls or emails with your property management to once a week at most.
Properly screening a tenant is one of the most important skills of a good property management company. Further, the ways in which tenants are screened is highly regulated by the federal government as well as by state and local entities.
By law, the property manager must adhere to the Fair Housing Guidelines set forth by the government. Serious fines can occur if those laws are violated. It is extremely important you allow the property manager to screen applicants without your interference, guidance, or influence. All applicants must be consistently treated exactly the same.
You should ask a property management firm what their qualification process and criteria are for screening applicants. In fact, many management firms will post this information their website. An investor should be careful if they wish to alter or add to the qualification process. This could result in applicants claiming discrimination or unfair treatment and can have serious consequences. It’s best to leave the screening to the company you have hired and avoid Fair Housing claims.
Bottom line, if you choose to have a property management company oversee your investment property, allow them to do the job for which they were hired. The whole idea of utilizing a third party company to mange your property is to create a neutral buffer between you, the rental home and the tenants. Getting involved in every process from screening the occupants to handling repairs to sourcing vendors will most likely impede the company from efficient business and will often lead to conflicts between all parties.
Utilizing a professional property management company to oversee your rental homes can be an extremely beneficial to you and can provide piece of mind knowing your property is being professionally managed. The other good news is there are lots of great property management companies to choose from.
As long as you adequately research the property management firm and confirm they truly are a reputable and capable company who specializes in the service of property management, your rental home should be in good hands