It feels wonderful to see the plentiful returns coming in after you commit to making property a component of your financial portfolio. That said, it can be overwhelming maintaining multiple properties, even if you are skilled with business and maintenance, and it can be downright impossible to manage even one small property if do not have such skills. It can be a Godsend to hire quality property management to handle your holdings with ease. But, how do you find someone who is capable enough to take the reins? Here are some pointers:
1. Start with Referrals
Start with realty professionals that you may know, such as the realtor that sold you your home. Does she or he have any contacts in the property management business? Perhaps you have colleagues or personal connections with realty investments that may be able to shed some light on the subject. Surely they would know who to recommend. Just remember, even if a person or company comes highly recommended by those that you trust, you should always conduct your due diligence by running a check with your state’s real estate commission.
2. See How Many Properties he or she is Currently Managing
It has been estimated that a trained employee of a management company can easily handle approximately 35 units alone. That also means one manager can handle that much, or a sufficient management company with multiple employees can handle an amount equal to the number of employees times 35. Just how many units are you looking to rent? Keep in mind the size of the company and its prior commitments before making a serious offer.
3. Evaluate the Candidate’s Advertising Strategy
Do you like the strategies used or do you feel they are over the top, or worse yet, not effective at all?
Look at the signage advertising vacancies in front of properties managed by the prospective company or individual. See if he or she also advertises in newspapers or on websites like Craigslist. Perhaps they have their own website for advertising properties for rent. You should review it for aesthetics and usability.
4. Check the Manager’s Vacancy Ratio
It is a good idea to check on the amount of vacancies that the manager has at the properties that he or she is currently managing. Are the properties in question more than halfway full? If they are not, what is the issue preventing occupancy? How long does it take for the manager to place a prospective tenant, and what criteria are used to evaluate a prospective tenant’s fitness?
Also, is the manager’s experience in line with what you are looking for? For example, if you are looking to rent a 5-bedroom house, and he or she has only rented from a community of one-room efficiencies, can you be sure that he or she is a good fit?
5. See if he or she Owns Property
While you may think that it would be beneficial for a manager to also own his or her own property, that is not always the case. That is because his or her interests will always be in competition with your own, especially if your properties are in the same market. He or she is not likely to bring tenants to your properties at the expense of his or her own. You want to be his or her number one priority.
6. Ensure he or she is Willing to Conduct Inspections
You will probably need to accomplish this by getting a commitment from him or her in writing. You can include this in his or her contract, or add it on as an addendum. Most of the time, prospective mangers will oblige willingly, however, there are a few who may refuse or insist on charging a fee for such services. This is not usual, and many managers worth their while will consider it part of the job.
7. Ask How They Will Handle Maintenance Issues
Will you allow the manager the leeway to make all maintenance decisions on his or her own, or will you allow him or her to spend cash flow up to a certain amount before including you in the decision? If so, what amount would that be? Are you going to allow the manger to hire any qualified professional, or do you have specific people in mind to handle each job that may arise? You need to know that the manger is comfortable with the way you choose to run things.
8. Ensure your Personalities Mesh
Personality matters in all business relationships, including quality property management. Do you feel that you will be able to get along with a potential candidate over the long run? Is he or she well-spoken and well-versed in landlord-tenant etiquette and local law regarding the same? You will also have to put yourself in a prospective renter’s shoes and ask yourself if you would feel comfortable leasing from the candidate.
9. Be Sure his or her Contract is Mutually Favorable
A good contract should outline the expectations of both parties and go over the finer points in great detail. How many days’ notice is needed to terminate the contract? When can expect your rental payments? How will repairs be handled? These are all important points to clarify.
You will certainly need to clearly state what you are willing to pay for the manager’s services and what you are expecting in return for such an investment. Usually, a manager will receive a particular percentage of each rent collected – typically 7 – 10%. Just be should that your contract outlines that you will not pay the percentage on rent that could be collected, just rent that is already received. Also, are you including a leasing fee per tenant acquired? This is similar to a real estate commission in a way, and such a charge is customary.
Also, be sure that all fees outlined are considered reasonable for the market. While a discounted rate may seem preferable, you don’t want to end up with a manager that is just starting out and not sure of what he or she is doing.
You will also need to be sure that you can openly communicate with your manager at all times, whether by phone, text, or email. All contact information should be clearly stated as such in an iron-clad contract.
10. Don’t Forget to Review his or her Tenant Leases
A good lease must address a few questions of its own. You will need to specify the monthly rent amount, when it is due, and the consequences for late payment. How delinquent can one be on the rent prior to eviction proceedings beginning? How much time does the lease cover? Is it a month-to-month or does it cover a certain term, such as a year? Are there legal consequences for breaking the lease? Does the tenant have to contribute to property maintenance, such as lawn mowing, or is that included? A good lease should address all this in detail.
A good manager should also be familiar with the marketplace in which the property is located. Using comparables, is the stated price the going rate for monthly rent in the given area? You don’t want long term vacancies due to greed or a misunderstanding.
As you can see, there are many important questions that you should ask before hiring a property manager. However, being discriminate will pay off in spades when you see profits increase and vacancies fall. Like any other business, hiring proper management is the key to getting ahead.