Rental properties are one of the most lucrative ventures an individual can put in their investment portfolio. What’s not to like? A property provides steady income while at the same time increases in value.
However, rental properties have their share of hard work. For instance, you have to advertise for vacant units; cater to the needs of our tenants; conduct property inspections; handle evictions, schedule maintenance; etc.
If you have multiple properties or a full-time job, it is almost impossible to handle the above tasks. Hence, you need a property manager.
A property manager is a company/real estate agent who handles all your rental properties on your behalf. This way all you need to do is lay back and let your money work for you.
Unfortunately, poor property management is a key reason why some investors fail to turn a profit on their investment. Thus, you need the right people on the job. Else you might not enjoy the fruits of being a landlord.
So how do you find the right property management? To learn how; keep reading.
1. Get Recommendations
When looking for a property manager it is essential to consider the process as a job opening. This means that you do not pick the first property management company you come across without thoroughly vetting them.
To start with, you need to get recommendations for property managers. You can get recommendations from your friends and business associates provided they also have properties under management.
It is essential to seek recommendations from people who also have properties under management because; they have probably had a few property managers in the past. Hence, they are in a good position to recommend the best property managers they have worked with in the past.
You should also make sure not to ask for recommendations from your business rivals as they might point you in the wrong direction.
As far as recommendations are concerned, look for property managers who are also managing properties in the same area as yours. However, ensure that the properties they manage are not so much so in the same rental bracket as yours. If your properties are not within the same price range as the rest, then the property manager will not get conflicted by serving you and your competition at the same time.
2. Get in Touch With the Candidates
Once you have a good number of potential candidates, get in touch with them. The point here is not to interview them but to conduct some background checks on them.
Hence before you get in touch with them you can check their websites for reviews as well as the Better Business Bureau. If any of you candidates have any negative reviews it is best to be cautious.
When you contact each potential property management firm, ask them to provide a list of addresses for the properties they manage. Make a point to visit the properties. Seeing the properties for yourself will give you a general idea of how well the property managers do their work. However, a good looking building is not a tell-tale sign of a good property manager.
The only people who can truly vouch for a property manager are the tenants and owners of the building. Unfortunately, getting the contacts for tenants is not possible because of privacy laws. However, if you hang around the property long enough, you should encounter some of the tenants.
When talking to tenants and the property owners make sure to inquire about their satisfaction with the management of the building. Key questions to ask include:
- How does the company handle complain?
- When and how rent collection gets carried out?
- How long do vacant units remain empty before the management finds a new tenant?
- How often does the building get inspected?
- How regularly is maintenance on the building conducted?
- What are some of the most common complaints tenants have?
These questions will help you to further asses the property manager’s commitment to the tenants’ needs.
Shortlist your list of candidates based on the type of reviews you get. Choose the few with the most outstanding reviews for further scrutinization.
3. Set Up Appointments With Each Potential Candidate
Now that you have a number of property management companies to work with, you should treat them like candidates looking to work for you. This means you have to conduct rigorous interviews with each property management firm on your list and pick out the most suitable one.
During the interview, it is necessary to ask relevant questions in order to make sure you fully understand how the management company works. Below are some of the most essential questions to ask:
a) How Many Properties do They Manage?
This question is meant to give you an idea of whether the company is overwhelmed by the properties they already manage. An overwhelmed real-estate management firms will not be able to perform any better with additional properties. Hence, if you sign up with an overwhelmed property manager, your property will not receive the amount of attention required.
A trained employee armed with the right resources can manage up to 40 units if accounting is not included in their duties. Hence, when you ask about the number of properties they have under their care, also ask about the active staff members.
If the total number of rental units under heir care divided by the number of trained property manages exceeds 40, then they are overwhelmed. Hence, chances are your property will get a bit of neglect.
b) Do They Own Property In The Same Area?
If your property manager owns rental property in the same area as you, then they are your business rivals. Think about it; if both your properties have a vacant unit, then the property manager will most likely give their vacant unit priority over yours.
c) How Do They Handle Maintenance and Repair Works?
These are the main factors that can cause you to lose tenants. If the repairs are not done in ample time tenants are most likely to leave. Additionally, if maintenance gets delayed to the point tenants can see the deterioration in the building, your properties value will drop. A drop in property value means a drop in the rental fees you can collect.
A good property manager has licensed, certified and insured contractors whom they can rely on to handle the repairs and maintenance promptly.
Hence, ask them about how they handle the repairs and maintenance of their buildings. Make a point to ask about the contractors they use. Chances are they use the same contractors for the properties located in one area. Make a point to also confirm that the contractors are insured and licensed.
d) How Do They Get and Retain Tenants?
A major part of being a property manager involves looking for tenants to occupy the vacant units. This involves a lot of marketing as well as SEO in order to create as much awareness about the empty units.
An ideal property manager knows how to market your property in a manner that sells it as a utopia for your ideal client. An ideal tenant is an individual who is able to pay their rent on time and is not involved in any illegal activities.
Hence, you should ask them about how they screen potential tenants so as to get ideal tenants. A high eviction rate is a sign that they are not effectively screening their tenants.
Furthermore, after attracting the ideal tenants, what measures do they take to ensure the tenants are not tempted to seek residency elsewhere. You see, retaining tenants is essential as it eliminates the occasional vacancies that reduce income generation.
e) How They Handle Rent Collections?
Handling rent involves,
1. Collecting rents from tenants
For rent collection, make sure you understand when the rents get collected and how the property manager handles defaulters. Are defaulters given a grace period after the deadline? Are they served with an eviction notice? If so, what is the process they follow when they need to evict a tenant?
2. Making deductions for maintenance and repairs
As far as maintenance and repair deductibles are concerned, it is advisable to keep the deductions to a minimum. Even if they do not deduct it, chances are they will conduct the repairs and then bill you for the following month’s rental income.
Ensure the property manager is okay with you setting a limit to the amount they can deduct or use towards repairs without your approval. Make sure they are also okay with providing you with the actual receipts from the contractors who conduct the repairs.
3. Allocation of your portion of the funds
Before you sign on the dotted line ensure you understand how and when you will receive your funds. Ask the property manager if your cut for each month will get received the same month. If there will be a delay in receiving your funds, ensure you understand why and what it implies.
4. The property managers cut
On average, property managers take home between 7% and 10% of the total income. Now it is essential to make sure you understand what the percentage represents. It could be 7-10% of rents collected for each month or for the total collectible rent.
For total collectible rent, the property manager collects a fixed amount irrespective of whether you have vacant units or not. Whereas the former implies they get a fixed percentage of the rents collected for a particular month or year.
Finally on Picking a Suitable Property Manager
After interviewing your candidates, it is essential to compare and contrast the facts you have acquired on each.
Start by comparing the reviews from their tenants as well as their tenant retention rate. This will give you a rough idea of how well they manage properties. Well managed properties have high customer retention because tenants are always pleased with the building’s condition.
Next compare their tenant acquisition and retention strategies. From their statistics on tenant turnovers, vacancy periods and retention you can tell who has the best strategies.
When considering their property management fees, make sure to check if the management services they undertake are worth it. Their statistics should also tell you if they are worth top dollar or not.
Finally, pick a property manager who is eager to please you. By eager, we mean that they should put you as their client first. Your needs and wishes should get respected and if there is an issue you should get notified instantly.
Hence, make sure the rent manager you settle for is renowned for making timely reports on your property so as to keep you in the know.