Five Things You Must Know Before Hiring a Property Manager
Now that you’ve invested in income-producing real estate, how do you maximize your profit? Do you hire a property manager or save their fee and manage yourself? These are important questions to ask yourself because they will affect the quality of your life as well as the performance of your investment.
If you decide to manage the property yourself you need to understand the time commitment involved. In addition to all of the “office” work, such as accounting and marketing, you need to be available to show vacancies, meet vendors at the property to get repair estimates and then confirm that the work was done properly, and conduct regular inspections to help avoid liability from unaddressed deficiencies.
You need to be available to answer the phone incase your tenant needs to report a repair, has a question about what they owe or just wants to complain about one of a whole range of issues, some completely ridiculous. No matter, you need to respond. And you need to be available 24/7. If there is an emergency in the middle of the night, you need to answer the call and then have a vendor willing to go to the property to make the repair.
You need to do all of these things in addition to your regular job. If you are fortunate enough to be retired, managing a property will become your new job. No matter where you are in your life, taking a decent vacation has become impossible.
If you decide to hire a property manager you need to be sure that they eliminate all of this for you and that they don’t make things worse. Property management can make or break the success of an investment. At a minimum, you must know the following information about the company you hire.
History and Reputation
Thoroughly research the companies you are considering. How long have they been in business? How many units do they manage? Do they manage in the area of your property? Are they in good standing with the Bureau of Real Estate? Are they investors themselves?
Answers to these questions and others will give you a good feel for their competence. Also ask for references and check the online reviews by other property owners.
Service Plans and Rates
Be sure you get what you are paying for. There are many companies that will offer a below market fee to manage your property just to get your business. When you read the fine print of their agreement you most likely will find that you will get only bare bones service. Or, more likely, you won’t get what you were promised. This goes back to the last item. You will be better off with a reputable company even if it costs a little more.
Be sure to understand how the fee is computed, whether it is a percentage, a portion of the profit or a fixed monthly rate. You can also negotiate bonuses for quickly filling a vacancy or a multiplier if tenant retention is high. Try to make it a win-win and you will get the best service.
Communication with Property Owners
As the property owner you are ultimately responsible for your property. A property manager is your agent and you are responsible for their actions when it comes to your property. You want to be sure you are hiring a professional who has your best interest in mind and has an open channel of communication so that everyone knows what is expected of them. This way property issues will be addressed quickly. Remember though, communication is a two way street.
Marketing of Vacancies
Get specific answers here. After all, each day a unit is vacant is costing you money. You need the widest possible exposure for your property. What websites does the manager advertise on? Do they create a webpage for your vacancy? Do they have their own website for cross-marketing purposes?
Once applications start coming in, they need to be properly screened. Does the manager have a written screening criteria and process? If they don’t, you will be exposed to claims of discrimination.
Some managers lower the bar just to get a vacancy filled. Not only does this open you to discrimination claims, you may end up with a troublesome tenant who it can take a very long time to evict. Rushing to fill a vacancy to increase cash flow can very likely end up costing you more in the long run.
Cooperation with Tenants
Your manager is the tenants’ point of contact. And that’s OK. In fact, it is best that the tenants don’t know who the owner is. In addition to protecting your privacy, tenants will not be able to play owners off their manager or vice-versa. This is a favorite tactic used by tenants to get something or not be held accountable for something else.
That being said, you want your manager to be accessible to your tenants so that there concerns are addressed in a timely fashion. This will lead to happy tenants who have one less reason to want to move. And of course, the manager should have a phone system capable of handling emergencies during non-business hours. A tenant with an emergency needs to be able to speak with someone with the authority to solve it.