You’ve inherited some properties or perhaps invested in a few and you’ve decided it’s time to hire a property management company. Find that perfect match for your goals and portfolio with this outlined approach.
One: When Should you Consider Hiring a Property Management Company
Timing on when to consider hiring a property management company goes hand-in-hand with your why for hiring property management over being a private landlord.
A good time to consider hiring a rental management company can be when your:
- Portfolio of rental properties is growing quickly
- Distance from the properties is an issue or you’d like to invest outside your area
- Needing time freedom
- Trying to handle too many tasks alone
- Not interested in management
- Not interested in being an employer
- Properties are regulated by more complex laws and tax implications such as affordable housing or HOA’s.
- Delving into commercial property management
Two: Time to Draft a List of Local Rental Management Companies
Out of habit, the first inclination might be to hit the world wide web and search for the phrase ‘property management companies’ – be prepared to be overwhelmed — a recent quick lookup brought 4.5 billion search results.
Although you’ll likely get a list of local property management companies at the top, it will be a shot in the dark to simply start calling them without a little research and prep.
Three Tips to Narrowing Your Search
- Be specific in your internet search. For example, the term ‘Commercial Property Management’ will yield a better result than the generic key phrase ‘property management companies’.
If your portfolio is mostly single-family dwellings or an apartment complex you may want to search ‘residential property management companies’ or ‘apartment management companies’.
From there, most search engines will allow you to sort by ratings.
- Perhaps a better route would be to reach out to your local real estate, landlord, or property management associations for referrals.
- Again, going to the experts, search professional directories such as:
Three: Understand the Property Management Services Offered
Before hiring a rental property management company, it’s good to know what services the typical pm company provides. If you’re new to the rental industry, you might not be aware of all the tasks a landlord and/or property management company juggle.
Here’s a glimpse into the property management duties and responsibilities most pm companies handle on the behalf of a landlord:
- Rental market research and setting rent amounts
- Vacant rental marketing and advertising
- Tenant screening and selection
- Lease negotiations and signing
- Tenant relations
- Rent collections, delinquent rent collections
- Legal issues such as compliance, regulations, and evictions
- Routine rental inspections
- Emergencies and disasters
- Financials: bookkeeping, handling tenant and owner funds, reports
- Maintenance, repairs, remodeling
…and the list goes on
Four: Property Management Fees Rundown
From the list above, a property management company would be caring for your properties and the tenants fulltime as if they were their own.
A good property management company is worth its weight in gold.
Have a good grasp of the fees going in to weigh against your desired long-term investment goals. This understanding will help you compare rental property management companies and consider if their fees are reasonable and customary.
Be prepared to pay 7-10% for the monthly management fee. From there, other fees you may be asked to pay could range from a setup or onboarding fee to a fee when a new tenant moves in or renews their lease.
In addition to the above, the management company may impose additional fees for services rendered. This article delves into further detail: All you Need to Know About Property Management Fees
Four: Know What to Look for in a Property Management Company
The main qualities to look for when you choose a property management company are:
- Compliance to regulatory concerns such as licensing and insurance
- A good reputation online and within their offered references
- Professionalism to include accountability, friendliness, and responsiveness
- Use of property management software that offers tenant portals for online rent payments and maintenance requests, owner portals for access to reports and ledgers, online ACH owner payments (owner disbursements).
- Proactive and not reactive – they have disaster plans, contingency plans, and standards in place.
Five: Research and Interview Prospective PM Companies
Top Questions to Ask
- Background and company details:
- How long has the property management company been in business
- Qualifications of management and staff
- Size of the company
- How many properties are under management
- How many owners do they represent
- Response time and contingency planning
- Do they invest and manage their own properties
- Are they members of any organizations or associations
- Rent statistics:
- Vacancy rates
- Occupancy rates
- The average length of tenancy
- Rent collection statistics:
- % delinquent
- percent collected by 1st, grace period, 10th, 20th, end of month
- The late fee charged to the tenant and is it kept by the management company
- Maintenance and deferred maintenance
- Is an owner contribution required upfront for unexpected or routine maintenance or are funds withheld monthly from the income for that purpose?
- Which maintenance items are typically recommended to defer?
- When and for what purpose are inspections conducted?
- Tenant relations:
- Are online portals offered for tenants to pay rent electronically?
- Can a tenant submit a maintenance request electronically?
- Are there satisfaction and/or retention programs in place (surveys, welcome baskets, etc)? If so, ask for details.
- The eviction process: eviction and turn over rates
Six: Tips on How to Choose a Good Property Management Company
Once you’ve narrowed down your options to a shortlist it’s time dig a little deeper to choose a good pm company.
Licensing and insurance
Lookup licensing online to make sure they are current and in good standing. It is also good to confirm their insurance policy information and ask what insurance levels you will be required to maintain.
You might also want to search what employees are saying about the property management company they work for by looking up employee reviews on sites such as GlassDoor.
Ask for a list of referrals from the management company and be sure to call every owner to ask for their insights and observations regarding those areas that matter most to you.
Call them a few times during a business day, perhaps on different days and drop them an email to research their responsiveness, professionalism, and friendliness.
Reporting and documentation review
Ask them for a copy of their management agreement, a sample tenant lease agreement, and sample owner reports. Reviewing these will be important for comparing those on your shortlist.
Marketing and tenant materials
Ask to see a vacancy posting and/or any brochures and marketing material. Do they stage their rentals, are the pictures clear, is the advertising clear and avoids discriminatory language?
Check out their welcome packet for tenants and any other tenant handouts. Do these marketing and tenant relations materials fall in line with your core objectives.
Seven: Know When it’s Time to Change Property Management Companies
We don’t know what we don’t know, right? The grass isn’t always greener but if you are lacking these key elements, maybe it’s time to choose a new rental property management company.
Signs it may be time for a change:
- Responsiveness has changed
- Bookkeeping and data-entry errors are popping up
- Online reviews are turning negative
- Tenant turnover is increasing
Perhaps you are leaning towards starting your own property management company or would like more information on investment opportunities and useful landlord information, check out the related reading below.