Property Management
Congratulations! Your investment property is under contract. You’ve successfully jumped over the first hurdle. Yes - I said first. Owning investment real estate and building a cash-flowing and appreciating portfolio is a marathon, not a sprint. And we’re here to talk about the next hurdle; Little known, Big differences: How to choose a Property Manager.
1) Shop around and ask for referrals:
After your property is under contract, the first action to take towards choosing an effective property manager is to get on the phone and start calling folks. Talk to other investors in your asset type and class. What property managers do they use? Who do they avoid? Go online and look at reviews. Once you have a short list, start calling.
Make sure the property management company you choose has experience in your asset type and class.
2) Ask questions:
Remember, this property manager is working for you. Be cordial and professional, but don’t be afraid to ask questions. It’s about how active or passive you want to be, which is different for every investor.
How is the pricing structured?
Are they willing to send you the management agreement and lease they use so you can review it? All property management companies are different, so it’s important to understand the lease conditions and procedures. Review the lease-up fee, management fee, and how they handle utilities and other payments. By using a property management company, you’ll be reducing monthly cash flow usually by 5% – 10%, ask what percentage they charge and any other fees involved so you can stay within your budget and target cash-on-cash return.
What are the rental comps in the area?
You should already have a general understanding of this (rentometer.com and Zillow/Redfin are good places to start), but it’s good to let the property manager answer this question. See if they’ve done their research about your asset type and market.
How Do They Handle Vacancies?
Communicate vacancy strategies with your property manager. Where and how would they advertise and market your property? How do they vet incoming tenants? What is their track record when filling vacancies in your asset type?
Do They Offer A Full-service Repair & Maintenance Team?
Sometimes it’s more cost-effective to source your repair and maintenance versus packaging it all into one management company. This usually comes down to how an investor strategizes cash flow and expenses. You should have a plan and strategy before you need it.3) Communication:
How often will you hear from the property manager and how soon will they return your call or email? You can start gauging the level of communication you expect from the moment you start calling property managers. If you ask for documents or to view a lease agreement before signing, how quickly do they get back to you? When it comes to your property, you need to know there is transparent and honest communication between both sides.
A good property manager will be the difference between a hassle-free experience or one dominated by problems. All your efforts to find the right property manager will pay off in the end and you’ll be happy you took the time to properly vet and evaluate your choices.
