Hiring A Property Management Company: What To Look For
What should real estate investors look for when hiring a property management company?
All serious rental property investors and turnkey property providers need professional property management. A lot of real estate agents, tech entrepreneurs and investors have tried to inject themselves into this business to take advantage of the booming amount of rental properties out there. Some have done okay. Others haven’t had the experience or right priorities to do it well. So, what should you be looking for in a good property management firm?
Branding & Service
Whether you are a solo real estate investor who really cares about people, a busy professional who really values your reputation, or a turnkey company selling hundreds of rental homes a year, you need to be really careful about the service and people you are outsourcing this work to. Their brand and the experience they provide is a direct reflection of your brand. It will be virtually indistinguishable for your tenants and buyers where your service ends, and where property management begins. If they have a bad experience they’ll blame you both. If it goes well, you’ll get the credit too. So, consider the overall brand image, the personal who will be directly engaging with your tenants and investors and contractors, and how well the system works.
Responsiveness
Just about everything is going to depend on how responsive your property management company is. How fast you can get updates, repair requests are dealt with, how full your properties stay, and your net income will all rely on fast responses. They should offer enough channels and the right channels for their different types of clients to reach out in their preferred medium. For some that may be by voice. For others it will be by text, email, online chat or Facebook. Don’t just rely on your experience when they are courting you for your business either. You need to know how they will do in this area every day.
How They Make Their Money
How your property management company makes its money will directly impact your asset performance, net yields, and how well your interests are aligned on a daily basis.
Ways property managers can make money include:
- New leasing fees
- Lease renewal fees
- Bookkeeping fees
- Monthly property management
- Markups on repairs, maintenance and renovations
- Property sales
- Late fees
- Evictions
- Rental application fees
Decision Making
Before hiring a property management company, make sure you know how much money they require to be held in reserves for repairs and maintenance. Make sure you are clear on who makes the calls on approving expenditures, and to what level. One investor may be okay with the property management company approving repairs up to $500 or $1,500. Another may want to approve every dollar. You want to keep them honest, but if you’ll be one the phone worrying about tenant calls every day then you lose a lot of the passivity that rental properties can provide.
Property Standard Requirements
You need to know their property standards before you sign a contract too. Will your properties be up to the level they expect before showing them to tenants? Some only want to deal with staged and luxury properties that have been recently renovated. Others know how to work with a lower end or raw product.
Tenant Application Requirements
How much will tenants pay if there are any application fees? How efficient is the process? How long does it take to get them approved? How big of a list of waiting tenants does the company maintain? Are their move in costs competitive enough? Is their qualifying criteria a good fit for the neighborhood?
Make sure you know the types of tenants they specialize in too, for example:
- Section 8 tenants
- Local government programs
- Regular cash paying tenants
- Retirees
- Corporate rentals
- Short term tenants
Know their stats too:
- What is their average vacancy time?
- Time to evict?
- Percentage of tenants that stay the entire lease?
- Turn around time on repairs and making units ready to re-lease?
- Tenant applications versus leases signed
