Managing property is a time-consuming task with no small share of headaches and costs. And while many real estate investors are up to the task of managing their properties, many more leave that job to a property management company. As your portfolio of properties grows, it almost becomes a necessity to invest in property management. Handing the reins of managing your property over to someone else is both a terrifying and freeing experience. It’s great to lift the burden of handling tenants and property upkeep off of your shoulders. But that also means giving it to someone who’s up for the job. A well-run property management company can be your ticket to freedom; a poorly-run or costly partner will only increase your number of headaches. If you’re embarking on the journey to find a property management company, here’s what you need to do to make sure it’s the right one.
Table of Contents - Here’s What You Need to Know Before You Hire a Property Manager
Gather referrals if possible
Don’t reinvent the wheel looking for a reliable property management company. Chances are, you know another investor who has already gone through the trouble of vetting property management companies. Ask for recommendations and referrals from friends, members of your investing club or trusted members of your inner circle. If you come up empty-handed and don’t have any referrals to pursue, don’t worry. The Internet has made it easier than ever to compare and contrast different firms! Pull up a few with good ratings online and do a little background research. When you’ve got two or three you feel comfortable with, you can start making calls or scheduling appointments to meet with them.
Ask questions and do your research
Never, ever choose a property management company until you’ve spoken directly with someone and have a point of contact. If a company prefers to conduct business via email that’s fine—just make sure you’re able to meet with them in person, via phone or even via video chat before you sign anything. The reason behind this is twofold. First, the willingness of a property management company to meet is indicative of their responsiveness. If a company is responsive, it goes a long way towards showing you how they’ll manage your property. Second, you can and should conduct a thorough interview with any firm you’re considering.
Ask good questions and learn as much as you possibly can about the company and its processes. The more you know, the more you’ll feel comfortable turning over property management to them—or deciding not to hire them! Here are a few simple, poignant questions to ask:
- What type of properties do you manage? Make sure they specifically manage the types of property you own or are looking to buy.
- Do you offer other services? Be wary of property management services that offer additional services! This can result in hidden fees and unwanted contracts.
- What do you charge? As we’ll discuss below, the cost isn’t everything—but it’s important! What you’re getting for that cost makes all the difference. Every property management company is going to have its way of doing things. When you find one that resonates with you on things like responsiveness and experience, be sure to continue vetting them—even if other variables aren’t quite perfect, like cost.
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Understand the charges and costs
Part of putting the burden of property management on someone else is compensating them for assuming that responsibility. You’re going to pay for property management out of your revenue for each unit, but how much depends on the company.
On average, property management companies charge no more than 10% of the price of rent—most are actually between 5-7%. And while this is an important figure to look at, what’s more important is what it entails. For example, a company may charge 6% for property management but tack on additional one-time fees for various tasks, like a quarterly walk-through of the property. Conversely, another company may charge 9% upfront, but have most (if not all) costs included.
Ask each property management firm for their cost, then immediately ask what’s included. Better still, ask for a cost breakdown if there are additional charges to consider, like tenant placement fees or fees for upkeep during vacancy periods.
When it comes to property management, you usually get what you pay for. But, knowing how you’re paying for it and what the costs and fee structure is will help you better balance your books.
Check out the properties
As a final step before hiring a property management firm, go and check out some of their currently managed properties. Look at the condition they’re in! You can tell a lot from a quick drive-by. And, when you do hire a company, don’t be afraid to drive by your properties from time to time as well!
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