Property management companies can be a lifesaver for busy real estate investors unable to be at their tenants’ beck and call. These companies can help you manage tenant placement, maintenance and repairs, rent collection and even evictions. They can also be a headache for investors who weren’t prepared for hidden fees, upselling services or unreliable behavior.
There’s no better way to find an awesome service provider than a referral from a satisfied customer. Use your network to find out which companies other real estate investors in your area are using.
If you don’t have any real estate investors in your area to ask, start with search engines. Follow up with references to learn more (and maybe find a colleague!). Questions to ask fellow investors include:
•How long have you worked with this company?
•What are your likes and dislikes about their service?
•Why do you continue to trust your business with this company?
•What are their rates (if they’re willing to share)?
Narrow down your options to a couple top choices. If you hear the same name repeatedly, chances are it’s a company worth evaluating.
Dive into the web
Whether you found the company online or from a friend, make sure to thoroughly research the business online. Type “company name + reviews” or “company name + complaints” to see what others are saying. Find out if they’re accredited with the Better Business Bureau and what their score is. You’d be surprised how much you can learn from a quick general search.
Each province has different requirements for property management companies, like requiring real estate licenses. While doing your research, take time to familiarize yourself with your province’s requirements.
Interview the business
Once you have your top prospects in mind, start calling the companies to demonstrate your interest and begin your relationship. Don’t be afraid to interrogate them a bit; you’ll trust your business and your tenants to this company! Some questions you’ll want to ask a prospective management company include:
•What kind(s) of property do you manage? They may not specialize or work with the type of property you own. Do they do strata management, or specialize in apartment buildings? You may feel more comfortable with a company that most commonly works with your property type.
•Which areas of the city do they manage? Your property may not be in the company’s coverage area, or perhaps some are and some aren’t. You’ll want to know before you get too far in the process.
•Do they offer other services in addition to property management? This is a trick question—you want them to say no and to only be property managers. If they also perform maintenance, you may not receive factual reports on any repairs that need servicing because they have an incentive to sell you a service. If they also do realty, their focus may be taken away from focusing on you, your tenants and your property.
•What do they charge? Costs should be transparent and upfront. Cost should factor into your decision on whether to pursue a company, but shouldn’t always be the biggest factor. Cost can vary wildly—in both the dollar amount and what you get for it. More on that below.
•Can they provide references? Some companies may list clients on their website. If not, don’t hesitate to ask. Businesses should have a pool of reliable clients they feel comfortable asking to be references.
Understand their costs
Pricing structures vary by property management company; you may be paying a percentage of monthly rent plus flat fees for other services. When asking companies about their prices, consider the following:
•What percentage of the rental price do you pay? This will be the basis of what you pay the property management company. It’s a good baseline for comparison between companies and gives you a good benchmark for how affordable or expensive each company is.
•Do they charge extra fees, like tenant placement? Some companies charge a flat rate for services like tenant placement, while others charge one month’s rent. Make sure you understand any fees and what they cover.
•What do costs cover? If you’re paying for tenant placement, do you also have to pay for marketing your listing? Know what your property manager will take care of for you, and what you’ll still need to cover.
•Do you still have to pay when the property is vacant? If there is no one renting your property, you may not want to pay a property manager in the interim. If the company is paid regardless of whether the home is rented, they may be less incentivized to fill the unit. Ask about your financial obligations when a tenant leaves.
Once you’ve decided to move forward with the company, don’t sign anything until you’ve read your contract thoroughly. Make sure you understand any fees, and ask clarifying questions if needed. If you frequently work with a lawyer, have them do a cursory review and flag anything out of the ordinary or potentially troublesome for you.
There’s a reason this advice keeps popping up—it’s the best indicator of a reliable company. Ask for addresses of properties the company manages, and drive by the properties to see if they’re in good condition. When you asked for contact information for other clients in your initial meeting, be sure to follow up. Call those clients and ask the questions you asked your colleagues.
Whether you’ve been a successful real estate investor for years or you’re just beginning, it’s important to have help. Your life is unpredictable and changing, and you may not always be able to manage your property as closely as you’d like. Even if you aren’t ready to hire a property manager, keep these tips in mind and keep tabs on the best management companies in your area. You never know when you’ll need them!