Rental properties have tremendous potential to generate revenue. However, the success of your investment rests heavily on the quality of your property management. Finding a quality property manager (PM) isn’t as cut and dry as one might think. Many factors must be considered when assessing a property’s needs.
This article will explain what a property manager is, why they are important, and how to find the right one to maximize your rental property’s earning potential.
What is a Property Manager?
A property manager is defined as any person or firm that carries out the various tasks involved in operating a residential or commercial rental property in exchange for a fee. In short, you pay them to take care of the grunt work so that you can invest your time elsewhere.
The tasks involved in managing property will vary depending on the type of property, size, location, and personal preferences. That being said, here are a few of the general responsibilities of a property manager:
- Listing and advertising
- Scheduling showings
- Screening potential tenants
- Leasing agreements/contracts
- Collecting deposits and rents
- Property maintenance
- Responding to tenant requests and emergencies
- Handling evictions
Not all property managers are the same. In many cases, a property manager or management firm will specialize in a specific area of expertise. Not all experienced property managers are suited for the same role. For example, a PM may have years of experience managing single-family residential properties but may fall short when managing a multi-family unit such as a residential apartment complex.
PM responsibilities also depend on what role you’d like them to assume. You can appoint specific duties, such as responding to tenant emergencies, scheduling routine maintenance, and rent collection, while outsourcing other tasks like leasing, marketing, and legal matters. Or, you can choose to hire a management firm that can handle 100% of your property’s needs.
Why Hire a Property Manager?
If you have the time and resources to manage a property on your own, you can save yourself a little money. However, managing a property can be a full-time responsibility. Many investors don’t have the time or desire to manage a rental property’s nuances. Here are a few common reasons to hire a property manager.
As I mentioned before, rental properties are time-consuming. Whether you have a full-time job or simply prefer to invest your time elsewhere, hiring a PM will free up your schedule. If you want to avoid 3:00 A.M. maintenance emergencies, requesting quotes from vendors, or trying to squeeze showings into your busy schedule, you’ll need a property manager. Delegating the property’s responsibilities to a PM will allow you the freedom to earn without the hassle.
Managing a rental property means spending a great deal of time solving problems. Rental properties are not all fun and games. Sometimes you’ll find yourself in uncomfortable and challenging situations. You may face expensive repairs, storm damage, difficult tenants who don’t pay rent, or complicated evictions. It’s easier to make logical decisions when removed from a potentially emotional or stressful situation. A good PM can take some of the burdens off of your shoulders.
It is common for investors to purchase rental properties outside the state or town they reside in. Distance can make it challenging to respond to emergency maintenance requests or ensure that tenants honor lease agreements. Out-of-state investors prefer to choose a property manager that is local to the rental property. It is beneficial to hire a local PM because they know the area, can assess the property in person, have vetted lists of vendors, and can respond quickly if any issues arise.
A quality property manager can help to maximize your property’s earning potential. Many PMs have the expertise and reliable resources to work efficiently and prevent loss. Most PMs will know tenant/landlord laws and regulations and can handle legal disputes, leases, and money handling. They will have vetted vendors to handle maintenance and repairs efficiently. Most importantly, they will likely have established processes for vetting tenants to reduce turnover or vacancies.
What to Look For in a Property Manager
Choosing a property manager to handle your investment property can be tricky. You’ll want to be sure that whoever takes on this vital role will meet your needs and expectations and do so efficiently.
Here are some of the essential qualities to look for in a property manager.
Choosing a property manager with a reputation for trustworthiness and integrity is vital. You should feel confident that your PM will make decisions in your best interest and conduct themselves to reflect your values. Choose a property manager that you’re confident will treat your tenants with respect and fairness and make financial decisions to optimize your property’s success. A property manager who cuts corners to cut costs can negatively affect your revenue when tenants decide to take their money elsewhere.
Too often, people confuse experience with expertise. Unfortunately, the amount of time a person has spent in an industry is not a reliable way to gauge their competency.
Rather than focusing on the number of years they have under their belt, focus on these key indicators:
- What professional licenses and certifications do they possess?
- Do they have a good reputation?
- What are their vacancy rates?
- Do they have established policies and processes?
- What does their client base look like? Do they have properties similar to yours?
- Are their contracts transparent and accurate?
- Do they have insurance, and what does it cover?
Communication and compatibility
Communication style & compatibility are not qualities that you can screen for on a job application. This is something that can be easily overlooked during the hiring process. However, the quality of your communication and compatibility with your property manager is key to successful management.
Think about it, a vast majority of the conversations you will have with your PM will be regarding some sort of problem that needs to be solved. In my experience, communication and compatibility play a pretty substantial role in the ability to work with someone towards a solution.
You may find someone that checks off all the qualities of a great property manager. Still, if you cannot effectively communicate or work together, it can become a burden or even a liability.
How to Find the Best Property Manager
Now that you have a better idea of what qualities to look for in a property manager, you may be wondering where to start. Here are a few tips to get you started with your search.
Consult with your broker
Ask for referrals
It never hurts to ask trusted colleagues and other investors for referrals. Be sure to get specific details about why they recommend a particular property manager.
Do your research
When interviewing property managers, make sure to request references. Research the PM online, read reviews, and speak to their references. Have a list of specific questions to ensure the PM fits all your needs.
Warning Signs to Watch Out For
Unfortunately, there are bad seeds in every industry. Things can go downhill quickly when property managers aren’t upholding their end of the deal. You’ll want to pay attention to avoid a property manager that isn’t up to snuff.
Here are a few red flags when searching for a property manager:
- Poor communication: If the PM you’re interviewing is slow to respond, late to appointments, or unwilling to meet in person, this behavior will likely be the norm.
- Spelling and grammar mistakes: If you’re receiving emails riddled with spelling and grammar mistakes—that’s a bad sign. It shows that the PM does not pay attention to details.
- Unprofessional behavior: Ensure that the PM you hire represents you in the highest light. Pay close attention to how they conduct themselves during meetings. Imagine how they will treat your tenants if they speak, dress, or act unprofessionally with you.
- Lack of references: If a potential PM does not have references or refuses to provide them due to “confidentiality,” it’s best to cross them off your list. A lack of references means they are inexperienced or don’t have any good references to provide. Either way, it’s not a good look.
- Services are not 24/7: Life happens. Water damage, burst pipes, and broken HVAC systems don’t wait for business hours to cause issues. If a PM does not have an emergency line with 24/7 assistance, move on down the line. Waiting to address maintenance emergencies can have serious consequences. Not only must tenants be provided a habitable living space, but your property can sustain severe and costly damages.
Hiring a property manager can help alleviate stress, free up your time, and keep your property in tip-top shape so that you can reap the appreciation benefits. However, every investor will have unique goals, preferences, and resources, and a PM might not be for everyone. Before deciding to take on landlord responsibilities or hand it off to a property manager, I recommend assessing your availability, resources, and industry knowledge.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.