I've only had 2 since I stopped managing my own (8 years or so). If my current one retired and I had to go shopping, I would:
- ask around for referrals.
- want someone who's been in business a few years at least.
- insist on a client list so I can talk to their landlords.
- drive by to see properties they manage, talk to renters if I catch them in the yard.
- insist that I be contacted and given a chance to make my own repairs if I want. I won't really do this, but if they resist, it suggests they plan on making money on maintenance (avoid these guys).
Also, I prefer one who's also an agent. This gives them an incentive to find deals for you, since they make money when you buy, when they manage, and when they sell.
I recently switched property management and here’s what I asked;
• How long they’ve been in business
• How many properties do they manage
• If they have references
• Do they have a list of vendors they use for repairs
• Do they up charge on the repairs
• What’s the worst thing that’s happened since being in the business and how did they deal with it
• What’s their leasing fee, late rent fee, and renewal fee
• Are they able to make repairs without contacting you and if so what’s the limit of the repair before they contact you (My property manager can spend $300 on repairs before he has to contact me up to three times in a month) - I have asked that they text me before every repair any way though
• What are their usual leasing terms
• How often they inspect the property and who changes out the air filters
• Who handles the landscaping
I know it seems like a lot but it’s better to know up front. I emailed them this list and just asked that they answered off of it. It made it a lot easier.
Some things that are deal breakers for me are;
• I won’t pay for an up charge on repairs. I’d be willing to compensate them if they’re managing a major project but not a percentage on every repair.
• They need to inspect the property at least twice a year but would prefer they change out the air filters quarterly so they enter the property
• And I like the communication on all repairs even as little as a text.
Hope this helps and good luck!
Hey Steve, here are a few things to look for!
Of course the management company you're looking for will need to be in the same area as your investment property, so do a Google search on management companies nearby. Remember, the first one is not always the best one, just because a company pays to be at the top of the listings, does not automatically mean that they're the best fit for you!
2. Response Time
If you are unable to get a timely response via email or phone from a property management company, this is likely how they'll treat you down the line, and how they treat tenants and prospects as well, keep looking for a company that will be quick to respond!
Contact a few management companies and ask what their associated costs are, below are some good costs to know and what to ask:
- Management fee | typically a percentage, ask whether it's based on charged rent or collected rent. Often the percentage will lower if you have multiple properties, so ask them if that's the case if you are thinking of doing more investing in this area
- Maintenance costs | ask for an hourly rate for general maintenance, any routine maintenance that you should be aware of, and if they have an in-house maintenance team or if they use third party maintenance. If they use third party, try and find out what they charge on top of any vendor bills that come through
- Placement fee | placement fees are charged when a new tenant is found and placed into the property. These fees can vary from a flat fee to a percentage of the rental amount.
- Renewal fee | when a current tenant renews, the property management company still has a significant amount of work tied up into this renewal, so often they will charge a fee or percentage for a renewal. It can be the same amount or lower than the Placement fee.
- Miscellaneous Fees | What do they charge for pets? Do you receive that fee or do they keep a portion of it? Do they charge a cleaning fee? What portion of that fee is coming to you? Utility charge? Late Fees? Make sure that you know where the money goes once it's received from the tenant.
You'll want to see what kind of capabilities the property management company has for providing your investment's information, how will you get financial data, vacancy data, and maintenance data? Several management companies are able to automate specific reports and will work with you on what you'd like to see and how often you'd like them to send this data, other companies may have an online portal designed for investors so you have all of that information at the tip of your fingers at all times.
Of course it's wonderful if the property management company has excellent reviews by both tenants and investors on Google and Facebook and other venues, however keep in mind that in property management, there are going to be a number of upset tenants. Whether it's losing a security deposit (most of the time rightfully so), or a late charge being added to their account, or a maintenance request that wasn't dealt with immediately, etc..., these are often arbitrary personal opinions that should not reflect poorly on the entirety of the management company.
6. Property Management Company
Ask the property manager what sets them apart from other companies in the area, how long have they been in business? How many units do they have under management? What is their typical turn-around time? What is their current vacancy rate? How do they market their units?
Check out the management company's website, is it user friendly? Would potential tenants be able to navigate the site with ease?
8. Property Classes
Is your property a B class property? A? C? Check out the other properties that are under management of the company you're vetting, see if they're in the same class as yours. Most management companies will manage a couple of different classes, however if you are seeing class C-D properties on their website, and your property is in class A, you may want to keep looking. It is important to ensure that the management company knows how to manage properties in the class yours is in, and that they're able to get the highest rental amount possible.
9. Management Contract
See if you can secure a copy of a blank management contract, find out how long their contract term is, are you going to be signing up for a year? A month? Do they offer trial periods? What is the minimum reserve required per unit? Go through the contract thoroughly, make sure that you agree with what you're signing up for!
In conclusion, there are many factors to finding the property management company, the key is to do your research, make the calls, and to go with the company you think will be the best fit for you and your investment!
Are year-long contracts pretty typical? I’m not a big fan of contracts that limit my ability to fire a vendor.