When selecting a property manager, the aim should be to find someone that cares about your property as much as you do. Unfortunately, this isn’t always an easy proposition. Reliable, proactive, and good property managers can be difficult to find. Moreso, you might discover that the property manager you thought was decent a year or 2 ago isn’t as good anymore.
You inevitably go through various property managers in your real estate investment business. Just as having a great property manager ensures your property functions at its highest level, a bad one can negatively affect your bottom line. The last thing you want is to cover costs out of pocket due to your property manager’s ineptitude.
How to Identify Good Property Managers for Bottom Line Property Management
Perhaps the easiest way to have a good property manager is to get someone highly recommended. When searching for recommendations, you should first begin with your real estate agent. This can be especially beneficial if your agent is also an investor agent—one that works with investors or is an investor themselves—as they have the required experience with property managers in the vicinity. They can use this expertise to point you in the appropriate direction.
You could also ask your local mortgage broker or contractor for recommendations. Gaining referrals from various team members can make it easier to determine the best property manager for you.
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Another probable source of good referrals is from a fellow investor in your area. You can gain access to this information by joining a local real estate investor group or networking at a real estate investor conference in your vicinity. In both cases, you simply need to ask for recommendations from other real estate investors.
Once you have created your list of potential property managers, you need to assess them based on the following interview topics.
Interview Topics to Screen Property Managers
Communication
When interviewing a prospective property manager for your bottom line property management, you need to determine if you can interact and communicate effectively with that property manager. It is imperative to find someone that listens and is capable of engaging in rational conversation.
That last thing you want is a yes woman or man. You want someone that can provide an honest opinion rather than simply saying what they think you want to hear. For instance, if you have a rental priced too high with no prospective tenants, you would want the property manager to tell you that the rent is too high rather than have them not say anything, especially if rent pricing is their expertise.
You also do not want a property manager that constantly gives excuses and never admits their mistakes. Apologizing can go a long way and helps to facilitate continuous dialogue between the property manager and owner.
In the end, the relationship you have with your property manager can be the foundation on which your success or failure is built as a property owner. If you utilize the bottom line property management process, you will discover that the right property manager can optimize your rental property investment.
Rental Property Showing
You should also consider what some property managers are willing to do when it comes to showing units. Most property managers in today’s bottom line property management utilize self-showing technology.
A negative to this, however, is that prospective renters are never met one on one. The renters have to view the properties themselves. When you meet a renter in person and interact with them, you get potential insights into what type of tenant they will be, as well as insights into your property.
For example, if numerous renters state that your unit doesn’t have enough storage, it might be worth addressing this by providing some additional storage.
Renter Placement
When it comes to renter placement, there are a plethora of ways property managers can screen tenants. The screening process can be as simple as a credit check to an in-depth national, in-person, and criminal screening. You will likely get a better tenant when you conduct a detailed screening.
One of the most widely used criteria is the credit score. While it is easy to believe that a credit score check is a great screen, it does have a potential downside. For example, if a tenant has a less than great credit score, they will find it difficult to rent units, motivating them to stay longer in an apartment. This is the type of tenant you actually want.
Using a strict margin could eliminate potentially great tenants. Furthermore, not taking the time to delve deeper into why a potentially great renter has a low credit score could cause you to miss out on them.
Another screening tool you can rely on is tenant references. Tenant references can be particularly effective in recognizing potentially problematic tenants. A negative to this, nevertheless, is that most prospective tenants tend to list their family members or those close to them as references. There are even cases where they pose as previous landlords to leave great reviews.
Nonetheless, you should lean towards property managers that make the additional effort to call references instead of simply writing them off.
Hidden Fees
Most property managers tend to nickel and dime customers. For this reason, you need to ask about every fee you can think of. The largest fee and perhaps one that most new property owners aren’t aware of is the upcharge on all maintenance or repair calls.
For instance, if your tenant calls about an electrical issue and the electrician charges $200, you will get a bill for $200 plus an extra fee. This fee can be a flat charge, a flat percentage, or even on a sliding scale.
The most reasonable payment choice is the sliding scale or the flat fee since it is meant to cover the additional administrative time required to handle such a call. If your prospective property manager offers a flat percentage, you should steer clear of them. This is because the price you pay for the fee increases with the repair cost.
Over 73% of property managers advertise vacancies, facilitate leases, and perform property inspections.
Standard Fees
The fees you pay for leasing and management tend to depend on your property manager. Typically management fees are about 8 to 10% of gross monthly rent. The exact amount you pay is negotiable and depends on the number of properties you own. A standard practice is to negotiate a lower monthly fee with a property manager once you have at least 6 units with them.
Leasing fees tend to cost about a month’s rent. You usually don’t pay leasing fees if the property management fee is particularly high. Some property managers tend to charge half a month’s rent. When a tenant wants to renew their lease, there might be additional fees. Some property managers charge as much as $150 for renewal, while others do not charge at all.
While comparing fees is important, it shouldn’t be the only variable you use to hire a property manager. Spending a little bit of time researching can get you great service.
Management Structure
You can typically group property managers into two categories: specialists and generalists.
Specialist property managers tend to divvy up tasks among the different specialists. For this reason, there is always a maintenance specialist, bookkeeper, customer service specialist, and leasing specialist. The great thing about this setup is that it can be quite efficient as one person is only responsible for a particular task.
They become extremely proficient at the task by specializing in a particular area. One major disadvantage of this system is that every task gets split up, and most times, one department is not communicating with the other.
On the other hand, generalist property managers handle everything for an individual property. This means that one person handles the leasing, maintenance, and turnover and is the tenant’s main contact point should there be any issues.
A great advantage of this setup is that the property manager has full knowledge of your unit. They personally know the tenants since they were responsible for placing them in the unit. A negative, however, is that this system requires the property manager to be a jack of all trades, which can result in them not developing any specialized expertise.
The model you choose will depend on your personal preference.
Rental Property Ownership
This is perhaps the most important quality to consider when searching for a property manager. If the property manager owns a rental property, they are bound to understand what it is like to be an owner.
Furthermore, if they use property managers to manage their property, they also understand what it is like to deal with a property manager and the associated fees. Real estate investors tend to view their properties in a particular way, and you want your property manager to have that same vision.
