Selection of your Property Manager is key to successful real estate investing.
A good property manager can make a middle of the road investment serviceable, while a bad property manager can ruin a good investment. The selection of your property manager is vitally important the success of your investment and not something that you should take lightly. The following are things to consider when interviewing property managers:
- Rental Philosophy of the Property Manager
- Ability of the Property Manger to Communicate
- Is Property Management the full time job of the Property Manager or a side hustle
- How many properties does the Manager manage
- Fees and Costs
- How big of a team does the Property Manager control
Rental Philosophy of the Property Manager
It is important that the property manager has a similar philosophy to the owner with regards to lease length, tenant screening criteria, rental amount, repairs, fees, and marketing. Some property managers churn tenants in order to increase fees for the manager and that comes as at the expense of the Owner. I have found that that a manager who prefers long term, stable tenants and is willing to work to get you those tenants results in much better cash flow for the owner.
Ability of the Property Manager to Communicate
Not all property managers are created equal when it comes to communication abilities. Property managers are your agents and represent you with all third parties associated with your property. Your property manager must be able to clearly and concisely communicate with you, your tenants, repair contractors, and anyone else that supports the ownership of your property. Communication is a key component of the job, and if your property manager is not able to effectively communicate it will end up costing you in the long run.
Is Property Management the full time job of the Property Manager or a side hustle?
Property management is not an easy task and a property manager who is not fully engaged in the business often struggles supporting owners. I would try and stay with property managers who are exclusively property managers as I have had the best success with those that focus on management. I would be wary of those property managers that are the General Contractor, the Realtor and the Property Manager as their inability to pick a niche is generally a red flag. This is not to say that a turnkey real estate company that provides all of those services should always raise a red flag, if they are a large professional organization they can likely handle it. Future posts will discuss turnkey real estate companies.
How many properties does the Manager manage?
Managing rental properties is challenging, but the issues are often carbon copies of each other. A property manager who is learning on the job with your properties and dealing with issues for the first time, will usually come at a cost to the owner. A property manager that manages a significant number of properties will generally have experience with a variety of issues and that experience will serve an owner well during any potential issues that may arise during the management of the property. Additionally, a property manager that manages a large number of properties will usually have a support team and systems that provide efficiencies in the management of your property.
Fees and Costs
Property managers make money in two ways, leasing fees and by taking a percentage of the rent. The percentage of rent is typically between 7 – 10% of the monthly rent and the leasing fee generally ranges from one half to an entire month’s rent. Generally, property managers will discount the monthly fee when they manage multiple properties for you. Everything is negotiable, so don’t be afraid to work with your property manager.
Conclusion
Next to the selection of the property you purchase, the selection of your property manager is the most important aspect of owning rental properties. Don’t be afraid to interview your prospective property manager, remember they work for you, not the other way around. Do your due diligence during the hiring of your manager and you will be rewarded by a long and profitable relationship. Don’t be afraid to find a new manager if the relationship is not working out.
Questions for the Property Manager
Here is a starting list of potential questions for the Property Manager Interview.
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