You’ve put a lot of work into your property investments not only for yourself, but for your residents, as well. Now, you’re thinking it’s time to hand over some of the responsibilities to a reputable property management company.
You want to find a licensed company that can cater to the needs of your properties and your residents. But where do you start? How do you know what to look for in a property management company? We’ve laid out four steps to help you whittle down that list of property management companies until you find the right one for you.
#1: Look for a Reputable Company That Fits Your Needs
There are a lot of property management firms out there, and they all have their specialties and niches. The first step is weeding through them all to find the one that will cater to the needs of your investment properties.
You can start by Googling property management companies in your area, looking on Yelp!, or searching through a site like All Property Management, which matches owners with vetted property managers. One of the best ways to find trustworthy companies is to ask other property owners. Get a list of recommendations from them and ask them what, exactly, makes that company stand out.
Once you have a list of companies that look like they might fit your needs, it’s time to ask some questions:
- What kinds of properties do they manage? Be sure to understand the property management company’s specialty to make sure they’re equipped to deliver the kind of service your properties need.
- Do they have the proper licensing for your city and state? Some states require property managers to hold real estate licenses, while others don’t, for example.
- What associations do they belong to? Do they belong to associations such as the National Association of Residential Property Managers (NARPM), the Institute of Real Estate Management (IREM), and the National Apartment Association (NAA), which offer training, certification, and professional development courses for members?
- What are their compliance procedures? Your property management company should have extensive knowledge of the laws that govern rental properties in your area. This is especially important if you’re looking for a company that can handle properties in multiple locations.
Narrow down your list to the property management companies that can answer these questions to your satisfaction and skip the ones that can’t.
Ask the ones on your shortlist for references. If the company can’t or won’t provide references, ask why that is. If there isn’t a good reason—like it’s a new business—then that’s definitely a red flag.
#2: Ask About Their Service and What They Deliver
Once you have your list narrowed down to a handful of companies, it’s time to ask about their specific services. At this point, it’s important to communicate exactly how many and what kinds of properties you have, and what kinds of services you’re looking for.
Then get answers to the following questions.
How many properties do they currently handle?
If you’re looking for more of a boutique property management company that provides more personalized service, a company that handles many properties won’t be the right fit, for example.
How do they set and collect rents and fees?
Especially now, with the emphasis on zero-touch business transactions, it’s important to understand how the management company will be processing rent and fees both for you and your residents. Do they allow credit card payments? Or do they use a full-service property management tool that handles payments through resident and owner portals?
How do they handle late payments?
Have them walk you through their process of notifying residents of late payments, the kinds of late fees they charge, and how they proceed if a resident is delinquent.
How do they handle resident and owner funds?
Where do they keep resident security deposits and emergency reserve funds for owners? In most states, for example, security deposits must be held in a separate bank account from the business and have to be released to the tenant before a certain number of days after they move out.
Are they a 24/7 service?
You probably don’t want your residents’ emergency calls going to an answering service—or to you—in the middle of the night. Having a 24/7 service is probably in your best interest.
What is their process for renting vacant units?
This one is really important. You want to make sure the property management company you choose can rent your properties quickly and to solid residents.
First, ask what the vacancy rates for their current properties are. This should give you a good idea of how well they handle turnover.
Then, ask about the following:
- Resident Marketing and Retention: How do they market vacant units to prospective residents and what are their tactics for keeping good residents in their properties?
- Property Showings: Especially now, with social distancing guidelines in place, how are they showing vacant units? Have they moved to virtual or self-guided tours?
- Resident Screenings: What is their procedure for resident screenings? What are they checking for and how long does it take?
How do they handle property inspections?
There are two sides to this coin. First, there are the inspections they must conduct after a resident moves out and before a new resident moves in. Talk through their process with them.
Then, there are the yearly or quarterly property inspections that catch issues like plumbing that needs replacing. Have them walk you through how often and when they conduct those types of inspections. How much notice do they give residents? Do they have personal protective equipment to prevent the spread of illness? How do they handle residents who won’t let them conduct their inspections?
How do they handle regular and emergency maintenance?
Ask them how they handle maintenance requests. How do they triage issues? How do they respond to emergency maintenance issues? What is their process for submitting and tracking work orders?
Then ask them whether they use vendors to complete some of their maintenance work and how they choose and vet them.
Do they have emergency plans for natural disasters/pandemics/other issues?
From wildfires in California, to floods in the Midwest, to a global pandemic, if recent events have taught us nothing else, they’ve taught us that we all need to be prepared. The property management company you choose should have procedures in place for the most common types of emergencies in your area.
For everything they can’t predict, there should be an all-encompassing emergency plan that ensures property managers can communicate with residents and owners, that residents know how and where to get help, that information is backed up, and that processes are in place to keep essential services running.
#3: Look at the Cost Structure
You are now probably down to a list of three or four companies; the ones that answered your questions best. For those companies, it’s time to look at cost.
How do they charge you for services and what kinds of fees do they charge?
Some property management companies charge a flat rate, or have rates for different service packages. This is particularly true of property managers who handle amenities.
Others charge on a commission-based schedule. They will get a percentage of either the rent collected or the rent due, depending on what the contract stipulates.
Then there are fees for the following:
- Vacant Properties
- Leasing
- Maintenance
- Late Payments
- Evictions
These are just some of the fees a property management firm might charge. There are other fees they may include, as well. So, it’s important to first know what fees are legal in your state and then look over the agreement carefully before you sign it.
Get a clear picture of what and how much they charge to make sure you’re not paying for services you don’t need or want, either.
#4: Communicate Your Expectations and Check Over the Property Management Agreement
Once you’ve chosen a property management firm that’s right for you, it’s time to sign the agreement. But before you do, go over with them one last time what your expectations are. Make sure those expectations are fully addressed along with potential outcomes if the arrangement doesn’t pan out.
Choosing a property management service for your properties takes research, time, and a lot of questions. But it’s important to work through the process methodically to make sure you’re getting a licensed, reputable company that can deliver for you and your tenants.
After all, the whole point is to hire a company that can take work off your plate, has the know-how to handle the day-to-day tasks of property management, and the expertise to help you manage and grow your investment portfolio.
