There are many reasons that people seek to hire property management companies. Perhaps you are just starting out and want to learn the ins and outs of property management from professionals. Perhaps you have multiple units that take up too much of your time which you wish to devote to other areas of your life such as more family time, or whatever the reason may for wanting to utilize your time more effectively.
I personally have been on both sides of this spectrum. I currently manage a good majority of my own properties which helped teach me through the years what to look for in a good property manager (PM). Let me make this statement very clear and if you come away with anything from this article let it be this: you want your property manager to treat your properties as you would treat them. He/she should treat your properties as if they were their own! Your property manager should have your (the owner) interests first and foremost, they work for you.
Let me break this down a bit. When I first started looking for properties in Florida, I knew right off the bat that since I spent more time in NJ that I would need a good property manager in FL, especially since if I did need to check on things I would need to hop on a plane. Now some may ask why I chose FL as a market when I am in NJ more often. There are plenty of reasons, but there is always one cardinal rule for me when I make an investment. I’m going to give you a second to see if you can guess what it is…….. Times Up! Of course, location is important, proximity to schools, shopping centers, highways, hospitals, condition of the area and property (scouting video in your MyOTA activities tab) itself but the cardinal rule for me is no matter how much I like a property my decision is based on: do the NUMBERS make sense!
So with that, the numbers also must make sense when you start to evaluate PM’s. I personally have put on both shirts when I started looking and I decided to call up some management companies and act like I was a renter and see how I was treated. Were they polite? Did they answer my questions, and if they didn’t have the answer immediately how long did it take them to get back to me? An example of a question was if I had an emergency in the middle of the night who was I to contact? Would I speak to a live person or must I leave a voicemail? You may say why? Well what happens if a pipe burst at 3 am and you have buckets of water draining into your apartment from upstairs? Bet you would want that taken care of immediately! The point is that I was trying to determine how they would treat my tenants which reflects how they would take care of my properties.
Of course, their services are not free, so we have to account for fees. In the northeast we can have fees that range from 8-15%. All of this is negotiable of course so don’t feel like you can’t ask for a better rate. Generally, the more properties you give them to manage, the better the rate you will get. From what I have heard there are some PM companies that will do a flat rate but generally they go with a percentage of the gross monthly rent. Now when we say the gross monthly rent we want to make sure its what is collected and not what is supposed to be collected. In simple terms, they get paid their percentage on what rents they physically collect. So, if there is a vacancy or a late rent this will give them more motivation to get those rents collected and those apartments filled.
Some other questions that you may want to ask are:
- How far are they from your properties and do they know the market?
- What kind of tenants do they have experience with? Low income or Section 8 tenants have different needs then other tenants.
- What forms of payment do they accept? Mail, online, direct deposit?
- How long is your contract? If you decide to leave after 10 months but you have a year contract what are the repercussions?
- What are the turnaround fees when a tenant moves out? Will they charge to find a new tenant and if so how much? I negotiated a flat fee.
- Lease renewal, as an example I negotiated with my PM to have the current tenants pay the lease renewals .
- Late fees – personally, for me, these are split 50/50 and are not applied to the overall monthly management percentage (this helps keep better track of income/expenses).
- How will their repair/maintenance charges work? Will they charge you an extra fee if they need to drive to a unit to let a plumber in if the tenant isn’t available?
- If there is an eviction for any reason will they charge you in addition to the attorney fees?
- Do they charge for marketing material?
- How many properties and what types of current properties are they managing?
- Remember everything in the contract needs to be clear and in writing so there are no surprises!
- Think of it like this , your managing your property manager!
The point I’m trying to make here is that you need to really do your research. Do not just go with the first property manger you come across. Join some real estate groups and read some reviews. If you properly vetted a few of them you could possibly reach out to current owners and ask them their experience with the property management company. Remember to keep an open mind as well, meaning if you read some reviews from tenants that have been evicted, they may not speak too highly of the management company, but the PM may have had good reasons to evict them. No matter what route you take, managing your own properties or hiring a property management company can be very rewarding at the end of the day.