subject: How To Hire A Property Manager [print this page] How To Hire A Property Manager How To Hire A Property Manager
Investing in properties long term is a great way to build up passive income. However, if you are managing the property itself, it is not passive income. There is nothing passive about fielding calls at 11:00 at night about the toilet getting stopped up. This is where a property manager comes into play.
That being said, hiring the wrong property manager can be just as bad, if not worse than not having a property manager at all. To truly be able to experience the joy of having monthly cashflow come in without headaches, you need to have a good property management company overseeing the operations of your property for you.
Not every property that you buy needs a property manager. For instance, if you have a property that requires very little maintenance and the property is located nearby; you may feel comfortable managing the property itself. This is especially true if the monthly cashflow on the property is limited. A property manager is paid based on a percentage of the gross rents collected on the property. On tight cash flow deals, this could be the difference between a cash flow positive deal and a cash flow negative deal in some cases.
There are several factors that you should consider when determining whether you should hire a property manager. Besides location, you need to look at your personal skills and abilities. You may not have the skills and abilities necessary to run a property. Trying to do so could very well be a recipe for disaster. It is better to pay the monthly fee than to mismanage the property and lose out on a significant amount of monthly income simply because you don't have the necessary skills. As an investor, you are also a business owner and smart business owners hire people to do the jobs that they cannot or do not want to do.
Once you have determined that hiring a property manager is a good decision for you and your investment decisions, the next step is to evaluate potential property managers to see which one would be the best fit for you. There are typically two options you could consider for hiring a property manager. The first option is to hire a property manager to work for you directly. The second option is to hire a property management company to manage the property for you.
An individual property manager is a person that will manage the property for you. They will either charge on a per hourly basis or they will charge a percentage of the gross rents. Most property management companies charge 10% of the gross rent collected. So if your gross rent is $1000 a month, the property manager will take $100.
In most cases, it will probably be cheaper to pay a percentage of the rent. However, if you are managing the property yourself, you may be able to get a property manager for cheaper if you are willing to pay hourly and decide which elements of the property management you will do vs. what the person you hire will do.
The biggest challenge to going with an individual is with an individual you are limited to that individual. For instance, what if your property manager gets sick or has a life event? You are now stuck with dealing with whatever work is associated with managing the property. When you hire a property management company, they typically have multiple employees and can share the load.
A property management company has a number of individuals that work for the company. In many cases, a company can provide the same services as an individual at the same cost. The reason why is because they can take advantage of shared resources among multiple clients. Since they are not only providing these services for you, they can leverage their resources more effectively.
Regardless of whether you decide to hire an individual or a company, there are several questions that you need to ask to prospective individuals or companies that you are considering. You should also make sure that you interview a number of them and not rely on simply speaking to a single candidate.
The most important question that you can ask deals with the experience of the property manager. The more experience they have in terms of number of clients, years in business, etc, the more likely they are able to perform effectively for you. However, experience alone doesn't equate to superior performance. Some companies, although they may be experienced might be understaffed and overworked and as such, suffer in their ability to manage the property effectively.
Therefore it is always a good idea to get referrals and references from prospective property managers. In fact, one of the best ways to find a good property manager is to speak to other landlords and find out who they use. If you get referrals directly from landlords themselves as oppose to relying on the company's references, you are more likely to find a company that will do a good job in managing the property.
Another question you will want to know the answer to is how many properties the property manager or company manages. If it is a company, you will also want to know how many properties is each manager that works for the company expected to manage. You want to make sure that the company is not expanding beyond its ability to effectively manage your property.
If you are interviewing an individual for managing your property you will want to evaluate that person's personality. If the person has a rough personality, this could result in conflicts with tenants and result in higher turnover. If you are interviewing a company, see if you can also interview the individual that will be assigned to your property.
Another very important question to ask property management candidates is their process for selecting tenants to rent the property to. You will want to know what is the candidate (if an individual) or the company's process for screening and selecting tenants. You want to make sure that the process is most likely to produce a tenant most likely to pay rent, but at the same time, you also want to make sure that the process does not discriminate in any way. A discrimination lawsuit for unfair renting practices is not something you want to experience.
Decisions on who to rent the property to should be based on unbiased information, such as period of employment, monthly income and credit history. You also want to make sure that the property management company is pulling the credit report of the prospective tenants so that you can discover any red flags of a potential problem tenant. This is especially true if you are going to be renting a property that is in a "tenant friendly" state, which means that the rental laws are more favorable to tenants than landlords. These states are more difficult to get problem tenants removed.
You also want to know how a property management company handles expenses. When there are repairs needed, who do they hire and how much does that person typically charge? Be weary of companies that charge fees and expenses significantly hire than what the market currently requires for these services. These are companies that are taking advantage of unsuspecting landlords.
Finally, make sure that you understand exactly what services are being provided by the company and get everything in writing. Not all companies are equal and some companies offer certain services while other companies don't offer those services. The last thing you want is to discover that the company doesn't handle repair calls if you think and expect them to handle those calls. Taking the time in advanced to properly review and screen property management companies will save you time and money over the long haul.
