Many property owners that would like to sell now find they have to hold and manage. If you own far from where you live or you simply aren’t interested in managing a second business, you should consider a professional property management.
Does One Size Fit All?
No. Property Management companies come in all sizes, some manage 20,000 units and others 500. Many property management companies are a small or family business’s. A large management company should have more resources available, but service may not be personal and it’s easy to get lost there unless you have a large portfolio. That’s the first point to consider; which size management company will give you personal service.
Interview smaller companies that would bend over backwards for your business. You may get better service and price leverage. If you choose this route, try to assess whether the company can absorb new business quickly, it’s a litigious business and they must be responsive day one.
If you have a single family home or a smaller rental property it’s just not that attractive to many companies. Not much income and although a larger company may welcome you, they may not give you much service. You may find that suddenly, you have many more little maintenance items than ever before as they maximize income within house maintenance and repairs.
How Do You Find Them?
Word of mouth is best. If you don’t have a personal resource then:
Local Real Estate Agencies: They may have a local property manager they like or perhaps one of the agents manages property.
Property Management Association: Ask for a list of their member firms.
State Apartment Association – In rural areas they may be a good resource for a firm near you.
What Do You Look for In a Management Firm?
Valid Brokers License: In California and other states a broker’s license is required to operate a property management company. You can check to with the local dept of real estate to validate it and see if it has ever been revoked or suspended.
Insurance: Ask for a copy of their business liability and E&O insurance. Adequate coverage protects you best. Be sure it’s current.
Management Fees: Property Management fees are generally a percentage of rental income. Shop it around. Expect fees of 5% or more as a percentage of rental income. If you own a single family home or a duplex that has low rental income, you may get quoted a flat rate. Expect $200 to $250 for full service management of a single family home.
Maintenance Staff: Does the firm have its own maintenance staff? Are they 24 x 7 for emergencies? Will they provide you with itemized statements and for larger jobs three independent bids? Does the company charge a fee on top of the management fee for major upgrades?
Working Relationship: Are they friendly and is the staff easy to reach at during normal business hours? Is the office clean and uncluttered? Are they responsive? Will they provide referrals or reviews? Do you want to work with them?
Reporting: All property Management firms should have software that will provide you with easy to read monthly statements.
Accounting: When will the manager mail your check to you? Can you use direct deposit? State laws usually dictate accounting rules for managers it’s good to have that information at hand.
Online Statements: Many firms will have online monthly itemized statements available to owners. This convenience will increase transparency and save you time.
EFT: Does the management firm allow tenants to pay online. This would allow bounced checks to be discovered sooner and will speed your cash flow. 1099: Will the management company provide you with an IRS-1009 and a summary profit and loss statement for tax purposes?
Reserves: Most companies will require you leave some funds on deposit so they don’t have to call each time to fix small items. You should ask how much reserves the company requires and limit how much a company may spend on your property for maintenance or repairs before needing your approval. Is $500.00 appropriate or $750.00, discuss your comfort level before you sign.
Vacancies: Do they charge a rental fee? Often companies will charge a percentage of the month’s rent for the service of renting a unit. The screening process should include an application, a credit report, a conversation with the prior landlord, and documented income verification.
The service should include reporting a qualified tenant to you and a proper lease. Be familiar with the process so that you can determine for yourself that a good job is being done. You only want good tenants, evictions are expensive. Viewings: Some companies will be there for a showing to groups of people interested in the unit. Other companies allow prospective tenants use of the keys with a small deposit. Find out how viewers can see your property and whether you are comfortable with their procedures. If the management company staff shows the unit, ask how often they will show. Do they work weekends when most people are looking?
Advertising: How will they advertise the vacancy? Be clear on all costs involved and have limits or a system of approval.
Evictions: This should require a lawyer and the proper legal procedure for your area. How do they charge for this and will the lawyers’ fees be invoiced so that you can see the true cost.
Termination of your Agreement: We like contracts that can terminate in 30 days with a written notice and without penalties. An exit plan that is agreeable to you is critical.
Special thanks to Jess and Collin for the photo