As a successful investor you may have already given thought to hiring a property manager take care of your investments. This article will give you some tips and tools that you can use to help make a successful decision.
Property managers exist for the management of all investment real estate from homes through large apartment properties and commercial properties. Like doctors and attorneys some are better than others. Most people use property managers because:
- They are tired of dealing with tenants
- Their onsite managers have been stealing from them
- They do not have time
- They do not have systems to collect rents and track the successful operation of their investments (i.e. all investment info goes into one checkbook – the personal checkbook.)
- There are too many laws and regulations
- There are too many lawsuits or evictions
- They want a professional to manage their property
- The partners do not get along and choose a property manager to be the neutral 3rd party.
Finding a Property Manager
Okay, you have established that you need a property manager. It is time to start researching the options in your area. Many people start by looking at the local yellow pages and computer search engines. Usually asking others for referrals is the best way to find a property manager. You may want to consider asking:
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Call a real estate broker who has experience dealing with the type of property you own.
It helps if you understand the needs of your properties, and the direction you want to take. Once you have assembled a list of companies, but before you call them, you need to decide what your goals are for your property and your expectations for the property management company. Your goals might read something like this:
- Keep property rented
- Manage roof install project
- Prepare an annual budget
- Annually inspect the property and send you a report.
- Send you a monthly financial report
- Help you lease your property
Once you have established your goals and narrowed down a list of property managers, you should view their websites and pre-screen them over the phone.
As an owner you will want to have some important information for the property manager you are calling:
- The number of units you need managed
- The unit mix
- The per unit monthly rental income
- Your effective vacancy rate
- The address of the property/properties
- The annual gross income of the property
- Problems you are having that you want the property manager to solve for you
For houses and small apartment complexes, many owners will quote a rate over the phone. With apartments and commercial property, property managers may want to look at the property before they make a proposal or meet with a potential client.
There are market norms for pricing, but every property manager has a different overhead structure and may charge more or less to you depending on if the property falls into their sweet spot.
Negative Cash Flow
If you have a property that has a continual negative cash flow, don’t expect a property manager to be able to turn that around for you without additional investment of capital.
Questions to Ask Property Manager to Screen Them:
Before you dial the phone and the friendly owner of the management company answers your call, you need to consider what questions you are going to ask.
First you need to describe your property and ask them if they are interested in managing your property.
Many property mangers will only manage certain types of properties or certain areas, in order to stay efficient in their operations.
Price: Of course one of the first questions all owners ask property managers is how much will the management cost.
This typically leads into a discussion about the property and the property manager. Some sample questions are listed below.
Once you have decided that this manager could work for you, you may want to set a meeting to discuss details. Remember that the cheapest price does not always equal the best service.
I think that personality fit is very important between the owner of the property, the owner of the property management company and the actual person that will be doing the day to day property management.
- How long have you been in business? (You are looking for long term stability.)
- How many units do you manage?
- Do you have experience in the kind of property I want you to manage? How much experience?
- Is your staff bonded?
- What does the bonding and your insurance cover?
- How do you collect the rents?
- If a tenant does not pay what do you do?
- How do you handle evictions? If you use an attorney who is it and how much does it typically cost?
- How do you select tenants for my property?
- How do you take care of tenants? Do you have staff available 24 hours a day to handle tenant issues and maintenance emergencies?
- How do you handle property emergencies?
- How will you staff the investment?
- Can I meet the property manager who will be directly managing my property?
- How much do you charge monthly? Are there additional charges?
- Describe the service that I get from you?
- Do you send monthly reports?
- What is included in my monthly reports?
- May I see a copy of a sample report?
- How do you handle property maintenance?
- How much could the maintenance cost?
- How do you advertise vacancies?
- What are your strategies for filling vacant units?
- How do you hire/screen onsite property managers?
- Can I visit your office?
- Do you prepare annual budgets for my property?
- Do you prepare a management plan? Does this plan include a method to reduce costs, increase rents and improve the property’s net operating income?
- Can you give me some example of your attention to detail?
- Do you manage similar properties?
- Do you have a CPM (certified property manager) on staff? What kind of training and experience do your Property managers have?
- Are you accredited by a national organization?
- Are you an Accredited Management Organization?
- What kind of insurance do you carry, for example liability, errors and omissions, employment practices liability insurance? What are the limits?
- How do you stay in touch with the legislative changes to the Landlord Tenant Act and commercial laws that occur every year?
- What sets you apart from your competition?
- Tell me about some of your success stories?
- Tell me specifically how you will take care of my investment?
- Do you have references I can call?
Once you have answers to the questions you probably will have a good idea of how the company is run and how well your property will be taken care of. You might ask or try to get a feel for the company’s key operating philosophies and focus on tenant and customer service.
You may also want to establish if the company is a local, regional, or national company. There are benefits that go with each and it depends on the kind of property you own.
Finally you will want to call the references.
Clearly you want to read the property management agreement before you sign it. Many Property managers have a standard contract that they may or may not edit. I think you can get some give and take on the day to day business issues, like:
- Who is doing maintenance
- Price of management
- Term of agreement
- Other fees and charges
Most managers will not give up much on the basic body of their agreement, because they have had an attorney review and approve the docs. It does not hurt to ask. Some companies are more flexible than others.
Bear in mind that the contract mirrors their company business practices, so any change from their standard operations may be difficult for them to accomplish.
Who is Responsible for What?
Regardless of your decision to hire a property manager you need to be involved. You cannot walk away from your responsibility as a property owner. A successful property owner is one who keeps their eye on their investment.
You must read your monthly financial reports. You must inspect the property. You must make sure that, at least annually, you are on the same page with your property manager, by virtue of approving a management plan and budget. You need to invest enough money into the property to make and keep it competitive in the marketplace. No property will operate well without supervision and continued reinvestment. If you do this you may have an opportunity to have a very successful investment. May the investor gods be with you!
Clifford A. Hockley is President of Bluestone & Hockley Real Estate Services, greater Portland’s full service real estate brokerage and property management company.. He is a Certified Property Manager and has achieved his Certified Commercial Investment Member designation (CCIM). Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM).