As an investor, the success of your real estate properties can depend on how well-managed they are, but it’s hard to keep up with property management yourself. Finding the right property management company to tackle day-to-day operations and keep tenants happy goes a long way in eliminating unneeded headaches, staying profitable, and staying sane.
But where do you start?
This comprehensive guide will provide all the information and tools needed to successfully hire your first property management company, from understanding how they can benefit you to determining which services are essential for each property.
What can a property management company do for you?
As a commercial real estate investor, one of the best decisions you can make for your investments is to hire a professional property management company to handle the day-to-day operations of your properties.
So what exactly is a property manager? Rocket Mortgage defines it as “an individual or entity hired by the property owner to oversee and manage the daily workings of their real estate investment.”
There are numerous advantages to leveraging an experienced firm for tenant services and rental management tasks.
With access to specialized personnel and experienced contractors, a property management company can provide peace of mind that your rentals are properly maintained and in optimal condition.
You can also enjoy higher occupancy rates, regulated rent increases, and increased revenue collection. Not only that, but it will also give you more time to focus on other matters related to your investments.
Working with a property management company is essential to ensure your properties remain well-managed and achieve maximum profitability over time.
#1 – Understand What You’re Paying For
It’s essential to understand precisely what responsibilities a property management company will take on when they come on board. These duties make up the foundation of the relationship between both parties.
These can include the typical rental and lease management activities, such as:
- Tenant screening;
- Filling vacancies;
- Financial reporting;
- Budgetary control;
- Rent collections;
- Enforcement of lease agreements; and
- Handling maintenance requests.
A property manager will do these things following your local area’s applicable laws and regulations.
#2 – Assess Your Needs
Consider what type of services you need from a property management company, such as tenant screening, rent collection, and maintenance. Research industry standards to have realistic expectations for their performance.
Ensure you feel comfortable with the prospective management company’s policies and procedures: Ask questions about their insurance protection and data security measures. Setting clear expectations from the beginning can help ensure that the relationship between you and your property manager runs smoothly well into the future.
#3 – Research Potential Options
Doing your due diligence is critical. Gather and stack your options.
Once you narrow down your list, investigate each company further by checking customer reviews online and reading the terms of service for each. Ensure the company has plenty of experience in commercial real estate investing and enough knowledge of local ordinances and tenant rights.
After investigating multiple companies, narrow your list down even further by contacting them directly and asking any questions you may have. You’ll be glad you put in the extra effort in the end.
#4 – Interview Each Company
When it comes time to interview each property management company, have a set of questions ready about their services and procedures.
These should include inquiries about their tenant screening process, methods of rent collection, and the policies they have in place for property maintenance.
Here are some critical questions to consider:
- What services do you offer?
- What type of insurance do you carry?
- How many staff members do you have? What are their roles?
- How do you find quality tenants?
- What’s your average response time to owners and tenants?
- What’s your level of experience?
- What’s your eviction rate?
- What’s your lease renewal rate?
- How do you market properties?
And, naturally, don’t forget pricing options and quotes from each potential company as well.
#5 – Set a Budget
Now that you have quotes to compare, setting a realistic budget is the next step.
Consider the upfront cost and additional fees associated with each service; this will help ensure that the selected property management company meets your needs without overstepping budgetary constraints.
While fees vary, there’s usually a fee of 6% to 12% of the monthly rental value of the property.
On top of that, here are some other standard fees:
- Setup: A one-time, flat fee when first hiring the company.
- Vacancy: Charged when the company needs to re-lease a vacant property.
- Lease Renewal: A fee when it’s time to renew the lease with a tenant.
- Placement: Paid when a new tenant is acquired.
- Maintenance: Usually charged when a management company retains a maintenance crew.
Additionally, remember that insurance costs may fluctuate during your agreement, and every company is different, so be sure to review all terms carefully before signing any contracts.
#6 – Check References
Before you make a final decision, conduct a thorough reference check of a property management company’s previous clients. This will give you vital insight into their performance, reliability, and service standards.
Reach out to the organization’s past customers and ask about their experience. A reputable property management company should be willing to provide references.
Ask targeted questions to gain a more comprehensive view of their capabilities, such as how quickly the company resolved issues, whether they were accessible, and if they would recommend them.
#7 – Get on the Same Page With Each Other
Gain a mutual understanding of who will be held responsible for which tasks. Get to know the team of your chosen property management company as best as possible.
Learning each team member’s roles and responsibilities can help you ensure an efficient workflow and clear communication between you, your staff, and the management company.
Such organization will permit clarity and understanding between yourself and your property manager, allowing both parties to handle their respective jobs without unnecessary issues.
A Big Decision That Leads to Big Rewards
Hiring a property management company is a big decision, but they’re valuable assets that can provide investors with peace of mind. They can take a lot of unnecessary stress off their plates and handle the little details that go into managing valuable real estate assets.
In the end, you already have enough to deal with on a daily basis as a property owner. Do yourself a favor and make your life a little easier by hiring your first property management company.
Categorised in: For Property Managers
This post was written by Chandra Lloyd
Chandra Lloyd is a writer for Market Apts with a focus on SEO copywriting and digital marketing for multifamily housing.