The Need for a Property Manager

When you purchase rental real estate, you will shortly realize that you have to manage the property. In many cases, you may choose to do this yourself. In some cases, including but not limited to, if the property is a significant distance from you, or managing personally does not fit your current work-flow, you are going to need to find and hire a property manager. This could be an individual, or a management company.

My Property Management Experience

When I first became involved in real estate, I truly had no idea what I was doing. Firstly, I was working with properties that were out of state. Secondly, the property manager that I was using was the family of a friend who also owned real estate in the same city. This worked out well for a while, but when the going got tough, the gaps in experience were exposed, on both of our parts. I went through another individual and then a company before ending up with the company that I use now. There have been some definite growing pains and lessons learned in this process.

Evaluation Criteria for a Property Manager

What I’m going to discuss now, are some of those lessons learned, in the context of what to look for when hiring a property manager. Here are the evaluation criteria I have come up with:

1. Responsiveness – When you contact them, they should get back to you promptly. If there is a problem on the property end, you should be notified quickly with potential solutions.
2. Proximity – They need to be close to your properties. If they are not close, they will not visit them, and your properties, and thus your profits, will suffer.
3. Professionalism – In interactions with you and with tenants, handle problems at a high level, be polite but firm when dealing with problems. If there is an issue, you need to be informed promptly.
4. Real Estate Knowledge – They need to be experienced in the business. Finding tenants, rent collection, accounting, construction estimating, able to prioritize repairs.
5. Pricing – They should match what the local market is for management. From what I’ve seen, it is usually 10% of the income, including rent, late fees, etc. when they handle leasing a unit, there is generally a fee of the first months rent. There is a lot of variability in what people offer. I think the best is when people state something up front, and them stick with it. Much as it might be frustrating to ask for a change and have it refused, there is something to be said for a company that knows what works for them and is willing to stick to their guns.
6. Communication – the most important thing, bar none. If they won’t talk to you, or respond to you, find someone else. If you don’t understand something, ask. You should expect a logical answer. If they are legit, they will have one. My best experience with a company was when I had a series of requests that were denied and I didn’t understand why, I called them. Just getting on the phone an being able to establish common ground, helped a lot.
7. Business Relationships – When you own real estate, you are going to have to have work done in one form or another. A lot of this may fall in the handyman category: basic repairs, cleaning, etc. Sometimes you are going to need a plumber or electrical or some other more specialized work done. Sometimes you will need work done outside of business hours. In all of these situations, you are going to have to rely on your property manager to find someone to get this work done. The more relationships they have with a network of contractors, or handymen and other specialists, the easier this process will be. A larger network also means they are more likely to know who provides the best quality service.

Finding a Balance

Upon reading this list, I’m sure the next questions is going to be along the lines of how important and what precedence should be given to each topic. The easy thing would be to say that this is going to be unique to each investor, dependent on their individual preferences. While this may be true to a degree, I expect that none of you came here looking for some half-baked cliché about what will or won’t work. Here is what it boils down to:

1. The company or individual you hire has to be close to your property. It is the gravity model of real estate; the further away, the less impact it has on them and the less they think about it.
2. Property management should be their primary focus, and they should have significant experience at it. I would shy away from a company that offers management as an add-on service to a realtor’s business or some such. When the going gets tough, they will focus on their primary business and your property will be left hanging.
3. Having a professional organization. This follows closely with number 2 in that having experience likely means they have work-flows and procedures in place to handle both standard activities and unexpected occurrences. If it seems like they are reinventing the wheel, run away fast!
4. Communication is key. This might be number one in that if they are slow getting back to you when you are first contacting them, it is a red flag.

What did I miss?

There you have it, my best ideas for what you need to evaluate a property manager. As I said, people have different ideas and needs. You might think some or all of these are great, or just the opposite. There may be, it is likely even, that there are qualities I didn’t even list that are deal-breakers for you. Either way, I want to hear what they are, so please, leave your thoughts in the comments.