After buying their income property, these new investors realize just how much work it is to manage a rental property. There are so many things to do to make the investment work that the property takes as much time as a regular job.
This is when several new investors start to feel like they have just bought themselves a job rather than an investment. That happens because many fresh real estate investors do not realize that real estate is not a passive investment like stocks.
To succeed with an investment property, you must dedicate vast amounts of time to oversee the myriad of problems that can happen. Even when there are no problems, the day-to-day process of keeping the rental operational is also time-consuming.
The only way to get around this limitation is to hire a professional property manager to oversee the asset. Property managers are the key that transforms a naturally non-passive asset into a passive investment that functions similarly to stocks.
The professional property manager oversees the property owner’s work, from marketing the rental to overseeing repairs, collecting the rent, and ensuring that tenants respect the lease terms. The property manager does this in exchange for an agreed fee.
Ho
wever, it is essential to know that employing a professional property manager will not solve all an investor’s problems. You must find a property manager with the right skills and a track record of improving the performance of managed properties.
How do you ensure that the property manager you hire meets these criteria? When hiring a property manager, screen them using the following parameters.
How to choose the right property manager
1. The property manager must be licensed
Licensed property managers are well-trained, and they have a reputation to protect. They follow a code of practice dictated by their professional body. They stand to lose a lot if they are found guilty of misconduct. In addition to being licensed, some states have their requirements for property managers. Only talk to property managers who meet these requirements.
2. Look for local expertise
The reason is simple: real estate is local. A national chain may have the right technology, but that does not compensate for the lack of local knowledge. Local property managers understand the applicable laws. They are intimately familiar with the demographics your property serves. They have relationships with essential vendors. Local firms can respond faster to changes as they unfold in the locality.
3. Look for specialized experience
You want a property manager with lots of experience in properties that are similar to yours. If you own a commercial building, don’t hire a manager with expertise in residential properties. If you own a multifamily unit, don’t hire an expert in single-family homes. The property manager you hire should be familiar with the different problems that can happen in your property.
4. Look for a proven track record
Do not hire a property manager until you have looked at the properties they have under management. That means checking the various indices for measuring the success of a rental property. What is the average vacancy rate in those properties? Are the tenants well-qualified; do they stay for the long term? How good is the manager at reducing costs?
5. Look at their technology, systems, and organization
What is the strength of their marketing systems? Do they have an online portal for tenants and owners? How much of their daily administrative tasks are paperless? Paperless systems are more secure and efficient. Property management companies that prioritize them are often better at managing communication and record-keeping.
6. Check out their contracts, agreements, and processes
Ask to review the vital documents they give new tenants and property owners. What are their processes for screening prospective tenants? What are their practices regarding the handling of tenants’ security deposits? What actions will they take in case of late payment or non-payment of rent? If it becomes necessary to evict tenants, what are the steps?
7. Ask about their fees and other payments
How much do they charge for their services? Do they base their fees on rent collected or rent expected? The difference between the two can make a lot of difference to your own profits. What is not included in this monthly fee; are there other payments you should be aware of? Can you expect to receive monthly and annual financial statements?
Lastly, impressions matter. Do not overlook your first impressions about a property manager. If you don’t like them or feel uneasy about working with the firm, walk away.