Property Management: Properly Managed

The biggest reason people opt out of having PM is the cost of utilizing their services cuts into your monthly cash flow.

But let’s be honest – having a PM, while it reduces your cash flow, can save you a lot of time, energy and (probably most importantly) stress when it comes to your rental properties.

For starters, let’s look at what PM do (or should).

• Find tenants and avoid vacancies – Finding good tenants is not always easy.  It takes time, advertising and a serious level of vetting to ensure tenants are placed that won’t cause damage to the property and will stay for years and years.  Further, the best way to kill your cash flowing property is to have tenant turnover ever year – you’ll end up not receiving rent for 1-2 months (at best) plus having to put forth all the money need to make the property “rent ready”.
  • A good PM can find tenants and keep them for a long period of time which ultimately improves your cash flow.
• Maximize rent – Property managers understand the market, the neighborhoods and the tenants likely to call your property “home”.  Using their vast knowledge and resources they can market rental properties to maximize the rental income which further improves your ability to cash flow and put you on the road towards additional properties!
• They deal with all the “stuff” – Don’t like dealing with calls at 2am?  Don’t like having to deal with tenants not paying?  Then don’t!!  Property managers are the interface between you, the landlord, and the tenant.  Let them deal with all of the other stuff and just present you with the rental income.

So, now that we have a basic idea of what PM should be doing, let’s dive into how to perform due diligence in selecting a PM.

First and foremost – You want to make sure that they have experience

Not just experience, but experience dealing with your type of property.  If you have a single-family property and they only deal with large apartment complexes then it might not be the best fit.  Additionally, if you are a “small” property, then they may dismiss you and not give you the same attention and dedication they would for a large 30–40-unit complex.

Location, Location, Location

We mentioned that if you lived out of state it would be difficult (extremely) to serve as a PM for your rental properties.  So, if you shouldn’t do it – why would you hire someone that isn’t local to your property to serve as the PM?

Being local allows the PM to know the best vendors when things come up.  They know the areas and know what the property should optimally rent for.  Additionally, they are likely to have more personal interactions with the tenants which can go a long way when/if issues ever arise.

Due Diligence

Besides collecting their fees (which we will discuss in a moment), PM goals are to keep the tenants happy and to keep you the landlord happy.  We recommend that you discuss the ability of the PM to perform semi-regular property inspections to ensure anything major gets caught before it becomes a major problem.  For both you and your wallet!  Sometimes these inspections will cost a small fee but it certainly beats the large amounts of money you may pay if your HVAC goes out!

Click to Watch our video on Due Diligence

Communication

Being an out-of-state landlord can be one of the easiest things you do - you simply wake up to see a rental deposit in your bank account. OR it can be the most excruciating experiences if you can’t ever get in touch with the PM Company when needed. 

Make sure you understand the methods of communication and their typical response time to ensure there are no delays in correspondence!

In-house vs. Subcontracting

This one, in our opinion, isn’t a deal breaker.  By having in-house maintenance, you can avoid some of the costs that it would cost to subcontract out.  Especially if the fix is relatively minor.  Ever seen a $150 diagnostic fee for something a 2-year-old could fix? 

It’s important to know what you are getting yourself into when utilizing a PM and which option they use so you can better understand potential maintenance and repair costs.

Fees

While most PM companies charge a flat 8-10 % fee based on the gross monthly interest, it can become easy to try and compare PM companies – but that’s like comparing apples to oranges on this single number.  However, it’s important to look at additional fees inflicted by the PM company – tenant placement fee, tenant renewal fees, vacancy fees, late payment service charges, and potential eviction fees to name a few.

Choose the Right Property Manager

Having the right PM Company is a vital component of any rental property.  They can cost you or save you hundreds or even thousands of dollars. 

So, do your due diligence in vetting a PM Company.  Don’t be scared to pay a higher fee for management if they will end up saving you thousands of dollars in the long run.